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MACOM (MTSI) Reports In-Line Q1 Earnings, Misses on Revenues

Zacks Equity Research

MACOM Technology Solutions Holdings, Inc. MTSI delivered fiscal first-quarter 2019 non-GAAP earnings of 20 cents per share, in line with the Zacks Consensus Estimate. The figure increased 25% on a sequential basis but declined drastically from the year-ago quarter.

The sequential increase in earnings was driven by prudent cost management.

Adjusted revenues increased 15.1% year over year but were flat on a sequential basis at $150.7 million. The figure missed the Zacks Consensus Estimate of $154 million and came in at the lower end of the guided range.

Management said that the results were impacted by trade tensions and recent geopolitical events. Also, orders from cloud customers slowed in the quarter, thereby impacting results.

In addition, the industrial market witnessed sluggishness due to macro slowdown. However, management expects end-market demand to be healthy for 2019, with 5G in particular expected to drive a rebound in the near future.

Operating Details

In fiscal first-quarter 2019, non-GAAP gross margin came in at 56.3%, expanding 260 basis points (bps) on a year-over-year basis and 150 bps sequentially.

Non-GAAP operating expenses, as a percentage of revenues, came in at 41.7%, which contracted 180 bps from the prior-year quarter and 70 bps from fiscal fourth-quarter 2018.

Adjusted operating margin came in at 14.5%, which expanded 420 bps from the prior-year quarter and 220 bps from the fiscal fourth quarter.

Adjusted EBITDA was $29.5 million, up from $20.9million in the year-ago quarter. However, the figure was up from $26.1 million in the fiscal fourth quarter.

Balance Sheet & Cash Flow

At the end of fiscal first quarter, cash equivalents and short-term investments were $185.8 million compared with $192.9 million at the end of the fiscal fourth quarter. Inventories were $120.9 million, down from $122.8 million a year ago.

Long-term debt obligations, excluding current portion, were $659.3 million in the fiscal first quarter.

Guidance

For fiscal second-quarter 2019, MACOM expects adjusted revenues between $134 million and $142 million. The Zacks Consensus Estimate for revenues is pegged at $159.4 million.

The company’s earnings are anticipated in the range of 4-12 cents per share. The Zacks Consensus Estimate for the same is pegged at 24 cents per share.

Further, non-GAAP gross margin is anticipated in the range of 55-57%.

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. Quote

Zacks Rank & Key Picks

Currently, MACOM carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the broader technology sector are Twitter TWTR, Lumentum Holdings LITE and Inphi Corporation IPHI. While Twitter sports a Zacks #1 Rank (Strong Buy), Lumentum and Inphi both 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 Twitter, Lumentum and Inphi is projected to be 22.1%, 17% and 18.5%, respectively.

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