MACOM(US:MTSI)2024-05-02 18:23Financial Data and Key Metrics Changes - Revenue for Q2 was $181.2 million, up 15.3% sequentially, driven by growth in Industrial & Defense and Telecom end markets [21][66] - Adjusted EPS was $0.59 per diluted share, compared to $0.58 in fiscal Q1 2024 [41] - Adjusted gross profit was $103.5 million, or 57.1% of revenue, down from 59.2% in fiscal Q1 2024 [37] - Adjusted operating income was $40.2 million, up from $38.6 million in fiscal Q1 2024, with an adjusted operating margin of 22.2% [39] Business Line Data and Key Metrics Changes - Revenue by end market: Industrial and Defense at $90.9 million, Telecom at $47.2 million, and Data Center at $43.1 million [22] - Data Center revenue decreased by 12.9% sequentially, while Industrial and Defense increased by 18% and Telecom increased by 54.1% sequentially [22] - The Industrial and Defense market remains the largest and is steadily growing, with robust Defense orders but weak Industrial orders [23] Market Data and Key Metrics Changes - U.S.-based customers represented approximately 44% of fiscal Q2 revenue, flat sequentially [37] - The data center market is experiencing significant growth opportunities, particularly for 100G, 400G, and 800G optical connectivity solutions [10] - The telecom market is showing improvements, particularly in SATCOM and Metro/Long-haul segments, despite overall macro weakness [58][94] Company Strategy and Development Direction - The company aims to diversify and expand its geographic and industry exposure, focusing on high-performance IC components for Defense and data center markets [6][10] - MACOM is pursuing opportunities in 5G and adjacent applications, such as distributed antenna systems [13][14] - The company is actively engaged in securing federal funding through the CHIPS and Science Act for foundry modernization and expansion projects [16][62] Management's Comments on Operating Environment and Future Outlook - Management remains cautious about certain telecom market segments but sees numerous opportunities for growth as data speeds increase globally [14][30] - The company expects revenue in fiscal Q3 to be up sequentially across all markets, with data center leading with low double-digit growth [46] - Management anticipates modest sequential improvements in revenue and operating profit for the remainder of fiscal 2024, with long-term expectations for gross margins to trend back towards 60% [46] Other Important Information - The company was awarded a multiyear contract valued at up to $11.4 million for advancing GaN technology [17] - MACOM's cash and short-term investments totaled approximately $476 million, exceeding the book value of its convertible note debt [21][45] - Inventory levels increased to $177.8 million, driven by the acquired RF business, with inventory turns improving to 1.8 times [43] Q&A Session Summary Question: Progress on RF acquisition and gross margin improvement - Management reported outstanding customer engagements and collaboration between RF teams, with ongoing efforts to improve gross margins [48][49] Question: Telecom vs. Data Center growth expectations - Management acknowledged strong performance in the data center market but maintained that telecom is expected to outgrow data center in the long term [102] Question: Contribution from the RF acquisition - The RF business contributed approximately $30 million in Q2, aligning with expectations [129] Question: Volatility in the data center business - Management confirmed that the data center market is volatile, with growth driven by ISP orders and transitions to higher data rates [97][119] Question: Future opportunities in the ACC market - Management sees significant potential in the ACC market, emphasizing the importance of technology leadership and competition [135]