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MACOM (MTSI) Earnings & Revenues Surpass Estimates in Q4

Zacks Equity Research

MACOM Technology Solutions Holdings, Inc. MTSI reported fiscal fourth-quarter 2019 non-GAAP earnings of 1 cent per share, against the Zacks Consensus Estimate of a loss of 2 cents per share. The figure also improved from the reported loss of 42 cents per share in the previous quarter.

However, the bottom line declined 93.7% on a year-over-year basis.

Revenues decreased 25.7% from the year-ago quarter but improved 3.6% on a sequential basis to $112.2 million, which surpassed the Zacks Consensus Estimate of $110 million.

Year-over-year decline in the top lime can primarily be attributed to slowdown in PON sales and sluggishness in the data center end-market. Further, suspension of shipments to Huawei, which resulted in reduction in MACOM’s sales to Huawei, remained a major concern during the reported quarter.

Nevertheless, the company witnessed sequential improvement in data center and, industrial and defense market in the fiscal fourth quarter.

Following the better-than-expected results and improved guidance, shares of the company surged 9.5%.

Further, MACOM has returned 83.5% on a year-to-date basis, outperforming the industry’s rally of 36.7%.

The company is benefiting from several U.S. defense programs that are aiding performance in the industrial and defense market. Further, MACOM’s high-performance analog components such as TIAs, CDRs and drivers, which are required in 100G deployment, are driving momentum in the data center space.

Additionally, the company remains optimistic about its portfolio strength, pricing strategies, and operational and supply chain activities.  



End-Market in Details

Telecom Market: The company generated $39.6 million revenues (35.3% of total revenues) from this market, down 10% sequentially.

Data Center Market: This market yielded $22.6 million revenues (20.1% of total revenues), which improved 28% from the prior quarter.

Industrial & Defense Market: MACOM generated $50.1 million revenues (44.6% of total revenues), improving 7% on a sequential basis.

Operating Details

In the fiscal fourth-quarter 2019, non-GAAP gross margin came in 53%, which contracted significantly 180 bps from the year-ago quarter.

Non-GAAP operating expenses came in 45.5% as a percentage of revenues, which expanded 310 bps from the prior-year quarter.

Consequently, the company’s non-GAAP operating margin was 7.6%, which contracted 470 bps year over year.

Adjusted EBITDA margin was 14% contracted 320 bps year over year.

MACOM Technology Solutions Holdings, Inc. Price, Consensus and EPS Surprise

 

MACOM Technology Solutions Holdings, Inc. Price, Consensus and EPS Surprise

MACOM Technology Solutions Holdings, Inc. price-consensus-eps-surprise-chart | MACOM Technology Solutions Holdings, Inc. Quote

Balance Sheet & Cash Flow

As of Sep 27, 2019, cash equivalents and short-term investments were $176.7 million compared with $185.8 million as of Jun 28, 2019. Inventories were $107.9 million, down from $110.5 million a year ago.

Long-term debt obligations, excluding current portion, were $655.3 million in the fiscal fourth quarter compared with $656.1 million in the previous quarter.

Cash used in operations was $7.6 million compared with $1.4 million of cash generated from operations in the last quarter.

Further, the company’s free cash flow in the reported quarter came in ($13.6) million compared with ($7.9) million in the previous quarter.

Guidance

For fiscal first-quarter 2020, MACOM expects revenues between $113 million and $117 million. The Zacks Consensus Estimate for revenues is pegged at $114.92 million.

Further, the company’s adjusted earnings per share is anticipated to lie in a range of 1 cent to 5 cents. The Zacks Consensus Estimate for earnings is pegged at 1 cent per share.

Moreover, non-GAAP gross margin is anticipated to lie within the range of 53-55%.

Zacks Rank & Key Picks

MACOM currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector worth considering are Alteryx, Inc. AYX, Fortinet, Inc. FTNT and Instructure, Inc. INST. While Alteryx and Fortinet flaunt a Zacks Rank #1 (Strong Buy), Instructure carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Alteryx, Fortinet and Instructure is currently pegged at 39.85%, 14% and 30%, respectively.

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