Earnings call transcript Q1 2023

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Operator

Welcome to MACOM’s First Fiscal Quarter 2023 Conference Call. This call is being recorded today, Thursday, February 2, 2023. 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

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

Actual materially differ results today. may discussed those from

more detailed could with a to we discussion For and of filings uncertainties result refer the that the MACOM’s differences, risks SEC. in those you

provided Management’s today. Form include filed A in discussion press SEC statements release financial X-K, also with to information. the call reconciliation non-GAAP during will of of which certain are adjusted was the and this company’s related adjusted GAAP results non-GAAP

call turn of I’ll over that, With Steve the CEO and Daly, MACOM. President to

Steve Daly

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

diluted first of for and XXXX per quarter was fiscal $X.XX share. Revenue adjusted our was $XXX.X EPS million

and we sheet. investments quarter translated strong short-term operations the to $XX cash ended performance financial million, $XXX from Our balance cash million flow with our on and in of

our X. the quarters was ratio time for was book-to-bill in less that QX book-to-bill was Our than first This eight X.X.

a QX, within well our XX% our revenue. turns sales environment. team in or total shipped in the was quarter approximately booked challenging of Our business revenue Overall, executed albeit market and

was our business that On improved. in our end highlighted has I Today, report environment call, weakening three the markets. can that demand not earnings we last

our X. customers. data book-to-bill prevalent Weakness as For as to our and broadband access than infrastructure less customers QX be at is center largest this reason, XG we most well ratio of expect telecommunications many our

Generally they reducing speaking, levels. these customers are markets on focused orders, and major inventory in our slowing are

main is broadly weak. speaking, customers, Beyond our also demand

bright one and our strong. products to for market Industrial continues is end Defense and well, However, demand spot is perform our that

our QX at the current in high Additionally, levels historically backlog fiscal entering remains despite softness bookings.

to a and I despite plan long-term with we the it’s confident think slowdown, remain short-term goals important prospects. growth we emphasize financial future perspective. our And that our current in balance strategic our

related and capitalize turn power MACOM need a signals. number markets increasing secular growing bandwidth is transmission end rates, of to needs which data across frequency and higher positioned for to on in levels higher our trends the drive

cycles like are life systems products customer best-in-class of solutions. have before than to long with revenue financial after provide need for performance specialized MACOM produce to been ever generate they’ve Our and introduced our years potential they more complicated Many suppliers high and returns. the

the market strength the diversity outstanding, We to past it view products technologies, competitiveness released And quality is over products inherent our years provide the to of of the to and stability. financial end as our of an company, markets finally, improve. and helping our few of continues

modest Data our sequentially sequentially. to increase The performance was $XX.X revenue X.X% $XX.X growth Defense driven down Crosspoint switches of was QX. sequentially, in Turning for end was million, down million, up XX.X% Telecom combination both networking of with during Industrial markets million portfolio. our a $XX.X FYXXXX, fiscal much shipments X.X% was Data products, supply and had been of our increased high sequential of along a and and Center in analog Center by which constrained

to MACOM’s we base current range which of highlight would believe wide exciting recent new will a applications. in see large drive like few we to customer production we our illustrate engaged the of opportunities, breadth success. a softness remain and programs, While in engagements I future

potential. wins revenue multi-million dollar have these of All

to Our the high discrete high be in limiters. diode power team including a switching market in leader continues power for and diode control circuits, products

have platform. radar secured limiter an new high socket power Aegis a on We shipborne

automatic has platforms also new team and wireless automotive on design The won wins sockets two communication toll on detection an system. achieved

analog, team, IC performance a high design defense Our revenue continues or X to with successfully their diversify has custom wins. U.S. Tier penetrated HPA and OEM

a application major They and memory a also support large next-generation development contract is radio. Manpack high secured power DDR test customer mobile The infrastructure. a IC to from

team U.S.-based supporting technologies. foundry and various MMIC and utilize that actively trusted gallium is Our requirements arsenide our radar satellite system

has in functions customers, team across a MMIC million wide our to won development and solutions. of contracts $XX close Specifically, range

haul a metro coherent socket customers service light production validate team and or that XXXG major are programs. have trusted designing that to or is long-term a driver support long TIA next-generation wins to data These won systems, light products center year. an that solutions U.S. are Our in ZR Xx this design we fiscal supporting Internet is compelling and provider with partner ramping and critical MACOM our support

everyone our These believe of share of our ramp most takes portion our gaining and will core illustrate a recently in are time these examples new wins to come we Most we from products, are markets. up. introduced products, market knows also coming future from which growth

requirements. we have volume our we confirmed new we product laser XXG and customers sales XXG the excited XX the today, PON, XGS the is to And market that have no change to market. example, system their laser meets sampling a in while As XGS This expect next an are over be PON high months.

network on support our wins. are module HTL successfully requisite In required X,XXX-hour their engage design or completing more customers will [ph] is customers addition, revenue which qualifications, end the by DFB ISP XXG of team Lightwave beyond More and These wins QX. to our continues users. with future

a I the key few across activities to would review like business.

our product demonstrate our a latest including per in sales and be or at highlighting terabit team to to customers we where engineers, support designs. eight the be attending lane Fiber will products Conference, live March, XXXG OFC, our will will booth, Optical module First, applications solution in X.X hosting we our OSFP demonstrations

amplifiers coherent offering. Our chipset with solution new includes along a transimpedance MACOM’s photodetector and drivers industry-leading

per XXXG high-speed today. of the the throughput data are lane industry in leading edge applications

will optical switch MACOM’s connectivity demonstrate DRIVE U.S. with leading for in ASIC conjunction supplier. from hardware We also solution PURE a

linear solution PURE driver transimpedance designed amplifier operate of comprises DRIVE up single PAMX Our that a in architectures multimode specifically and to for XXXG. mode

and optical noise been represents This to and Our designed latency has innovative industry-leading ASICs. to amplification solution lane XXXG chipset low server equalization solutions power, support ranges, communications. direct linear dynamic to broad enable switch per connection low low for

X.XX on silicon years the make a GaN aerospace, Force carbide for established two Massachusetts wafer approximately we transfer customers. process Research the goal from company and products in MMIC and announced, defense previously the As ago, to a technology to Air commercialize with our commercial our priority Labs to micron fab

I’m this happy that is to announce the month. released to process production being

technology now our the density. transfer silicon GaN designing state-of-the-art introducing engineers products have will industry-leading IC carbide with to offer this parallel excited a In later process these with and the we on been on begin customers are We power activities, our design month. products

products provides delivers Ka-band the power sale today. product satellite for or applications. comparable is for Our PAE sampling this efficiency power-added in today from with flagship output which the in MMIC is and amplifier uplink XX is power designed market performance, amplifier a This process, MAPCMPXXX, the available of best which watts mimic

operate amplifiers, including that noise This switches to as support gigahertz ICs amplifiers, low up receive beam-forming and will MMICs about power well ICs. process XX as high-power transmit

segment and on We this for schedule the MMIC entire of the are getting very achieving opens and done on million team market. launch about excited milestone, GaN it believe and process We silicon product on release production this I $XXX high-frequency congratulate a carbide budget.

may definitive have agreement and has announce today, earlier operations to issued into OMMIC a Paris, a France. manufacturer you am seen release pleased located acquire press the As to entered of SAS, in a near semiconductor MACOM I assets

materials five XX-plus-year processes a millimeter production process suitable epitaxy, gallium has telecommunications, applications The company and products heritage arsenide integrated OMMIC IC including processing defense. designers of in employees, comprises Today, and gallium technicians and OMMIC skilled semiconductor and microwave staff. for portfolio approximately wafer nitride, aerospace of the a wave XXX design. engineers, and specializes and in compelling differentiated circuit wafer and has team compound three, and small in

numerous provides benefits MACOM. acquisition This to strategic

products processes address and expand XXX-nanometer OMMIC’s can build XX-nanometer MMIC and spent high-frequency and have our to years upon team strengthen MACOM’s and better target developing portfolio processes, their plan proprietary so we we markets. OMMIC’s First, refining expertise. their and

products performance. Simply MACOM’s. they including as that high-frequency time OMMIC Today, high-power very higher operate offer that produces well than industry-leading at chips, have core typically low-noise products radar as amplifiers frequencies put, true amplifiers delay,

entire strategic, chain, science material products our of growth OMMICs gross expertise improve Second, epitaxial strengthening our believe simplify margins is our growth increasing across epi business supply world-class, our which to our performance and has in-sourcing is in and manufacturing of we certain expertise material products’ epi on the potential our our advantage. growth knowledge and competitive improve increase and all capabilities

OMMIC Revenue leveraging emphasizing a Third, standard growth and expansion customers. revenues their were associated of major believe We OEMs. we processes opportunity. customer many Historically, portfolio customer accelerate base larger products OMMIC by growth significant grow serviced their to significantly. design a can MACOM’s will custom development foundry small has and by revenue represents also of chip come IC at work whom base, onto their team

and products. force with larger already are products can existing qualified ESA several the Space are share processes sales We also I’ll European confident global Agency our use. OMMIC’s satellite note for gain or of market by their

both their opportunity improve see profitability on gross manufacturing products. to capability OMMIC margins utilize an idle we and MACOM and fully to wafer Fourth, X-inch

installed runs a Massachusetts a X-inch yet notably, production and transitioned While production line, X-inch fab. line on their line. they have they production X-inch OMMIC wafer Today, and purchased is to fab have X-inch their MACOM’s the all not

And markets. us of finally, an European-based enable Having will which and industrial us. to this a range will serve customers, manufacturing a which and strategic acquisition the EU focus to customers European automotive access MACOM’s us in better better operation presence, telecommunications, engineering inside wide enable for significantly aerospace, is expands

goal regions. European headwinds business an for existing consideration purchase The includes to intellectual asset approximately potential future property, assets million. estate offset OMMIC’s as We OMMIC’s and geopolitical purchase The is acquisition operations, existing €XX.X and MACOM on purchase other business our operations to increase of hand. structured any facilities. will cash have a using real strategic from

second transaction MACOM’s the We during quarter. expect close fiscal to

the approvals to regulatory subject like customary highlight to that would However, and transaction closing I conditions. is

provide review financial Jack results. a detailed more of our will now

Jack Kober

morning, Steve, everyone. Thanks, and good

was by was revenue center operating a revenue. up fiscal for first was modest in The first quarter in quarter per earnings X% expectations $XXX.X million, line sequential The with sequential increase our record quarter-over-quarter. data Revenue XXXX driven in with as share. the as and well improvements increase of margin

fourth the fiscal geographic fiscal basis, of represented sales QX customers a customers to compared U.S. our XXXX. compared XXXX. XX% XX% sales QX On quarter our China XX% year domestic fiscal both and of approximately XX% to results QX in to approximately approximately for to full represented

highlight sale for us. focusing quarters I approximately as four in would is like over strategic Steve the revenue growing past to priority to European X%. customers also a highlighted, region has And this that been on

million, Adjusted gross sequentially. profit was of $XXX.X revenue or XX.X% flat

we’ve This a allows us MACOM model flexible in fabs, cycles financial a leading business Ann also and and utilizes as proprietary as As Arbor change. the to our leverage manufacturing access of discussed foundries. as past, well portfolio process leveraging technologies provides Lowell third-party

was and of $XX.X million of million million. $XX.X R&D consisting Total expense adjusted $XX expense of expense SG&A operating

due $XXX,XXX were expenses R&D sequentially operating XXXX lower fiscal from QX Total to down expenses. by slightly

$XX.X QX was a QX. million margin from fiscal $XX.X for million, sequentially in income in fiscal up from QX fiscal XX.X% operating was QX. up in XX% operating record Adjusted Adjusted

maintaining We while business in are operating we closely investments as managing profitability. expenses balance the our

model and products term, as longer we operating growth. future introduce to the leverage revenue they new we Over in see contribute our

was fiscal Trailing QX fiscal million Depreciation $XXX.X million QX XXXX. $XXX.X expense as adjusted adjusted EBITDA million for compared $XX.X EBITDA and XX months, was to $X was million. in

associated offset Adjusted net $XX,XXX $X increased on securities term growing QX expense million, floating portfolio fiscal for more returns up The was in loan. our with interest income the of from than our QX. rate higher marketable fiscal interest short-term

an at remained X% income million. expense Our resulted in $X.X in tax adjusted and rate QX of non-GAAP approximately fiscal

were quarter, first from the tax for XXXX. QX $XXX,XXX slightly payments fiscal cash Our down

XXXX adjusted We tax and year year fiscal XXXX. expect rate for X% income remain into to at the fiscal our remainder of

share fully was QX earnings adjusted share to of QX. count net fiscal QX. $X.XX, per adjusted per to a in was compared Fiscal shares compared share $X.XX million income Adjusted XX.X million in million utilizing fiscal $XX.X of earnings diluted $XX

cash items. to moving Now on balance sheet flow and

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

in quarter. As a to outstanding were days prior result, day XX compared XX sales days the

by increase the an the up quarter million sales at of in over million reflects primarily shipments sequentially. due quarter. balance periods were receivable accounts end, Our prior increase and to Inventories $X.X the in $XXX.X timing

prior X.X due requested in QX, delivery of finished our shortening and remained basis in to the X.X modest orders the from customer as and XXXX. Inventory a inventory we through quarter. during down quarter. quality inventory on postponements expect to goods in lower reduce increase progress occurring sequential had our a on times certain The We net year lead times strong based balance fiscal times, were turns we customer slightly

Fiscal QX cash million. from $XX.X operations approximately flow was

As we’ve on cash to QX of our and September our current level. cash in our quarter noted sizable represents experienced during due we flow items fiscal the prior a from a call, operating operations moderated working increase figure timing flow capital

capacity the in CapEx next few capabilities fab million. Capital prior We expenditures $XX up expand expect $X.X technical investments the to fiscal QX, quarter. make to quarters. still to in plan CapEx million $X.X XXXX million to our for the be totaled and We of process range expand over continue fiscal from

As the continue in with profitability we’ve manage business. the the capital our process efficiency past, investments done in technologies, and spending, overall new we capabilities programs to development balancing carefully of will

be placed service certain CHIPS credits until capital the to after This X, tax like qualifying I of not manufacturing cash pursuing we associated expenditures provide items, year that capital and XX% fiscal XXXX. do we will highlight apply our certain XXXX. into also Act to to would tax from to Act expect to expect of these the addition for In investment funding, an credit January CHIPS credit advanced received

credits a XXXX. credit material to depreciation as tax financials year tax And an on be We over expense for we to do impact these recognized expect will anticipate as offset fiscal time. our such, this have not

XXXX. for million $XXX.X first equivalents $XXX.X quarter in up from Cash, and were QX short-term the cash investments fiscal million, fiscal

gross than than $XX less leverage down and million. to is first Our our net less quarter now is X.X, debt

to the governance better highlight items discuss X, I to our would our has like stockholders we team the in engaged also on meeting as XXXX. approach annual MACOM and March outreach our quarter, that annual stockholder with during understand top

back few Before note to to like Steve, turning a items. I’d it

guidance to flow cash by the these and plans outside QX includes supplies our our down these variable healthy manage to including margins few. Through First, efforts, of XX%, to compensation, we cycles. a spending approximately fees service and reduced course expect support expense over discretionary business remain name positive

to excited is operation. OMMIC’s MACOM European-based and as we to talented favorable well valuation. Second, and new It’s workforce acquire at technology, valuable a differentiated believe as a dedicated be what

perspective, short the meaningful impact our a from In EPS. have a revenue or on term not financial OMMIC should

it which as opportunities, However, will value. we provide additional we expect drive growth will the longer in that business, and profitability invest stockholder term

to and the to and people, I plans OMMIC look the investments XXXX MACOM welcome our forward to team and make plant processes, continued in MACOM. to also

I back will Steve. now turn the over discussion to

Steve Daly

to be expected range to adjusted shares. any March $X.XX and in to XX.X%. million. Adjusted Thank in earnings XX, is gross or revenue financial to from expected of XXXX million acquisition. $XXX This MACOM to $X.XX XX.X fully And in margin per ending be based of $XXX fiscal impact million does be revenue include share the not is on the the OMMIC plant Jack. QX diluted expects guidance between XX.X% you, range contributions

the and Industrial Telecommunications sequential Defense coming and in revenues slightly weakness we to QX, our business. expect balance Center In down be our in Data from

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

market months confident financials are that years improve and share and we our the to in can take We continue ahead.

we stronger can are our ago, is it meet we confident year exceed and portfolio was targets. product or Our than one

operator to questions. like now ask any the I to take would

Operator

Instructions] of coming Needham. you. the question first with Bolton from Now Thank [Operator Quinn line

is line open. Your

Quinn Bolton

you’re as do half pattern strong into calendar of Hey your look last? a think how any markets correction first guys. you a and how March Congratulations demand the the year? largely on inventory see think revenue can But I end us half down the look you and we second will Do you do inventory you sense, may some look the this senses the sort first XXXX and of Or into obviously, recovery year and across have part results. guess revenue as for think on you XXXX, long of give weakness year? you you correction. that’s the of event the you guiding

Steve Daly

Yes, good morning, Quinn.

So it’s be to customers really inventory difficult us guidance for giving on trends.

the least be and at accurate So is believe answer on. course the sort that’s do thinking area we’re balance grow we something our Defense, I then that’s The look that think on is an data most at up. to – will we question. we two the concerned center believe we to give certainly part a we’re XXXX I&D, of and also our make projections of of struggle first the our telecom. at what backlog and of Industrial continue so would And one when three we fiscal probably the your of to and continue look We When year-over-year markets about that well basis. grow the will during year. the And should markets and our will that

XX% we a knows, everybody FY very strong XXXX with had As very, growth.

see do so year weakening. this And that we

those there the I make is it’s at – weak might of us And broadband the on markets and prepared other and overhang turn. markets. mentioned are our difficult a macro XG my the moment, generally to As point remarks, the is for understand on speaking, when I’ll many

I question, make us for it’s your hope so projections. And these longer-term to Quinn? difficult that answers

Quinn Bolton

maintained having they an three-inch manufacturing either expense Steve. Thank the fab operating does. Jack, you sounds fab. six-inch acquisition, of plus guess the fixed at idle as And for the operations I Steve look then or like guess, I you, it It OMMIC with

you walk operations. can the transaction? right as that through revenue any It that of of that that the expenses us fab it? sort enough so close you And think way offset to sounds those just fixed like through impact I there’s Is maintaining guess, largely about

Steve Daly

that’s think right. I

you sort I X% should that think think to at revenue. our rate their of overall of X% of run revenue total

low it’s a number today. very So

first their our all plan to line, we is product globally, also that the so think about six-inch has And I And in talked line the out not as this And say could. to maybe has And growth. but rationale product important I doing if to to the migrate management that, market just like I acquisition investors begin let done. that the highlight for the understand. we potential team is to new MACOM, of me tremendous that build are line. This only the think acquisition just business for the for products

to that currently an brings we OMMIC today. don’t MACOM expertise have

we X.XX even As production process. nanometers. everybody working on nanometer our knows, XX nanometer XXX nanometer just XXX or launched and XX and to is OMMIC

years that’s to they So take would those and – along in do. products, are MACOM further developing producing which

tremendous of by spent bringing So portfolio. time amount saved MACOM the OMMIC or into

epitaxial These They the targeting to $XXX we opportunity, much And million and very which interesting high at frequency a have medium tremendous when business ASPs, size market developed margins, which will have about medium SAM. have be is metal complement they – some small also business. not of be look to will This high a have doing. to we They products technology performance is capability barriers that commodity entry. high will niches. quite a the improve very to that Second, an unique. contact growth we’re incredible work

wave time, to leadership arguably be will today successful, below this think business be take So just at forward of we’re profitable to is That And look is business. drive we our a that breakeven, the position. when position it we our growing part take frequencies. in to we hovering but we will goal want a and that millimeter to

Operator

our moment Thank next question. please you. One for

the Our coming Tom line of next O’Malley from with question Barclays.

open. line is Your

Tom O’Malley

guys. for question. my Hey Thanks taking

clear, talking of So, about any there? strength others Industrial if you’ve the the a when your get guide. you’re into would from? talk about secondly, big side. to ordering talk I just weakening reduction the there’s the substantial. that’s where look you’re OpEx patterns coming of And Defense in out some peers you some of then to I you out into about heard business. midpoint Industrial Could seeing kind changes on in talk the year, Could It’s quarter, about you in relative as pretty your and look expect

You been so it’s past, declining to guys very quickly? the just have much. how Thank in at that but good you want understand

Steve Daly

Tom. you, Thank

take of the part then handle I’ll question, that So can first second the piece. Jack

believe As this you QX also market of know, is record been Industrial Defense even in have grow. coming was was opportunities share a a XXXX seeing quarter, but gaining and last record year we’re to I from Industrial. and MACOM, continued FY Most QX for year. And not only Defense, may

end for over over talked last that to the the market I&D believed we’ve year two a we would term, or And us. continue long be strong

we of year. So the market. this full grow are projecting we’re low things market think lot We will for that good actually in single doing a digits

while the we terms continuing are their But sort order and a the what In of think normal basis. regular speaking, smaller industrial more pockets there ordering companies generally sure. of pattern, inventories, for are on to are down medium burning weakness larger companies see of the I is

just And then the I Jack that. over to turn I’ll OpEx, highlight it before about

in well done the team financial with As to long-term much MACOM has issues short-term And entity we the had when to script, day focus Huawei at while financial as we deal macro And that went mentioned now performance. a when shutdowns. deal industry. and the with here very with we on the jaw then COVID dealing list, softness the performance in on global we had the as super

we they to team address have and come issues talented very that ready get them. a is try of as So in front to

throttling some our and bit And we about spending. that’s back of a seeing you’re little think as QX what of

ready that. some were and address to the actions Jack to sort for detail and this. of we’re were surprised environment current not add can We those we by taking So

Jack Kober

really of and through the maintaining business, that referring flows been the the operating of things to Those Yes, upon to that, at all spending, some line. levels into to into regard ripples items of key as we that from then some that that spending maintaining and look with the attributes guide the our organization. expense I a just But of going have continuous of of goods cost the profitability and QX. Tom, I doing and flows build to address business. guess also it’s discretionary the your improvement into to we’re was perspective It question

I we’re a coming But the There’s of organization and things touched remarks, of outside commissions upon things coming including doing services compensation that variable will couple things down a supplies. top be prepared across my different line bit. and down. like like things there’s which in number obviously, with our a

So that staffing – there’s to a think looking of items reduction consolidation we’re And what looked call I the comes we’ve the including had. thing minor other contributing are a of that. series way continually We assess business, at together. have to would organization I we did that is design small the the a center one a

OpEx to. you referring contributing those also items were that savings So the to some are of

Tom O’Malley

Thank you, guys.

Operator

next One question from for Bank line question. you. of Arya of Thank moment the our America. our coming with next And Vivek

line Your open. is

Blake Friedman

provide any general, trends down heading by you about Thanks. to focusing you Hi, for I’m seems my Vivek. this Based on revenue for comments perspective. from Thanks China quarter. the and in like question. the on on Blake can into quantify Or geography is sequentially were QX? taking just demand in potential customers commentary your XX% geography? Friedman a Can on sales headwind

Jack Kober

Blake. the QX total that fiscal represented mentioned back revenue I our had to regard China year. full our XX% think China we compared this Jack, of in is revenues, for to Yes, and With XX%

you So was noting. not [Indiscernible] steep thought down we it’s quite as to. were worth referring an what as area But that

Steve Daly

that add Yes, I’ll comment. just to

a not only also microwave there. and green and with we They electric our also markets a components that growth vehicles. market opportunities, products of high RF the sell be see including continues for We some China So wave energy and to products, of markets emerging into MACOM. our a laser lot analog the have strategic performance lot light industrial but

those to break constantly into looking technology. our we’re opportunities so applications And for with

again believe manufacturing OEMs since Europe then just a in that of tremendous the issue facility the and the of us X% to help opportunities setting wanted up will geography, And of a European-based major about double we up into our is highlight wafer in some growth fab you of brought take sort there’s inside I that digits. revenue, backyard which the European up in Union

Blake Friedman

as you Thank quick calls, revenue believe a a I $X mentioned follow-up. Got past On it. just Understood. target. then you. billion And

believe fiscal think was it we I XXXX.

given weaker the weakening there’s to adjustment Just – just curious macro target? today, that macro any if

Steve Daly

we’re Well, target not of changing $X the billion.

can aspirational goal. we past, talked the confident an about is And as that. we’ve still We’re that in hit

number in the is think claimant. I what’s with current changed here time last of that months really the the given associated line

revenue shifting reasonable it’s in think that to of billion out of be I time. assume that timing we’ll the $X

And that. so we haven’t fully reviewed I’ll highlight that.

strategic aligned through come targets is with Our typically planning a process. very detailed which analysis, bottom-up our

which and frame think, fiscal fair that we’ll – headwind, be environments evaluating would July are one would to I conclude complete push when to time. in providing out fiscal be a would in fair where But we that time so we XXXX. the the that your in it’s cycle, it’s August suspect I think and And assume we’ll to point, XXXX

Operator

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

is line open. Your

Harsh Kumar

of Hey, Yes. XX%, of couple steadily in that going to the now Appreciate wanted very kind do been range. thanks, clamping you’ve kind ask guys. were the They up quarters, last Steve, stuck are maintain to I of a investors and and Jack we XX.X% while on you gross about much. guys for as for margins. profitability OpEx appreciate

I you that. But know have plans and be to than higher aspirations

mid-XX%s up what some And mid-term go be might your goal? would I just the I to make that long-term, margin things So of a follow-up. potentially to curious, have if was that’s maybe then that the

Steve Daly

Sure.

first can of maybe I’ll and add question So the take that on. part Jack

in represent gross products that business price. of through think that to high-XXs would would the these leading we’re frequency into really development and is that be Examples And would from drive our higher exists come the the today. be are entire we the today would I accretive. margins new So we’re portfolio drive low-XXs That we the products the come an our performance. are market, margins product example portfolio to in that to the where highest – way that expect cutting-edge portfolio and to business OMMIC delivering can margins portfolio the the often be going a

drive GaN that’s that from Second, just that XXX-nanometer coming addressing. we that margins million we will about, our $XXX announced, latest we’ll And that as process talked we SAM be process believe our up. a products

highest rate. So highest our power theme data here highest and at MACOM frequency, is the

if we within up. stay we the the successful we And that margins markets edge, will be the and on driving that technologies develop,

that is will products. sure so moving and differentiated operational going it. strength thematically to phase how margins next to is potential the we’re technology by issues. executional there’s driving the But be about additional the and not Maybe I’m of we up And there. do your

Harsh Kumar

sorry. helpful Very –

Jack Kober

work just quarters. add the terms that, some number in we’ve been Harsh, we past margins over to And the of made gross we’ve as before, of with to progress our pleased of

I or if that back look you improvements. over, think, eight have above sequential quarters, it’s and number XX% seven think been I we’ve made

the third allows them our and of manufacturing some also well. being And model with as ramp different with that fab going internally products to that over parties, certain provides that business certain we out us protection with flexible of to our have cycles us varying

gross margins. that of kind protects So our overall

forward. as the our we’ve and we’re stronger feel that past been like contributions point place margin look from the we made years, all we operations making couple of a in the view, as improvements will much we that gross and those teams go over From of a continue have at

Harsh Kumar

Tom earlier. to that Thanks, O’Malley asked guys. my a wanted I back to for question And follow-up, go

phrase a core out there play, industrial too of weakness are of that space the bit industrial where hard all are the They’re space, maybe consumer. calling So calling core In in sort differently. the weakness you the industrial that. most not out in companies other are – players many question little any

one it’s had focusing start if to or a of could that as but maybe of two that. see starting provide issues year on our if wanted some you maybe with if I put where to something around blinders So actually growth it’s last that, based broader should more function interest, area than some and you you’re or color customers just curious or on understand we the

Steve Daly

comes the industry that Yes. of microcontrollers than specific And ASICs. service may or to different MACOM business, think large really that industrial it I some be bellwethers down with which

first So – that be the so we would have point.

I think performance. you’re seeing MACOM specific

example, We sell, for into test measurement. openers, sensors, equipment and and door medical

say have don’t really that markets consider those we been for But that would MACOM, and ourselves to a expect I performing well continue. bellwether. we So

industry our trends. I a we’re lot into from trend So fact read that deviating maybe wouldn’t the

Operator

question Thank David from next Benchmark. with the you. our line of And Williams coming

Your open. line is

David Williams

through that of the thinking some get question of some feels this demand, fairly on be good and of wanted once And and if maybe market congrats on seeing ask, but back the just forward that earlier, that Hey, here. it and to? movement we the kind demand for the the look that COVID morning. first more China we rebound of if as about maybe freedom the a you’re just we quarter, about kind half was Thanks possibility how can impact, the that’s could head curious second that feels quickly. and of question kind of potentially execution I upside And this to into year, could like a a environment an of like there there. the into

Steve Daly

for you the Thank Yes. question.

just possible, it more taking view of and a Chinese think New be could we said, conservative probably coming we with of So upside. some But little are is bit there off that a Year.

haven’t sort people – of getting work. We are to really back

inventory levels seeing China, We have the the and positive we’re trends channel there. in some within monitoring been

way think the three But will too I pace. things which But months. going go next improving. call months is to the to it’s quite over at six There’s China way we do a that also there’s of remain frankly, to muted potential potential early think the it

products. to counter the continue is Europe. way So introduce that we’re we’re going North to on to we’re focus America going Obviously, to and going

we customers The ability slowdown starts up really can of to activity to really engage directly. stronger really with and revenue for will we China growth into and staff when and to be that also COVID the hampered ignites engage has MACOM. our more overhang think send and open our But customers, better that more China

in been different and Today, also to MACOM engineers that just drive are application are in we of feel has they’ve like our under we sales four cities. keeping MACOM business operate application employees We front in visiting growth. centers doing about but rotate a folks that job customers, typically China. to XXX These great and and customers, need and development

fall of calendar year, from middle good things that. will So happens we the if that think the towards

David Williams

or a strength for Thanks center and anything seeing for color. of so better then or And is the worse. around my Great or you’re data any from and are areas areas weakness particular that just maybe even maybe maybe that follow-up that. customer much

I color So kind would of we’re there helpful, be think. just

Steve Daly

Yes.

I point center. So the because the center one are year a to lot make and in year revenues lot this of year. we into this want trends year seeing will our will a data ship hearing last lot inside of a this about data roll negative – fiscal of our just think we because reasonably actually revenue our – But we be couldn’t strong products the fiscal

will so complex substrate the a switches in had growth product. that that includes for provide And opportunity materials our of many included or MACOM. Crosspoint And packaging that

That’s that, these the speaking, improving. for or revenue we’re CWDMX, applications supply So or is generally AOCs, been of helping our have the AOCs center. would markets data platforms this like weak. SRX NRZ these I year it’s short-reach, whether chain that relatively Outside on, say,

in been has offset activity in PAMX our an increase That by business.

growth reasonable seeing PAMX DRX we’re applications. and example, in SRX for So for

we’re on So a it’s customer. positioned the It that where customer, – really would I depends at mix. say there’s

a be had we in year. we application won’t revenue very we year, that forecast that in were platform last our large a example, know of this For DRX

and are significant constantly on winning our feel I’ll and our So is of customers customers’ customers. there things of general, are market our amount depending the customers thing we then in like, is that moving at which environment last at the a inventory do point out And business.

will our that of electronic of provide bit also this CDRs, devices, of nature. a drivers, TIAs, so And a headwind for things a lot

Operator

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

Your is open. line

Tore Svanberg

a and OMMIC are little talk about I bit today. where Thank good was and could more Yes. Steve, hoping you revenues you the morning.

business, And introduce it it’s this assume of a maybe where that’s intend as $XX other million primarily sort like mean technology business. I there I you will areas well? in the to the obviously that be are as sounds grow So still main satellite satellite today? Should you segment? Or

Steve Daly

Right.

I about closed be too deal a we their So about little given haven’t specifically yet. the want just business, careful talking to

there’s OEMs. that some of is tremendous I visit And list actually would and website. on their on to North amount information – European of I what legacy see of So information defense public customers. blend a a their based ommic.com. They satellite manufacturers, everybody encourage some you’ll American really what

So satellites, well because typically they’ve been line, as defense X-inch manufacturers on applications. been have a they operating targeting as satellite

operate we to as including future, want high-volume Remember, MACOM think the W many that higher at band. so business commercial up can worlds, is their not And but the we the markets frequencies. the about bring them already to products into different in today in,

But today. the speaking, they’re way. you’re provides applications just opportunity a So – Generally thinking defense company to it’s it satellite great in and right about the grow.

Tore Svanberg

That’s business on perhaps question a of And dynamics. sort very helpful.

to maybe on of turns comment the the terms to this your you is in So how few XX% XX% for expect turned March you get been last quarter? quarter. much even to where it sort the normal can about you run you you semiconductor of business But mentioned I going the to guidance need years midpoint nothing there’s know industry. forward? XX% the And

Steve Daly

So in seen I increase the QX, quarter it QX. believe XX%. it we was XX% was the Last And before turns an – or in then have business. quarter,

fact this are trend MACOM customers and are have are cycle down, think coming that lead suppliers turns inventory. now is times coming times waiting So we Many do business. knowing see a We down. of that increasing coming buying, like the from

So other orders, people say, on curve normal actually lead they’re where not performance. are we’re a side of in let’s more dynamic the long returning that placing to,

think in comment I what we looking say meet will our really and that to booked were We the in can’t our making backlog, quarter. at have on methodology past following that on within the we’re ship terms same would of we the book what assumptions current percent targets.

trend book-to-bill year. a So for And highlight an I had that’s and of point think had we here, one that a thing. increase, fiscal We – tremendous fiscal which I’ll we are X.X:X a – just important is but booking think performance seeing our that we XXXX. book-to-bill good last

then X a we QX, book-to-bill in And quarter, of everybody knows had and last X.X.

strong in have exposure. regarding So We we consumer our backlog. position very a are don’t

and top of XX% is and X% is our one Our our of more revenue product total XX% big than XX customers, no about no revenue.

very So we business. a diversified truly have

important think to And I that’s so note.

Operator

Thank line Matt question next you. with coming Cowen. our from And of the Ramsay

open. line Your is

Sean O’Loughlin

And sort Hey, time into you dig revenue quarter. congrats good getting of that’s expectations finish is on know for helpful. you of opportunity, on nice on I of to process million initial long-term the But across in the thanks and Congrats could to maybe ramp for that just be terms and SiC that there. that long-term then a that line. But scale wanted And morning guys. This if the mentioned. question. sort opportunity $XXX GaN first, the taking market. deeper on addressable would on the Sean that ask for Matt. O’Loughlin I a bit

Steve Daly

Sure.

maybe million satellite SAM satellite. whether is defense-related, that we downlink primarily that key So we’re and communications, defense, $XXX uplink, to identifying satellite as or address market second the it’s as aerospace want well to is

So we defense on. know, these as The markets that will slow-moving are the market. market, is focus you a

into the take revenue. to will wins turn it the technology design product So time get and

a so month. we expect the beginning probably sample we’re to some of think fiscal this in As QX rolling fiscal I into modeling of amount non-material today, would revenue and announcing to to appear we’re this and see do just starting year year of I starting about XXXX. this

a numbers is might think what it’s fiscal those too for of and I So really growth no year. tell. this be, early opportunity XXXX. in terms This to material contribution XXXX And way

Sean O’Loughlin

similar your It XXXX then accelerating of And part was Thanks. the opportunity difficult a I more impact and that trends if you’re makes traction power your GaN was LDMOS. commented sense. Yes, wondering RF transition forward. long-term that wanted the in maybe be question had gaining peers helpful. and different going specifically one a year, like but ask And broader to Super may maybe sounds I is to GaN going on set how world. a seeing of over telco.

Steve Daly

we, would MACOM HBT, that’s LDMOS. that If do focus not today sell on strategy, arsenide gallium GaN. certainly We course, true, then support of Right. and, pHEMT,

the sector very the look that are So in size, defense at commercial good to also the I highlight have thing a are different that that we GaN again, consider would And when focused for I of market markets line, we equal focusing have is on the communications that overall segments and defense. you profit extent side we those MACOM. the on the on opportunity, but industrial and about are and and you believe that. would

Operator

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

Your open. line is

C.J. Muse

whatever get the perhaps about that good how cyclical about you you shortages three remain? of hoping of morning. we metrics. of I look little to potential each, normalization kind inventory Yes, guess, think of what once kind are correction will the backlog? could guess kind within thinking kind was different times speak a of as you visibility and normal businesses bit through I and like And lead I sub-segments

Steve Daly

Thanks the Great. question. for

the So of in it’s technologies. our hard to as as well summarize that aggregate because portfolio diverse

DSP. As two up diodes terminal all way you know, PAM-X building the we’re in to manufacturing

manufacturing different our all are of So and across the back these end cycle, the the very the test customers portfolio that. time, time, know

So very we’re where customers on products, our depending ordering selling different have our patterns.

about And think parse I normalized it’s think that we a so just when normalized hard here. environment, to –

answer really can question I sure not specifically. I’m So your

C.J. Muse

is of on to current versus much I how at relative view I guess, your, trying not? of based optimistic what backlog is kind for I’m XXXX guess, get

Steve Daly

looking not that to. need goals still on at it’s to to based that achieve the book we amount the of based we because need It’s necessarily backlog. say would I significant a markets So on business

we on numbers assumptions future part making of an and in their bottoms-up customers, based a programs sales forecast we’re and demands. customers with So getting understanding and where identify speaking

only year, – looking that’s not we specifically data about we when fiscal at, so in talk we’re And our the the backlog.

guidance. as why time, one of as go in to imagine, reasons that’s Clearly, guidance. there’s difficult don’t full I out in think can you would environment, so give and generally give it we more you And year full even be the this year more risk,

C.J. Muse

so much. Thanks

Steve Daly

you. Thank

Operator

[Operator with Instructions] the question Craig-Hallum. of And Richard Shannon line coming our next from

is line Your open.

Richard Shannon

my the for the with Maybe want guys calling correctly weakness Steve, I’m got areas thanks notes, of taking digging Well, here, the into just business, I to that broadband. side question. of checking confirm either specifically different out telecom coherent. within areas in differences of expectations And when more other are XG in and seeing within businesses patterns. normal dynamics you by seeing not segments, or customer return here you’re my and of levels then to inventory those two one broadband, those them telecom I weaker and hopefully, XG here activity

Steve Daly

Right.

Was we in you I say if are your heard that seeing weakness question? So that I coherent? correctly, would

Richard Shannon

if wondering that I’m Yes, was…

Steve Daly

due think a weakness weakness say Yes. broadband, we very inventory we that definitely CATV of front primarily customers major there’s and we are on front have we XG the then we different on primarily that different with from amplifiers. or end amount And end RF then modules burn XG, very have bit and of down believe the broadband. story inventory significant are the at particularly broadband, – customers so markets, that’s there in large like there, a things dynamics seeing when back really in look inventory, would adjustments. side, to our And I

Richard Shannon

going And have mostly They you on great. here. the talked may structural reductions missed March sound topic in about of here team then following I quarter OpEx, into Perfect. kind nature. up the the Okay. here, some of That’s but

just make basis And from absolute then the case here. an the is sure that’s should So see year. there dollar rest of going the to pattern want we a through

Jack Kober

OpEx we’re going not of as into in Yes. but an what structural. that majority more And would the discretionary Richard, it’s doing say Jack. our are a QX, is on some side this I look in standpoint. the there guide items from of to you is There

all as appropriate pushed look discretionary rebounding will level further sure do into that, are So bit profitability. But here, some a there of little we the we to be maintaining said items out, having as out amongst future make that you some want those periods. an things we’re of

all we spending of be as with So forward. will judicious our go we

Operator

Thank for call to back you. time. And now would this turn Steve Daly over like no Mr. at remarks. to closing I’m I further any questions the showing

Steve Daly

you. Thank the would day. MACOM. OMMIC past a I like the quarter. closing, thank their to for Have to contributions welcoming closing to acquisition In nice look We this and our forward employees team

Operator

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

You disconnect. now may

MACOM Technology Solutions (MTSI) 2 Feb 232023 Q1 Earnings call transcript