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MACOM Reports Fiscal First Quarter 2023 Financial Results

MACOM Technology Solutions Holdings, Inc. (“MACOM”) (Nasdaq: MTSI), a leading supplier of semiconductor products, today announced its financial results for its fiscal first quarter ended December 30, 2022.

First Quarter Fiscal Year 2023 GAAP Results

  • Revenue was $180.1 million, an increase of 12.8%, compared to $159.6 million in the previous year fiscal first quarter and an increase of 1.1% compared to $178.1 million in the prior fiscal quarter;
  • Gross margin was 61.3%, compared to 59.0% in the previous year fiscal first quarter and 60.9% in the prior fiscal quarter;
  • Operating income was $38.6 million, or 21.4% of revenue, compared to operating income of $27.1 million, or 17.0% of revenue, in the previous year fiscal first quarter and operating income of $37.0 million, or 20.8% of revenue, in the prior fiscal quarter; and
  • Net income was $29.5 million, or $0.41 per diluted share, compared to net income of $138.8 million, or $1.95 per diluted share, in the previous year fiscal first quarter and net income of $239.3 million, or $3.36 per diluted share, in the prior fiscal quarter. Net income for the previous year fiscal first quarter included a $118.2 million gain associated with the sale of an equity interest in a private company and net income for the prior fiscal quarter included a $202.8 million non-cash income tax benefit associated with the release of the valuation allowance on the majority of our deferred tax assets.

First Quarter Fiscal Year 2023 Adjusted Non-GAAP Results

  • Adjusted gross margin was 62.6%, compared to 61.4% in the previous year fiscal first quarter and 62.6% in the prior fiscal quarter;
  • Adjusted operating income was $58.8 million, or 32.7% of revenue, compared to adjusted operating income of $49.0 million, or 30.7% of revenue, in the previous year fiscal first quarter and adjusted operating income of $56.9 million, or 32.0% of revenue, in the prior fiscal quarter; and
  • Adjusted net income was $58.0 million, or $0.81 per diluted share, compared to adjusted net income of $45.4 million, or $0.64 per diluted share, in the previous year fiscal first quarter and adjusted net income of $55.1 million, or $0.77 per diluted share, in the prior fiscal quarter.

Management Commentary

“We are pleased with our Q1 results,” said Stephen G. Daly, President and Chief Executive Officer. “We remain focused on executing our long-term strategy to further our position as a leading supplier of high frequency, high power and high data rate semiconductor solutions.”

Business Outlook

For the fiscal second quarter ending March 31, 2023, MACOM expects revenue to be in the range of $166 million to $170 million. Adjusted gross margin is expected to be between 61.5% and 63.5%, and adjusted earnings per share is expected to be between $0.76 and $0.80 utilizing an anticipated non-GAAP income tax rate of 3% and 71.5 million fully diluted shares outstanding. This guidance range does not include any revenue contributions or financial impact from our pending acquisition of OMMIC SAS, a semiconductor manufacturer based in France.

Conference Call

MACOM will host a conference call on Thursday, February 2, 2023 at 8:30 a.m. Eastern Time to discuss its fiscal first quarter 2023 financial results and business outlook. Investors and analysts may visit MACOM's Investor Relations website at https://ir.macom.com/events-webcasts to register for a user-specific access code for the live call or to access the live webcast. A replay of the call will be available within 24 hours and remain accessible by all interested parties for approximately 90 days.

About MACOM

MACOM designs and manufactures high-performance semiconductor products for the Telecommunications, Industrial and Defense and Datacenter industries. MACOM services over 6,000 customers annually with a broad product portfolio that incorporates RF, Microwave, Analog and Mixed Signal and Optical semiconductor technologies. MACOM has achieved certification to the IATF16949 automotive standard, the AS9100D aerospace standard, the ISO9001 international quality standard and the ISO14001 environmental management standard. MACOM operates facilities across the United States, Europe, Asia and is headquartered in Lowell, Massachusetts.

Special Note Regarding Forward-Looking Statements

This press release contains forward-looking statements based on MACOM management’s beliefs and assumptions and on information currently available to our management. These forward-looking statements include, among others, statements about MACOM’s strategic plans and priorities, our ability to execute our long-term strategy, improve our position and drive market share gains, the impact of our pending acquisition of OMMIC SAS, strength and competitiveness of new product introductions and technology portfolio expansion, anticipated demand for our products, MACOM’s profitability, prospects and growth opportunities in our three primary markets, the potential impact to our business of an economic downturn or recession, anticipated financial and business improvements, the estimated financial results for our 2023 fiscal second quarter and the stated business outlook and future results of operations.

These forward-looking statements reflect MACOM’s current views about future events and are subject to risks, uncertainties, assumptions and changes in circumstances that may cause those events or our actual activities or results to differ materially from those indicated by the forward-looking statements, including any failure to accurately anticipate demand for our products and effectively manage our inventory; risks related to any weakening of economic conditions; our dependence on a limited number of customers; our ability to develop new products and achieve market acceptance of those products; component shortages or other disruptions in our supply chain, including as a result of the COVID-19 pandemic, geopolitical unrest or otherwise; inflationary pressures; our ability to compete effectively; and those other factors described in “Risk Factors” in MACOM’s filings with the Securities and Exchange Commission (“SEC”), including its Annual Report on Form 10-K, its Quarterly Reports on Form 10-Q and other filings with the SEC. These forward-looking statements speak only as of the date of this press release, and MACOM undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise.

Discussion Regarding the Use of Historical and Forward-Looking Non-GAAP Financial Measures

In addition to United States Generally Accepted Accounting Principles (“GAAP”) reporting, MACOM provides investors with financial measures that have not been calculated in accordance with GAAP, such as: non-GAAP gross profit and gross margin, non-GAAP operating expenses, non-GAAP income from operations and operating margin, adjusted EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP diluted shares, non-GAAP income tax rate and non-GAAP interest expense. In this release or elsewhere, we may alternatively refer to such non-GAAP measures as “adjusted” measures. This non-GAAP information excludes the effect, where applicable, of intangible amortization expense, share-based compensation expense, non-cash interest, equity method investment gains and losses and the tax effect of each non-GAAP adjustment.

Management believes these excluded items are not reflective of our underlying performance and uses these non-GAAP financial measures to: evaluate our ongoing operating performance and compare it against prior periods, make operating decisions, forecast future periods, evaluate potential acquisitions, compare our operating performance against peer companies and assess certain compensation programs. We believe this non-GAAP financial information provides additional insight into our ongoing performance and have therefore chosen to provide this information to investors to help them evaluate the results of our ongoing operations and enable more meaningful period-to-period comparisons. These non-GAAP measures are provided in addition to, and not as a substitute for, or superior to, measures of financial performance prepared in accordance with GAAP.

A reconciliation between GAAP and non-GAAP financial data is included in the supplemental financial data attached to this press release. We have not provided a reconciliation with respect to any forward-looking non-GAAP financial data presented because we do not have and cannot reliably estimate certain key inputs required to calculate the most comparable GAAP financial data, such as future acquisition costs, the possibility and impact of any litigation costs, changes in our GAAP effective tax rate and impairment charges. We believe these unknown inputs are likely to have a significant impact on any estimate of the comparable GAAP financial data.

Investors are cautioned against placing undue reliance on non-GAAP financial measures and are urged to review and consider carefully the adjustments made by management to the most directly comparable GAAP financial measures. Non-GAAP financial measures may have limited value as analytical tools because they may exclude certain expenses that some investors consider important in evaluating our operating performance or ongoing business performance. Further, non-GAAP financial measures may have limited value for purposes of drawing comparisons between companies because different companies may calculate similarly titled non-GAAP financial measures in different ways because non-GAAP measures are not based on any comprehensive set of accounting rules or principles.

Additional information and managements assessment regarding why certain items are excluded from our non-GAAP measures are summarized below:

Amortization Expense – is related to acquired intangible assets which are based upon valuation methodologies, and are generally amortized over the expected life of the intangible asset at the time of acquisition, which may result in amortization amounts that vary over time. This non-cash expense is not considered by management in making operating decisions.

Share-Based Compensation Expense – includes share-based compensation expense for awards that are equity and liability classified on our balance sheet and the related employer tax expense at vesting. Share-based compensation expense is partially outside of our control due to factors such as stock price volatility and interest rates, which may be unrelated to our operating performance during the period in which the expense is incurred. It is an expense based upon valuation methodologies and assumptions that vary over time, and the amount of the expense can vary significantly between companies. Share-based compensation expense amounts are not considered by management in making operating decisions.

Non-cash Interest, Net – includes amounts associated with the amortization of certain fees associated with the establishment or amendment of our term loans and convertible notes that are being amortized over the life of the agreements. We believe these amounts are non-cash in nature, are not correlated to future business operations and do not reflect our ongoing operations.

Equity Method Investment Gains and Losses – primarily includes non-cash gains and losses associated with a non-marketable equity investment we had in Ampere Computing Holdings LLC and the $118.2 million cash gain on the sale of this investment in December 2021. We believe these items are not correlated to future business operations and including such amounts does not reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments – the fiscal fourth quarter includes a non-cash benefit of $202.8 million associated with the release of the valuation allowance on the majority of our domestic deferred tax assets resulting from our assessment of positive and negative evidence as of September 30, 2022. We believe this non-cash amount is not correlated to future operations and does not reflect our ongoing operations. Includes adjustments to arrive at an estimate of our non-GAAP income tax rate associated with our non-GAAP income over a period of time. We determine our non-GAAP income tax rate using applicable rates in taxing jurisdictions and assessing certain factors including our historical and forecast earnings by jurisdiction, discrete items, cash taxes paid in relation to our non-GAAP net income before income taxes and our ability to realize tax assets. We generally assess this non-GAAP income tax rate quarterly and have utilized 3% for our first quarter of fiscal year 2023 and for our second, third and fourth quarters of fiscal year 2022 and 5% for our first quarter of fiscal year 2022. Our historical effective income tax rate under GAAP has varied significantly from our non-GAAP income tax rate due primarily to gains or losses associated with our equity method investment in a private business, income taxed in foreign jurisdictions at generally lower tax rates, research and development tax credits and merger expenses. We believe it is beneficial for management to review our non-GAAP income tax rate on a consistent basis over periods of time. Items such as those noted above may have a significant impact on our GAAP income tax expense and associated effective tax rate over time.

Adjusted EBITDA – is a calculation that adds depreciation expense to our adjusted income from operations. Management reviews and utilizes this measure for operational analysis purposes. We believe competitors and others in the financial industry also utilize this measure for analysis purposes.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited and in thousands, except per share data)

 

 

Three Months Ended

 

December 30,

2022

 

September 30,

2022

 

December 31,

2021

Revenue

$

          180,104

 

 

$

          178,143

 

 

$

          159,620

 

Cost of revenue

 

              69,749

 

 

 

              69,636

 

 

 

              65,477

 

Gross profit

 

            110,355

 

 

 

            108,507

 

 

 

              94,143

 

Operating expenses:

 

 

 

 

 

Research and development

 

              38,832

 

 

 

              39,678

 

 

 

              35,470

 

Selling, general and administrative

 

              32,940

 

 

 

              31,798

 

 

 

              31,604

 

Total operating expenses

 

              71,772

 

 

 

              71,476

 

 

 

              67,074

 

Income from operations

 

              38,583

 

 

 

              37,031

 

 

 

              27,069

 

Other income (expense):

 

 

 

 

 

Interest income (expense), net

 

                  602

 

 

 

                 (372

)

 

 

              (1,693

)

Other (expense) income, net

 

                  (55

)

 

 

                 (120

)

 

 

            114,908

 

Total other income (expense)

 

                  547

 

 

 

                 (492

)

 

 

            113,215

 

Income before income taxes

 

              39,130

 

 

 

              36,539

 

 

 

            140,284

 

Income tax expense (benefit)

 

               9,611

 

 

 

          (202,797

)

 

 

               1,457

 

Net income

$

            29,519

 

 

$

          239,336

 

 

$

          138,827

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

Income per share - Basic

$

               0.42

 

 

$

               3.42

 

 

$

               2.00

 

Income per share - Diluted

$

               0.41

 

 

$

               3.36

 

 

$

               1.95

 

Weighted average common shares:

 

 

 

 

 

Shares - Basic

 

              70,481

 

 

 

              69,998

 

 

 

              69,400

 

Shares - Diluted

 

              71,374

 

 

 

              71,274

 

 

 

              71,224

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(unaudited and in thousands)

 

 

December 30,

2022

 

September 30,

2022

ASSETS

 

 

 

Current assets:

 

 

 

Cash and cash equivalents

$

          126,155

 

$

          119,952

Short-term investments

 

            468,577

 

 

            466,580

Accounts receivable, net

 

            112,039

 

 

            101,551

Inventories

 

            121,335

 

 

            114,960

Prepaid and other current assets

 

              19,527

 

 

              10,040

Total current assets

 

            847,633

 

 

            813,083

Property and equipment, net

 

            118,945

 

 

            123,701

Goodwill and intangible assets, net

 

            356,593

 

 

            362,671

Deferred income taxes

 

            229,253

 

 

            237,415

Other long-term assets

 

              35,288

 

 

              34,947

Total assets

$

        1,587,712

 

$

        1,571,817

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

Current liabilities:

 

 

 

Current portion of finance lease obligations

$

              1,034

 

$

              1,006

Accounts payable

 

              35,647

 

 

              30,733

Accrued liabilities

 

              57,103

 

 

              65,475

Total current liabilities

 

              93,784

 

 

              97,214

Finance lease obligations, less current portion

 

              26,761

 

 

              27,032

Financing obligation

 

                9,500

 

 

                9,544

Long-term debt obligations

 

            566,332

 

 

            565,920

Other long-term liabilities

 

              28,791

 

 

              29,359

Total liabilities

 

            725,168

 

 

            729,069

Stockholders’ equity

 

            862,544

 

 

            842,748

Total liabilities and stockholders’ equity

$

        1,587,712

 

$

        1,571,817

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited and in thousands)

 

 

Three Months Ended

 

December 30,

2022

 

December 31,

2021

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

Net income

$

            29,519

 

 

$

          138,827

 

Depreciation and intangible asset amortization

 

              12,855

 

 

 

              15,234

 

Share-based compensation

 

              11,047

 

 

 

               9,949

 

Gain on equity method investment, net

 

                    —

 

 

 

          (114,908

)

Deferred income taxes

 

               9,067

 

 

 

                  662

 

Other adjustments, net

 

                 (381

)

 

 

                  627

 

Accounts receivable

 

            (10,489

)

 

 

            (12,875

)

Inventories

 

              (6,375

)

 

 

              (5,839

)

Change in other operating assets and liabilities

 

              (6,970

)

 

 

               2,427

 

Net cash provided by operating activities

 

              38,273

 

 

 

              34,104

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

Proceeds from sale of equity method investment

 

                    —

 

 

 

            127,750

 

Purchases of property and equipment

 

              (9,616

)

 

 

              (5,095

)

Sales, purchases and maturities of investments

 

               1,666

 

 

 

            (16,937

)

Proceeds from sale of assets

 

                    —

 

 

 

                    19

 

Net cash (used in) provided by investing activities

 

              (7,950

)

 

 

            105,737

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

Payments on finance leases and other

 

                 (278

)

 

 

                 (279

)

Proceeds from stock option exercises and employee stock purchases

 

               2,320

 

 

 

               5,135

 

Repurchase of common stock - tax withholdings on equity awards

 

            (26,375

)

 

 

            (27,756

)

Net cash used in financing activities

 

            (24,333

)

 

 

            (22,900

)

Foreign currency effect on cash

 

                  213

 

 

 

                  (82

)

NET CHANGE IN CASH AND CASH EQUIVALENTS

 

               6,203

 

 

 

            116,859

 

CASH AND CASH EQUIVALENTS — Beginning of period

 

            119,952

 

 

 

            156,537

 

CASH AND CASH EQUIVALENTS — End of period

$

          126,155

 

 

$

          273,396

 

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.

RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS

(unaudited and in thousands, except per share data)

 

Three Months Ended

 

December 30, 2022

September 30, 2022

December 31, 2021

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Gross profit - GAAP

$

110,355

61.3

$

108,507

60.9

$

94,143

59.0

Amortization expense

 

910

0.5

 

1,778

1.0

 

2,505

1.6

Share-based compensation expense

 

1,474

0.8

 

1,166

0.7

 

1,401

0.9

Adjusted gross profit (Non-GAAP)

$

112,739

62.6

$

111,451

62.6

$

98,049

61.4

 

Three Months Ended

 

December 30, 2022

September 30, 2022

December 31, 2021

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Operating expenses - GAAP

$

71,772

 

39.9

 

$

71,476

 

40.1

 

$

67,074

 

42.0

 

Amortization expense

 

(5,903

)

(3.3

)

 

(6,258

)

(3.5

)

 

(6,781

)

(4.2

)

Share-based compensation expense

 

(11,973

)

(6.6

)

 

(10,692

)

(6.0

)

 

(11,292

)

(7.1

)

Adjusted operating expenses (Non-GAAP)

$

53,896

 

29.9

 

$

54,526

 

30.6

 

$

49,001

 

30.7

 

 

Three Months Ended

 

December 30, 2022

September 30, 2022

December 31, 2021

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Income from operations - GAAP

$

38,583

21.4

$

37,031

20.8

$

27,069

17.0

Amortization expense

 

6,813

3.8

 

8,036

4.5

 

9,287

5.8

Share-based compensation expense

 

13,447

7.5

 

11,859

6.7

 

12,693

8.0

Adjusted income from operations (Non-GAAP)

$

58,843

32.7

$

56,926

32.0

$

49,049

30.7

 

 

 

 

 

 

 

Depreciation expense

 

6,042

3.4

 

6,141

3.4

 

5,947

3.7

Adjusted EBITDA (Non-GAAP)

$

64,885

36.0

$

63,067

35.4

$

54,996

34.5

 

Three Months Ended

 

December 30, 2022

September 30, 2022

December 31, 2021

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Net income - GAAP

$

29,519

16.4

$

239,336

 

134.4

 

$

138,827

 

87.0

 

Amortization expense

 

6,813

3.8

 

8,036

 

4.5

 

 

9,287

 

5.8

 

Share-based compensation expense

 

13,447

7.5

 

11,859

 

6.7

 

 

12,693

 

8.0

 

Non-cash interest, net

 

412

0.2

 

412

 

0.2

 

 

458

 

0.3

 

Equity method investment gain, net

 

 

 

 

 

(114,908

)

(72.0

)

Tax effect of non-GAAP adjustments

 

7,816

4.3

 

(204,503

)

(114.8

)

 

(934

)

(0.6

)

Adjusted net income (Non-GAAP)

$

58,007

32.2

$

55,140

 

31.0

 

$

45,423

 

28.5

 

 

Three Months Ended

 

December 30, 2022

September 30, 2022

December 31, 2021

 

Net income

Income per

diluted share

Net income

Income per

diluted share

Net income

Income per

diluted share

Net income - GAAP diluted

$

29,519

$

0.41

$

239,336

$

3.36

$

138,827

$

1.95

 

 

 

 

 

 

 

Adjusted net income (Non-GAAP)

$

58,007

$

0.81

$

55,140

$

0.77

$

45,423

$

0.64

 

Three Months Ended

 

December 30, 2022

September 30, 2022

December 31, 2021

 

Amount

% Revenue

Amount

% Revenue

Amount

% Revenue

Interest (income) expense, net - GAAP

$

(602

)

(0.3

)

$

372

 

0.2

 

$

1,693

 

1.1

 

Non-cash interest expense

 

(412

)

(0.2

)

 

(412

)

(0.2

)

 

(458

)

(0.3

)

Adjusted interest (income) expense (Non-GAAP)

$

(1,014

)

(0.6

)

$

(40

)

 

$

1,235

 

0.8

 

 

Contacts

Company:

MACOM Technology Solutions Holdings, Inc.

Stephen Ferranti

Vice President, Strategic Initiatives and Investor Relations

P: 978-656-2977

E: stephen.ferranti@macom.com

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