Group 1 - MACOM Technology Solutions (MTSI) is positioned to benefit from multiple secular growth trends in the connectivity and computing space [1] - The company is rated a Buy with a price target of $130 [1] Group 2 - The investment approach at Henriot Capital is fully quant-driven, relying on data-driven models for stock selection [1] - The motto of "invest first, investigate later" emphasizes a disciplined focus on model recommendations without human bias [1]

Core Insights - MACOM Technology Solutions Holdings, Inc. (MTSI) reported second-quarter fiscal 2025 earnings of 85 cents per share, exceeding the Zacks Consensus Estimate by 1.2% and up from 59 cents per share a year ago [1] - The company posted revenues of $235.89 million, surpassing the Zacks Consensus Estimate by 2.52% and increasing from $181.23 million in the same quarter last year [2] Revenue Breakdown - Telecom Market: Generated revenues of $65.2 million, accounting for 27.6% of total revenues, reflecting a year-over-year increase of 38.1% driven by high demand for products supporting the 5G market in the U.S. [3] - Data Center Market: Revenues reached $72.2 million, representing 30.6% of total revenues, with a significant year-over-year growth of 67.2% due to strong demand from Internet service providers [4] - Industrial & Defense Market: Generated revenues of $98.5 million, making up 41.8% of total revenues, with an 8.4% year-over-year increase attributed to high demand for electronic warfare and secure communications products [5] Operating Performance - Non-GAAP gross margin for the second quarter was 57.5%, an expansion of 40 basis points from the previous year [6] - Non-GAAP operating expenses were $75.8 million, an increase of 8.4% year-over-year, but as a percentage of revenues, it contracted by 280 basis points to 32.1% [6] - Non-GAAP operating margin improved to 25.4%, up 320 basis points from the prior-year quarter [7] Balance Sheet Highlights - As of April 4, 2025, cash equivalents and short-term investments totaled $681.5 million, an increase from $656.5 million as of January 3, 2025 [8] - Inventories rose to $209.3 million from $198.4 million reported in the year-ago quarter [8] - Long-term debt obligations were $339.1 million, slightly up from $338.8 million in the previous quarter [8] Future Guidance - For the third quarter of fiscal 2025, MACOM Technology expects revenues between $246 million and $254 million, exceeding the Zacks Consensus Estimate of $230.1 million [9] - The anticipated non-GAAP gross margin is projected to be in the range of 56.5-58.5% [10] - Adjusted earnings per share are expected to be between 87-91 cents, higher than the Zacks Consensus Estimate of 84 cents [10]

Core Insights - M/A-Com reported revenue of $235.89 million for the quarter ended March 2025, marking a year-over-year increase of 30.2% and exceeding the Zacks Consensus Estimate of $230.08 million by 2.52% [1] - The company's EPS for the same period was $0.85, up from $0.59 a year ago, also surpassing the consensus EPS estimate of $0.84 by 1.19% [1] Revenue Performance by Market Segments - Telecommunications revenue reached $65.17 million, exceeding the estimated $57.36 million, reflecting a year-over-year increase of 38.1% [4] - Industrial & Defense revenue was reported at $98.54 million, slightly below the average estimate of $100.92 million, with a year-over-year change of 8.4% [4] - Data Center revenue amounted to $72.18 million, surpassing the estimated $71.82 million, showing a significant year-over-year increase of 67.3% [4] Stock Performance - M/A-Com shares have returned +6.4% over the past month, while the Zacks S&P 500 composite has seen a +11.3% change [3] - The stock currently holds a Zacks Rank 3 (Hold), indicating potential performance in line with the broader market in the near term [3]

Financial Performance - Revenue for the three months ended April 4, 2025, was $235.9 million, a 30.1% increase from $181.2 million for the same period in 2024[124] - Gross profit for the six months ended April 4, 2025, was $247.3 million, compared to $182.5 million for the same period in 2024, reflecting a 35.5% increase[124] - Net income for the three months ended April 4, 2025, was $31.7 million, compared to $15.0 million for the same period in 2024, indicating a 111.5% increase[124] - Revenue increased by $54.7 million, or 30.2%, to $235.9 million for the three months ended April 4, 2025, and by $115.6 million, or 34.2%, to $454.0 million for the six months ended April 4, 2025[126] - Gross profit for the three months ended April 4, 2025, was $130.2 million, representing a gross margin of 55.2%, compared to $95.2 million and 52.5% for the same period in 2024[132] Operating Expenses - Operating expenses for the three months ended April 4, 2025, totaled $95.3 million, up from $79.8 million in the same period in 2024, representing a 19.3% increase[124] - Research and development expenses for the three months ended April 4, 2025, were $57.8 million, an increase from $45.6 million in the same period in 2024, reflecting a 26.5% rise[124] - Research and development expenses increased by $12.2 million, or 26.8%, to $57.8 million for the three months ended April 4, 2025, and by $33.2 million, or 39.0%, to $118.2 million for the six months ended April 4, 2025[133] - Selling, general and administrative expenses rose by $3.3 million, or 9.6%, to $37.4 million for the three months ended April 4, 2025, and by $5.6 million, or 7.9%, to $76.7 million for the six months ended April 4, 2025[134] Cash Flow and Liquidity - Cash and cash equivalents at the end of the period were $110.9 million, down from $115.0 million at the end of March 29, 2024[139] - Net cash provided by operating activities was $105.3 million for the six months ended April 4, 2025, compared to $51.3 million for the same period in 2024[140] - Cash flow used in investing activities was $167.1 million for the six months ended April 4, 2025, primarily due to cash paid for acquisitions and purchases of short-term investments[142] - As of April 4, 2025, the company held $110.9 million in cash and cash equivalents and $570.6 million in liquid short-term investments, indicating strong liquidity[146] - Cash provided by financing activities for the six months ended April 4, 2025, was $26.3 million, mainly from $86.6 million in proceeds from convertible notes[144] Debt and Financing - The company reported a loss on extinguishment of debt amounting to $193.1 million for the six months ended April 4, 2025[124] - The company recognized a $193.1 million loss on extinguishment of debt in the six months ended April 4, 2025[136] - The company exchanged approximately $288.8 million in 2026 Convertible Notes for $257.7 million in 2029 Convertible Notes and issued 1,582,958 shares valued at $205.9 million[147] - The company plans to use remaining cash and short-term investments for general corporate purposes, including working capital and debt payments, indicating a focus on financial stability[150] Market Outlook - The company expects revenue growth in the Data Center market driven by the adoption of higher speed processing technologies and upgrades to data center architectures[115] - Future revenue growth is anticipated from the expanding product portfolio in the Industrial and Defense market, including applications in test and measurement and satellite communications[114] - The Telecom market revenue is expected to grow due to 5G deployments and the expansion of communications equipment[116] Tax and Interest - The estimated annual effective tax rate for the fiscal year ending October 3, 2025, is expected to be approximately 17%[138] - Interest income increased to $7.2 million for the three months ended April 4, 2025, compared to $5.4 million for the same period in 2024, and to $14.2 million for the six months ended April 4, 2025, compared to $10.9 million for the same period in 2024[135] - A 1% change in interest rates could impact annual interest income by $6.8 million based on cash and short-term investment balances as of April 4, 2025[154] Currency Risk - The company has limited exposure to foreign currency risk, with most international agreements denominated in U.S. dollars, minimizing potential negative impacts[155] - As of April 4, 2025, the company had $25.1 million in notional forward foreign currency contracts to hedge against currency fluctuations[156] Government Funding - The company announced a preliminary agreement for potential funding of up to $70 million from the U.S. Department of Commerce under the CHIPS Act[149]

Group 1 - M/A-Com reported quarterly earnings of $0.85 per share, exceeding the Zacks Consensus Estimate of $0.84 per share, and showing an increase from $0.59 per share a year ago, representing an earnings surprise of 1.19% [1] - The company achieved revenues of $235.89 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 2.52%, and up from $181.23 million year-over-year [2] - M/A-Com has outperformed consensus revenue estimates four times over the last four quarters [2] Group 2 - The stock has underperformed the market, losing about 12.7% since the beginning of the year compared to the S&P 500's decline of 4.3% [3] - The company's earnings outlook is crucial for investors, as it includes current consensus earnings expectations for upcoming quarters and any recent changes to these expectations [4] - The current consensus EPS estimate for the upcoming quarter is $0.88 on revenues of $235 million, and for the current fiscal year, it is $3.43 on revenues of $926.29 million [7] Group 3 - The Semiconductor - Analog and Mixed industry, to which M/A-Com belongs, is currently ranked in the top 18% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5] - M/A-Com currently holds a Zacks Rank 3 (Hold), suggesting that the shares are expected to perform in line with the market in the near future [6]

Financial Data and Key Metrics Changes - Revenue for Q2 fiscal 2025 was $235.9 million, an increase of 8.1% sequentially, with adjusted EPS at $0.85 per diluted share [5][28] - Adjusted gross profit for Q2 was $135.6 million, representing 57.5% of revenue, consistent with previous quarters [28] - Adjusted net income increased approximately 8% to $64.3 million compared to $59.5 million in Q1 [33] - Cash and short-term investments totaled $681.5 million, up $25 million from Q1 [36] Business Line Data and Key Metrics Changes - Revenue by end market: Industrial and Defense at $98.5 million, Data Center at $72.2 million, and Telecom at $65.2 million [6] - Telecom revenue increased 18% sequentially, Data Center up 11%, and Industrial and Defense up 1% [6] - The Q2 book-to-bill ratio was 1.1, indicating strong bookings and a record backlog [7] Market Data and Key Metrics Changes - Industrial and Defense demand is growing due to U.S. and international DoD system upgrades [8] - Telecom order trends are improving, particularly in 5G infrastructure and broadband access [9] - Data Center business remains strong, driven by demand from cloud service providers [10] Company Strategy and Development Direction - The company focuses on designing semiconductor products for high power, high frequency, and high data rate applications [14][22] - Plans to expand European presence and capabilities through the acquisition of a wafer fab in France [72] - Emphasis on innovation in semiconductor process technologies to maintain competitive advantage [15] Management's Comments on Operating Environment and Future Outlook - Management acknowledges increased uncertainty in the markets but remains optimistic about product portfolio and growth strategy [39] - The company expects revenue for Q3 to be in the range of $246 million to $254 million, with growth anticipated across all end markets [39] - Management highlights the volatility in the data center market but sees potential for continued growth driven by high data rate trends [44][46] Other Important Information - The company is transitioning the Wolfspeed RF business fab, with activities on or ahead of schedule [24] - Recent customer engagements include a supplier award from BAE and pilot production orders from a European radar manufacturer [26] Q&A Session Summary Question: Data center business growth sustainability - Management indicated that the data center business has been growing and is on track for mid-forty percent year-over-year growth, driven by higher data rates and industry trends [43][44] Question: Impact of Wolfspeed RF fab transition on gross margins - Management noted that while the RF business had low profitability initially, efforts are being made to improve margins, and the transition is expected to be neutral or positive for gross margins [48][50] Question: Budget trends in data centers - Management sees continued investment from ISPs in data centers and high levels of innovation in platforms, indicating a positive outlook for growth [55][56] Question: SATCOM business growth and opportunities - Management highlighted the growth in the SATCOM business, particularly with new product lines like the OptoAmp, and the shift to higher frequency bands [60][62] Question: European defense spending exposure - Management confirmed growing direct exposure to European defense spending, supported by the acquisition of a wafer fab in France [72][74]

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was $235.9 million, an increase of 8.1% sequentially, with adjusted EPS at $0.85 per diluted share [4][26] - Adjusted gross profit was $135.6 million, representing 57.5% of revenue, consistent with previous quarters [26] - Adjusted operating income increased to $59.8 million, up 8% sequentially from $55.4 million in Q1 [28] - Adjusted net income rose approximately 8% to $64.3 million compared to $59.5 million in Q1 [30] - Cash flow from operations was approximately $38.7 million, down $28 million sequentially but up over $20 million year-over-year [32] Business Line Data and Key Metrics Changes - Revenue by end market: Industrial and Defense at $98.5 million, Data Center at $72.2 million, and Telecom at $65.2 million [5] - Telecom revenue increased by 18% sequentially, Data Center by 11%, and Industrial and Defense by 1% [5] - The Q2 book-to-bill ratio was 1.1, indicating strong bookings and a record backlog [6] Market Data and Key Metrics Changes - Demand in the Industrial and Defense sector is growing, driven by U.S. and international Department of Defense upgrades [6] - Telecom order trends are improving, particularly in 5G infrastructure and broadband access [7] - The Data Center business remains strong, with demand from cloud service providers and rapid shifts in technology deployments [8] Company Strategy and Development Direction - The company focuses on designing semiconductor-based products for high power, high frequency, and high data rate applications [13][21] - MACOM aims to build a best-in-class semiconductor portfolio, emphasizing advanced process development and innovation [14] - The strategy includes expanding capabilities in Europe and enhancing the European Semiconductor Center's offerings [18] Management's Comments on Operating Environment and Future Outlook - Management acknowledges increased uncertainty in the markets but remains confident in the product portfolio and long-term growth strategy [37] - The company expects Q3 revenue to be in the range of $246 million to $254 million, with growth anticipated across all end markets [37] - Industrial and Defense is expected to lead with approximately 10% sequential growth, followed by Data Center at 5% [37] Other Important Information - The transition of the Wolfspeed RF business fab is on or ahead of schedule, with plans to increase capacity by up to 30% [22] - The company received a supplier award from BAE for quality and delivery performance [24] Q&A Session Summary Question: Data center business growth sustainability - The data center business has been growing significantly, with expectations of mid-40% year-over-year growth for fiscal 2025, driven by higher data rates and industry trends [40][41] Question: Impact of Wolfspeed RF fab transition on gross margins - The transition is expected to be neutral or positive to gross margins, with ongoing improvements anticipated as the fab comes under MACOM's control [46][50] Question: Budget trends in the data center market - Continued investment from ISPs in data centers is expected, with significant innovation in high-speed connectivity solutions [52][54] Question: SATCOM business growth and opportunities - The SATCOM business is growing, with new product lines like the OptoAmp enhancing market opportunities, particularly in high-frequency applications [58][60] Question: Exposure to European defense spending - MACOM's direct exposure to European defense spending is increasing, supported by the acquisition of a wafer fab in France [70][72]

Revenue Performance - Revenue for Q2 2025 was $235.9 million, an increase of 30.2% year-over-year from $181.2 million and an increase of 8.1% from the prior quarter's $218.1 million[7]. - Revenue for the three months ended April 4, 2025, was $235.887 million, a 8.1% increase from $218.122 million in the same period last year[26]. Profitability Metrics - Gross margin for Q2 2025 was 55.2%, compared to 52.5% in the same quarter last year and 53.7% in the prior quarter[7]. - Adjusted net income for Q2 2025 was $64.3 million, or $0.85 per diluted share, up from $43.2 million, or $0.59 per diluted share, in the same quarter last year[7]. - The company reported net income of $31.7 million for Q2 2025, compared to a net income of $15.0 million in the same quarter last year[7]. - Basic income per share for the three months ended April 4, 2025, was $0.43, compared to a loss of $2.30 per share in the same period last year[26]. - Net income for the three months ended April 4, 2025, was $31,666 million, representing 13.4% of revenue, compared to a net loss of $167,530 million (-76.8%) in the previous quarter[32]. Future Guidance - For Q3 2025, MACOM expects revenue to be between $246 million and $254 million, with an adjusted gross margin of 56.5% to 58.5%[5]. - The anticipated non-GAAP income tax rate for Q3 2025 is 3%[5]. Operational Efficiency - Adjusted income from operations for Q2 2025 was $59.8 million, or 25.4% of revenue, compared to $40.2 million, or 22.2% of revenue, in the same quarter last year[7]. - Adjusted gross margin for Q2 2025 was 57.5%, consistent with the prior quarter and slightly up from 57.1% in the same quarter last year[7]. - Income from operations for the three months ended April 4, 2025, was $34,870 million, or 14.8% of revenue, up from $17,527 million (8.0%) in the previous quarter[32]. Research and Development - Research and development expenses for the three months ended April 4, 2025, were $57.837 million, a decrease of 4.4% from $60.369 million in the prior year[26]. Cash Flow and Assets - The company reported a net cash provided by operating activities of $105.346 million for the six months ended April 4, 2025, compared to $51.302 million for the same period last year[30]. - Total assets increased to $1.918 billion as of April 4, 2025, from $1.756 billion a year earlier, reflecting a growth of 9.2%[28]. - The company had cash and cash equivalents of $110.926 million at the end of the period, down from $146.806 million at the beginning of the period[30]. Liabilities - Total liabilities were $716.525 million as of April 4, 2025, compared to $629.297 million a year earlier, indicating an increase of 13.9%[28]. - The company incurred a loss on extinguishment of debt amounting to $193.098 million during the six months ended April 4, 2025[30]. Customer Base - MACOM services over 6,000 customers annually across various industries, including Industrial and Defense, Data Center, and Telecommunications[8]. Shareholder Information - The company had 75,741 diluted shares for the three months ended April 4, 2025, compared to 72,780 in the previous quarter[32].

Financial Performance - MACOM reported revenue of $235.9 million for the fiscal second quarter of 2025, representing a 30.2% increase year-over-year from $181.2 million and an 8.1% increase from the previous quarter's revenue of $218.1 million [10] - The gross margin for the quarter was 55.2%, up from 52.5% in the same quarter last year and 53.7% in the prior quarter [10] - Income from operations was $34.9 million, or 14.8% of revenue, compared to $15.4 million (8.5% of revenue) in the same quarter last year and $17.5 million (8.0% of revenue) in the prior quarter [10] - Net income for the quarter was $31.7 million, or $0.42 per diluted share, compared to a net income of $15.0 million ($0.20 per diluted share) in the same quarter last year and a net loss of $167.5 million ($2.30 loss per diluted share) in the prior quarter [10][24] Business Outlook - For the fiscal third quarter ending July 4, 2025, MACOM expects revenue to be in the range of $246 million to $254 million, with an adjusted gross margin expected between 56.5% and 58.5% [4] - Adjusted earnings per diluted share are anticipated to be between $0.87 and $0.91, utilizing a non-GAAP income tax rate of 3% and 76.5 million fully diluted shares outstanding [4] Company Overview - MACOM Technology Solutions Holdings, Inc. designs and manufactures high-performance semiconductor products for various industries, including Industrial and Defense, Data Center, and Telecommunications [6] - The company services over 6,000 customers annually and has a broad product portfolio that includes RF, Microwave, Analog, Mixed Signal, and Optical semiconductor technologies [6] - MACOM has achieved certifications for automotive, aerospace, and international quality standards, and operates facilities across the United States, Europe, and Asia [6]

Wall Street analysts expect M/A-Com (MTSI) to post quarterly earnings of $0.84 per share in its upcoming report, which indicates a year-over-year increase of 42.4%. Revenues are expected to be $230.08 million, up 27% from the year-ago quarter.The current level reflects an upward revision of 1% in the consensus EPS estimate for the quarter over the past 30 days. This demonstrates how the analysts covering the stock have collectively reappraised their initial projections over this period.Before a company anno ...