MACOM Reports Fiscal Third Quarter 2017 Financial Results

LOWELL, Mass. — (BUSINESS WIRE) — August 1, 2017 — MACOM Technology Solutions Holdings, Inc. (NASDAQ: MTSI) (“MACOM”), a leading supplier of high-performance RF, microwave, millimeterwave and lightwave semiconductor products, today announced its financial results for its fiscal third quarter ended June 30, 2017.

Third Quarter Fiscal Year 2017 GAAP Results

  • Revenue was $194.6 million, an increase of 36.7%, compared to $142.3 million in the previous year fiscal third quarter and an increase of 4.6% compared to $186.1 million in the prior fiscal quarter;
  • Gross profit was $92.6 million, an increase of 25.2%, compared to $74.0 million in the previous year fiscal third quarter and an increase of 34.5% compared to $68.9 million in the prior fiscal quarter;
  • Gross margin was 47.6%, compared to 52.0% in the previous year fiscal third quarter and 37.0% in the prior fiscal quarter;
  • Operating income was $6.6 million, compared to $10.2 million in the previous year fiscal third quarter and an operating loss of $33.6 million in the prior fiscal quarter; and
  • Net loss from continuing operations was $14.0 million, resulting in $0.22 loss per diluted share, compared to net income from continuing operations of $21.4 million, or $0.11 income per diluted share, in the previous year fiscal third quarter and net loss from continuing operations of $134.3 million, or $2.21 loss per diluted share, in the prior fiscal quarter.

Third Quarter Fiscal Year 2017 Adjusted Non-GAAP Results

  • Adjusted gross margin was 58.5%, compared to 57.3% in the previous year fiscal third quarter and 58.5% in the prior fiscal quarter;
  • Adjusted operating income was $52.9 million, or 27.2% of revenue, compared to $34.9 million, or 24.5% of revenue, in the previous year fiscal third quarter and $48.6 million, or 26.1% of revenue, in the prior fiscal quarter;
  • Adjusted net income was $43.9 million, or $0.67 per diluted share, compared to adjusted net income of $27.9 million, or $0.51 per diluted share, in the previous year fiscal third quarter and adjusted net income of $39.4 million, or $0.63 per diluted share, in the prior fiscal quarter; and
  • Adjusted EBITDA was $61.6 million, compared to $42.1 million for the previous year fiscal third quarter and $56.7 million for the prior fiscal quarter.

Management Commentary

"We delivered 5 percent sequential growth in our fiscal third quarter, in line with guidance, despite a weakening carrier spending environment in China," remarked John Croteau, President and CEO of MACOM. "Countering this cyclical weakness, our A&D and multi-market businesses remained solid, and our Data Center business continued to outperform, enabling us to meet guidance.

"Our Networks business overall was up 43.5 percent year-over-year, despite a sequential decline in telecom Optical revenue. PON was down considerably year-over-year and now comprises less than 5 percent of total revenue. Carriers and OEM customers are now squarely focused on deploying 10G PON, which we expect will drive a new wave of investment next year. However, the rapid transition away from 2.5G has created a temporary overhang for our business. Metro/Long-Haul business in China was also weaker than expected in the third quarter, but very strong in other regions.

"The decline in Optical was offset by growth in our Data Center businesses, which were up strong sequentially and 310 percent year-over-year, now totaling almost 30 percent of company revenue. We continue to ramp supply aggressively to meet the demand in these Cloud-based businesses.

"Our visibility into carrier demand in China remains limited. We expect PON to be sequentially down again in the fiscal fourth quarter. This, combined with continued pushouts in Chinese provincial deployments, will create a gap in demand for our fiscal fourth quarter, which cannot be overcome by growth in Data Center revenue."

Mr. Croteau concluded, "Given the current environment, we have taken a conservative approach to fiscal fourth quarter guidance. We will responsibly adjust investment levels in line with our revenue outlook, while increasing focus on successfully executing on our growth strategies. We remain confident that fiscal 2018 will deliver revenue growth in line with our target annual financial operating model of 20 percent."

Business Outlook

For the fiscal fourth quarter ending September 29, 2017, we expect revenue to be in the range of $165 million to $174 million. Adjusted gross margin is expected to be between 58% and 61%, and adjusted earnings per share between $0.45 and $0.50, on an anticipated 66.7 million fully diluted shares outstanding.

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