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MT

MACOM Technology Solutions Holdings, Inc. (MTSI)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY25 revenue was $218.1M (+38.8% y/y, +8.7% q/q) with adjusted EPS of $0.79; GAAP EPS was −$2.30 due to a one-time, primarily non‑cash $193.1M loss on extinguishment of debt tied to convertible note refinancing .
  • End-market mix was strong: Industrial & Defense ($97.4M), Data Center ($65.3M), and Telecom ($55.4M); book‑to‑bill was 1.1 and turns were ~23% of revenue, supporting record backlog and near‑term visibility .
  • Gross margin came in at 53.7% (adjusted 57.5%); management guided FY25 gross margins to 57–58% given Lowell fab under‑utilization and mix shift toward RF Power, with initiatives underway to improve yields and cost structure .
  • Q2 FY25 guidance: revenue $227–$233M, adjusted GM 57–58%, adjusted EPS $0.82–$0.86, tax rate 3%, ~76.0M diluted shares; sequential growth expected across all end markets with Data Center leading (~10%) .
  • Strategic catalysts: CHIPS-related fab modernization plan (Jan 14 reference) and France 2030-funded MESC ‘MAGENTA’ MMIC program (Feb 5), bolstering long‑term GaN, space/defense, and European positioning .

What Went Well and What Went Wrong

What Went Well

  • Record Q1 revenue and sequential growth across all end markets; adjusted operating income up 9% q/q to $55.4M and adjusted EPS up to $0.79 .
  • Data Center and Industrial & Defense posted record quarterly revenues; “Q1 was a good start to our fiscal 2025… building a stronger, broader and more competitive product portfolio” — CEO Stephen Daly .
  • Strong cash generation: CFO highlighted ~$66.7M cash from operations and ~$63M free cash flow; cash and short-term investments reached ~$656.5M, net cash >$157M vs converts .

What Went Wrong

  • GAAP net loss (−$167.5M) driven by the one-time $193.1M debt extinguishment from convertible refinancing; non-core and primarily non‑cash .
  • Gross margin softness (53.7% GAAP, 57.5% adjusted) due to Lowell fab under‑absorption and mix; management expects FY25 adjusted GM 57–58% rather than low‑60s near term .
  • Lowell fab loading headwinds: cable infrastructure and certain industrial platforms remained weak; a large radar program volume temporarily down pending contract reload .

Financial Results

MetricQ1 FY24 (Dec 29, 2023)Q4 FY24 (Sep 27, 2024)Q1 FY25 (Jan 3, 2025)
Revenue ($M)$157.1 $200.7 $218.1
GAAP Diluted EPS ($)$0.17 $0.39 −$2.30
Adjusted EPS ($)$0.58 $0.73 $0.79
GAAP Gross Margin (%)55.6% 54.7% 53.7%
Adjusted Gross Margin (%)59.2% 58.1% 57.5%
GAAP Operating Margin (%)7.0% 13.7% 8.0%
Adjusted Operating Margin (%)24.5% 25.2% 25.4%
Adjusted EBITDA ($M)$44.8 $57.9 $62.2
Adjusted EBITDA Margin (%)28.5% 28.9% 28.5%

Segment revenue breakdown:

End Market ($M)Q4 FY24Q1 FY25
Industrial & Defense$92.8 $97.4
Data Center$56.2 $65.3
Telecom$51.7 $55.4

Key KPIs:

KPIQ4 FY24Q1 FY25
Book-to-Bill1.1 1.1
Turns (% of revenue)~22% ~23%
Cash from Operations ($M)~$62.3 $66.7
Capex ($M)$5.2 $5.3
DSO (days)48 41
Inventory Turns (x)1.7 1.7
Cash + ST Investments ($M)$581.9 ~$656.5
Net Cash vs Converts ($M)>$133 >$157
Adjusted Diluted Shares (M)74.5 75.6

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($M)Q2 FY25N/A$227–$233 N/A
Adjusted Gross Margin (%)Q2 FY25N/A57–58 N/A
Adjusted EPS ($)Q2 FY25N/A$0.82–$0.86 N/A
Tax Rate (Non-GAAP)Q2 FY25N/A3% N/A
Fully Diluted Shares (M)Q2 FY25N/A~76.0 N/A
Adjusted Gross Margin (%)Remainder FY25Exit FY25 ~59% target (commentary) 57–58% expected Lowered near‑term expectation
Capex ($M)FY25~$35 ~$30 (ex-CHIPS) Lowered
Net Interest IncomeFY25~consistent with Q4 Increase at similar rate through FY25 Raised trajectory

Note: Prior quarter (Q1 FY25) guidance for its own period was $212–$218M revenue, 57–59% adj GM, $0.75–$0.81 adj EPS, 3% tax, ~75.0M shares .

Earnings Call Themes & Trends

TopicQ-2 (Q3 FY24)Q-1 (Q4 FY24)Current (Q1 FY25)Trend
Data Center: 1.6T transition—1.6T starting to ramp; 200G/lane focus 800G strength moderating as lead customers transition to 1.6T; breadth expanding Positive momentum to 1.6T
LPO (linear pluggable optics)—Early deployments; MSA membership expanding Late CY25/CY26 revenue contribution expected; strong interest Building interest; medium‑term driver
ACC/linear equalizers—Active copper opportunities; volatility acknowledged Shipping ACC; use‑cases expanding (PCIe6/7); cables primary growth Evolving use cases; diversified
Gross margin/fab utilization—Aim to exit FY25 ~59%; fab loading/NPI improvements planned FY25 adj GM 57–58% on Lowell under‑absorption and mix; actions underway Near‑term constrained; improvement initiatives
Telecom/SATCOM—Strength in NA 5G; robust LEO/SATCOM SATCOM multi‑band opportunities (E/V/Ku); LMS linearizers; U.S. 5G radios demand Sustained strength
Defense/A&D—Record I&D revenue; GaN/MMIC leadership Record IND; radar/EW upgrades; RF over fiber solutions; GaN breadth Strong secular tailwinds
CHIPS/fab investment—Strategy to modernize and expand; R&D funding ~$29M PMT signed; Lowell modernization + 6" GaN line; NC 6" capacity plan; long-term benefits Strategic, long-term tailwind
Wireline (PON/CATV)—DOCSIS 4.0 rollout modest growth; PON muted PON slowly ticking up; CATV modest growth expected Gradual recovery

(“—” indicates no document coverage available for Q3 FY24 in this set.)

Management Commentary

  • Strategy: “Our strategy is to build a unique, best‑in‑class and diversified semiconductor portfolio… capture a larger share of the 3 markets we focus on” .
  • Data Center mix: “A lot of that growth has been driven by strength in our 800 gig portfolio… lead customers transition over to 1.6T” .
  • GM dynamics: “Lower wafer volumes going through our Lowell fab resulting in underabsorbed costs… expect gross margins for the remainder of fiscal year 2025 to be in the range of 57% to 58%” .
  • ACC viability: “We have been shipping and will continue to ship… we believe the demand will continue… spill over into PCIe 6 and 7” .
  • SATCOM: “Strength will continue for the next 3 to 5 years… MACOM can be a leading provider… linearized SSPAs and TWTs… lasers and photodetectors” .
  • CHIPS/MESC: “Signed a nonbinding PMT with the CHIPS program office… minimal near-term P&L impact”; “MESC awarded a MMIC development project funded by the French government (France 2030)” .

Q&A Highlights

  • Data Center trajectory: Management expects sequential growth led by Data Center (~10%) in Q2; highlights 800G to 1.6T transition and broader customer adoption across optical and copper solutions .
  • Gross margin clarity: Mix and Lowell fab under‑utilization are the primary drags; RF business margins improving post‑Wolfspeed acquisition via yield/cost actions and increased MMIC standard products .
  • ACC/LPO positioning: ACC shipments ongoing; LPO offers DSP elimination, power savings, and latency benefits; initial contributions expected late CY25–CY26 .
  • Backlog/visibility: Record backlog (fourth consecutive ≥1.0 book‑to‑bill); visibility strongest over next two quarters given 4–6 month lead times .
  • Capex and CHIPS: FY25 capex guided ~$30M (ex‑CHIPS); fab modernization and capacity expansion plans have multi‑year horizons with expected margin/throughput benefits .

Estimates Context

  • We attempted to retrieve S&P Global consensus for Q1 FY25 revenue and EPS; data was unavailable due to SPGI request limits. As a result, we cannot quantify beats/misses versus Wall Street consensus for Q1 FY25 at this time [SPGI request limit error].
  • Implication: Given raised Q2 guidance ($227–$233M revenue, $0.82–$0.86 adjusted EPS) and segment breadth, consensus for FY25/quarterlies may need upward revisions on revenue/EPS, while gross margin assumptions should reflect 57–58% adjusted profile near term .

Key Takeaways for Investors

  • Core execution remains strong: Record revenue, record backlog, and robust cash generation underpin near‑term growth across Data Center, Telecom, and Industrial & Defense .
  • Adjusted profitability resilient despite mix/fab headwinds: Adjusted operating margin held ~25% and adjusted EBITDA ~28.5–28.9%; management guiding GM at 57–58% while pursuing yield/cost actions .
  • One‑time GAAP noise: The −$2.30 GAAP EPS reflects a primarily non‑cash refinancing charge; underlying adjusted EPS rose to $0.79 .
  • Data Center pivot: Watch for an 800G to 1.6T hand‑off and LPO evaluation momentum; MACOM’s breadth across copper and optical at 200G/lane is a differentiator .
  • Defense/SATCOM secular drivers: Radar/EW upgrades and LEO satcom link content sustain I&D strength; LMS linearizers and GaN/MMIC depth support premium positioning .
  • CHIPS/MESC strategic optionality: Fab modernization and European MMIC program enhance long‑term GaN competency and regional access; near‑term P&L impact minimal .
  • Trading lens: Near‑term catalysts include Q2 revenue/EPS guide, segment momentum (Data Center ~10% q/q), and any fab/CHIPS program updates; monitor GM trajectory vs 57–58% and Lowell fab loading commentary for margin re‑rating .