MACOM(MTSI) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $252.1 million, representing a sequential increase of 6.9% [23] - Adjusted gross profit was $145.2 million, or 57.6% of revenue, slightly ahead of prior quarters [24] - Adjusted net income increased approximately 6.1% to $68.2 million compared to $64.3 million in Q2 2025 [27] - Adjusted earnings per diluted share was $0.90, up from $0.85 in Q2 2025 [27] - Cash flow from operations was approximately $60.4 million, up $21.6 million sequentially [28] Business Line Data and Key Metrics Changes - Industrial and Defense (IND) revenue was $108.2 million, up 10% sequentially; Data Center revenue was $75.8 million, up 5% sequentially; Telecom revenue was $68.1 million, up 4% sequentially [5] - The Q3 book-to-bill ratio was just over 1.1, indicating strong demand and a record backlog [6] - The data center business is expected to see significant growth across almost all data rates and platforms, with a record 200G per lane product revenue anticipated in Q4 [12] Market Data and Key Metrics Changes - The IND market remains strong, particularly in the US and European markets, with opportunities in military space electronics and electronic warfare [8] - Telecom orders are solid, especially in 5G infrastructure and broadband access, despite expectations of limited growth in the global radio access network market [10] - The data center market continues to grow, driven by high-performance connectivity ICs supporting 800G and 1.6T deployments [11] Company Strategy and Development Direction - The company focuses on technology differentiation across all product lines, aiming to enable high power, high frequency, and high data rate applications [7] - The strategy includes strengthening RF microwave and optical systems engineering capabilities to engage customers early in system architecture discussions [7] - The company aims to be the premier designer and manufacturer of high-frequency and high-power GaN IC semiconductors in Europe, leveraging its European Semiconductor Center [21] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to improve yields and operational metrics at the RTP fab, which came under full control ahead of schedule [20] - The company anticipates revenue and profitability growth in Q4 2025, with adjusted gross margin expected to be between 56% and 58% [33] - Management noted that while telecom revenues may slightly decline sequentially, the overall telecom business is expected to grow over 40% year-over-year [59] Other Important Information - The company has executed a plan to increase fab output capacity by up to 30% with the purchase of discounted fab equipment [21] - Susan Ocampo will retire from the Board of Directors effective August 31, 2025, after 15 years of service [34][35] Q&A Session Summary Question: RTP fab conveyance and margin headwind - Management discussed the transition of the RTP fab and the expected timeline for improvements to turn the margin headwind into a tailwind, estimating a 25 to 50 basis points improvement over the next few quarters [41][42] Question: LPO adoption pipeline - Management highlighted the growing interest in LPO solutions, with one customer already in production and expectations for more business in 2026 [50] Question: Industrial and Defense trends - The growth in the IND category is primarily driven by defense, with a book-to-bill ratio over one for several quarters [53] Question: Telecom business outlook - Management noted that while there may be slight sequential declines, the telecom business is expected to grow over 40% year-over-year [59] Question: Data center growth drivers - The data center segment is experiencing broad strength across all data rates, with significant year-over-year growth anticipated [62]