MACOM Reports Fiscal Fourth Quarter and Fiscal Year 2023 Financial Results

LOWELL, Mass., November 09, 2023--(BUSINESS WIRE)--MACOM Technology Solutions Holdings, Inc. ("MACOM") (Nasdaq: MTSI), a leading supplier of semiconductor products, today announced its financial results for its fiscal fourth quarter and fiscal year ended September 29, 2023.

Fourth Quarter Fiscal Year 2023 GAAP Results

• Revenue was $150.4 million, a decrease of 15.6%, compared to $178.1 million in the previous year fiscal fourth quarter and an increase of 1.2% compared to $148.5 million in the prior fiscal quarter;

• Gross margin was 57.6%, compared to 60.9% in the previous year fiscal fourth quarter and 58.0% in the prior fiscal quarter;

• Income from operations was $15.6 million, or 10.4% of revenue, compared to income from operations of $37.0 million, or 20.8% of revenue, in the previous year fiscal fourth quarter and income from operations of $17.3 million, or 11.7% of revenue, in the prior fiscal quarter; and

• Net income was $24.5 million, or $0.34 per diluted share, compared to net income of $239.3 million, or $3.36 per diluted share, in the previous year fiscal fourth quarter and net income of $11.9 million, or $0.17 per diluted share, in the prior fiscal quarter. Net income for fiscal year 2022 includes 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.

Fourth Quarter Fiscal Year 2023 Adjusted Non-GAAP Results

• Adjusted gross margin was 60.1%, compared to 62.6% in the previous year fiscal fourth quarter and 60.1% in the prior fiscal quarter;

• Adjusted income from operations was $37.2 million, or 24.7% of revenue, compared to adjusted income from operations of $56.9 million, or 32.0% of revenue, in the previous year fiscal fourth quarter and adjusted income from operations of $37.0 million, or 24.9% of revenue, in the prior fiscal quarter; and

• Adjusted net income was $40.1 million, or $0.56 per diluted share, compared to adjusted net income of $55.1 million, or $0.77 per diluted share, in the previous year fiscal fourth quarter and adjusted net income of $38.5 million, or $0.54 per diluted share, in the prior fiscal quarter.

Fiscal Year 2023 GAAP Results

• Revenue was $648.4 million, a decrease of 4.0%, compared to $675.2 million in fiscal year 2022;

• Gross margin was 59.5%, compared to 60.2% in fiscal year 2022;

• Income from operations was $107.4 million, compared to $132.7 million in fiscal year 2022; and

• Net income was $91.6 million, or $1.28 per diluted share, compared to a net income of $440.0 million, or $6.18 income per diluted share in fiscal year 2022. Net income for fiscal year 2022 includes a $118.2 million gain associated with the sale of an equity interest and a non-cash income tax benefit of $202.8 million associated with the release of the valuation allowance on the majority of our deferred tax assets.

Fiscal Year 2023 Adjusted Non-GAAP Results

• Adjusted gross margin was 61.3%, compared to 62.0% in fiscal year 2022;

• Adjusted income from operations was $189.6 million, or 29.2% of revenue, compared to $211.0 million, or 31.2% of adjusted revenue, in fiscal year 2022; and

• Adjusted net income was $193.3 million, or $2.70 per diluted share, compared to adjusted net income of $201.0 million, or $2.82 per diluted share in fiscal year 2022.

Management Commentary

"We believe focusing on the highest frequency, highest power and highest data rate applications will further strengthen our market position and results in fiscal year 2024," said Stephen G. Daly, President and Chief Executive Officer.

Business Outlook

For the fiscal first quarter ending December 29, 2023, MACOM expects revenue to be in the range of $149 million to $153 million. Adjusted gross margin is expected to be between 59% and 61%, and adjusted earnings per diluted share is expected to be between $0.55 and $0.59 utilizing an anticipated non-GAAP income tax rate of 3% and 72.2 million fully diluted shares outstanding.

Conference Call

MACOM will host a conference call on Thursday, November 9, 2023 at 8:30 a.m. Eastern Time to discuss its fiscal fourth quarter and fiscal year 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 Data Center 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 and the associated earnings call 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, priorities and long-term growth drivers, our ability to execute our long-term strategy, strengthen our position and drive market share gains and growth, our ability to better address certain markets, expand our capabilities and extend our product offerings through the acquisition of Linearizer Communications Group ("Linearizer Acquisition"), statements about the potential market and product expansion opportunities resulting from MACOM’s establishment of its European Semiconductor Center ("MESC"), the team’s capabilities and technology and expansion thereof and any potential financial benefits derived by and financial impact to MACOM from the Linearizer Acquisition or the OMMIC SAS asset acquisition and MESC establishment and the pending acquisition of the RF business of Wolfspeed, Inc., strength and competitiveness of new product introductions and technology portfolio expansion, including the anticipated rate of new product introductions, anticipated demand for our products, MACOM’s profitability, revenue targets, 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 2024 fiscal first 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 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 geopolitical unrest or otherwise; inflationary pressures; any failure to accurately anticipate demand for our products and effectively manage our inventory; our dependence on a limited number of customers; risks related to any weakening of economic conditions; 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, non-GAAP EBITDA, non-GAAP net income, non-GAAP diluted earnings per share, non-GAAP income tax rate and non-GAAP interest (income) 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, acquisition and integration related costs, equity method investment gains and losses, debt extinguishment costs 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 management’s 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.

Acquisition and Integration Related Costs - includes items such as professional fees and other costs incurred in connection with acquisitions and integration specific activities which are not expected to have a continuing contribution to operations and the amortization of the fair market step-up value of acquired inventory and fixed assets. We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.

Equity Method Investment Gain, net – primarily includes non-cash gains and losses associated with a non-marketable equity investment we had 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.

Debt Extinguishment Costs – includes the write-off of unamortized deferred financing costs and professional fees associated with the paydown of our term loans. We believe these non-cash amounts are not correlated to future business operations and do no reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments – 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 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 acquisition 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												Twelve Months Ended
	September 29, 2023				June 30, 2023				September 30, 2022				September 29, 2023				September 30, 2022
Revenue	$	150,375			$	148,522			$	178,143			$	648,407			$	675,170
Cost of revenue		63,749				62,396				69,636				262,610				268,989
Gross profit		86,626				86,126				108,507				385,797				406,181
Operating expenses:
Research and development		37,508				36,668				39,678				148,545				148,228
Selling, general and administrative		33,511				32,152				31,798				129,852				125,279
Total operating expenses		71,019				68,820				71,476				278,397				273,507
Income from operations		15,607				17,306				37,031				107,400				132,674
Other income (expense):
Interest income (expense), net		3,843				2,344				(372	)			8,423				(4,300	)
Other (expense) income, net		(458	)			(29	)			(120	)			(665	)			114,746
Total other income (expense)		3,385				2,315				(492	)			7,758				110,446
Income before income taxes		18,992				19,621				36,539				115,158				243,120
Income tax expense (benefit)		(5,458	)			7,768				(202,797	)			23,581				(196,835	)
Net income	$	24,450			$	11,853			$	239,336			$	91,577			$	439,955
Net income per share:
Income per share - Basic	$	0.34			$	0.17			$	3.42			$	1.29			$	6.30
Income per share - Diluted	$	0.34			$	0.17			$	3.36			$	1.28			$	6.18
Weighted average common shares:
Shares - Basic		70,988				70,937				69,998				70,801				69,783
Shares - Diluted		71,828				71,408				71,274				71,503				71,166

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
	September 29, 2023			September 30, 2022
ASSETS
Current assets:
Cash and cash equivalents	$	173,952		$	119,952
Short-term investments		340,574			466,580
Accounts receivable, net		91,253			101,551
Inventories		136,300			114,960
Prepaid and other current assets		19,114			10,040
Total current assets		761,193			813,083
Property and equipment, net		149,496			123,701
Goodwill and intangible assets, net		390,392			362,671
Deferred income taxes		218,107			237,415
Other long-term assets		34,056			34,947
Total assets	$	1,553,244		$	1,571,817
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Current portion of finance lease obligations	$	1,162		$	1,006
Accounts payable		24,966			30,733
Accrued liabilities		57,397			65,475
Total current liabilities		83,525			97,214
Finance lease obligations, less current portion		31,776			27,032
Financing obligation		9,307			9,544
Long-term debt obligations		447,134			565,920
Other long-term liabilities		33,902			29,359
Total liabilities		605,644			729,069
Stockholders’ equity		947,600			842,748
Total liabilities and stockholders’ equity	$	1,553,244		$	1,571,817

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
	Twelve Months Ended
	September 29, 2023				September 30, 2022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income	$	91,577			$	439,955
Depreciation and intangible asset amortization		52,153				57,229
Share-based compensation		38,103				41,185
Gain on equity method investment, net		—				(114,908	)
Deferred income taxes		19,798				(200,431	)
Other adjustments, net		(6,948	)			644
Accounts receivable		12,253				(16,981	)
Inventories		(10,570	)			(32,261	)
Accrued and other liabilities		(21,315	)			(5,643	)
Change in other operating assets and liabilities		(8,134	)			8,193
Net cash provided by operating activities		166,917				176,982
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of business, net		(87,692	)			—
Proceeds from sale of equity method investment		—				127,750
Sales, purchases and maturities of investments		140,727				(284,121	)
Purchases of property and equipment		(24,699	)			(26,513	)
Proceeds from sale of assets		8,005				23
Net cash provided by (used in) investing activities		36,341				(182,861	)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of long-term debt		(120,766	)			—
Payments on finance leases and other		(1,209	)			(957	)
Proceeds from stock option exercises and employee stock purchases		5,574				8,052
Repurchase of common stock - tax withholdings on equity awards		(32,619	)			(36,003	)
Net cash used in financing activities		(149,020	)			(28,908	)
Foreign currency effect on cash		(238	)			(1,798	)
NET CHANGE IN CASH AND CASH EQUIVALENTS		54,000				(36,585	)
CASH AND CASH EQUIVALENTS — Beginning of period		119,952				156,537
CASH AND CASH EQUIVALENTS — End of period	$	173,952			$	119,952

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
RECONCILIATIONS OF GAAP TO NON-GAAP RESULTS
(unaudited and in thousands, except per share data)
	Three Months Ended																					Twelve Months Ended
	September 29, 2023							June 30, 2023							September 30, 2022							September 29, 2023							September 30, 2022
	Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue
Gross profit - GAAP	$	86,626			57.6			$	86,126			58.0			$	108,507			60.9			$	385,797			59.5			$	406,181			60.2
Amortization expense		1,341			0.9				1,131			0.8				1,778			1.0				4,369			0.7				7,839			1.2
Share-based compensation expense		1,389			0.9				1,180			0.8				1,166			0.7				5,304			0.8				4,597			0.7
Acquisition and integration related costs		981			0.7				760			0.5				—			—				1,962			0.3				—			—
Adjusted gross profit (Non-GAAP)	$	90,337			60.1			$	89,197			60.1			$	111,451			62.6			$	397,432			61.3			$	418,617			62.0
	Three Months Ended																					Twelve Months Ended
	September 29, 2023							June 30, 2023							September 30, 2022							September 29, 2023							September 30, 2022
	Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue
Operating expenses - GAAP	$	71,019			47.2			$	68,820			46.3			$	71,476			40.1			$	278,397			42.9			$	273,507			40.5
Amortization expense		(6,092	)		(4.1	)			(5,976	)		(4.0	)			(6,258	)		(3.5	)			(23,735	)		(3.7	)			(25,592	)		(3.8	)
Share-based compensation expense		(9,180	)		(6.1	)			(7,538	)		(5.1	)			(10,692	)		(6.0	)			(38,285	)		(5.9	)			(40,276	)		(6.0	)
Acquisition and integration related costs		(2,462	)		(1.6	)			(3,095	)		(2.1	)			—			—				(8,379	)		(1.3	)			—			—
Debt extinguishment costs		(143	)		(0.1	)			—			—				—			—				(143	)		—				—			—
Adjusted operating expenses (Non-GAAP)	$	53,142			35.3			$	52,211			35.2			$	54,526			30.6			$	207,855			32.1			$	207,639			30.8
	Three Months Ended																					Twelve Months Ended
	September 29, 2023							June 30, 2023							September 30, 2022							September 29, 2023							September 30, 2022
	Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue
Income from operations - GAAP	$	15,607			10.4			$	17,306			11.7			$	37,031			20.8			$	107,400			16.6			$	132,674			19.7
Amortization expense		7,433			4.9				7,107			4.8				8,036			4.5				28,104			4.3				33,431			5.0
Share-based compensation expense		10,569			7.0				8,718			5.9				11,859			6.7				43,589			6.7				44,873			6.6
Acquisition and integration related costs		3,443			2.3				3,855			2.6				—			—				10,341			1.6				—			—
Debt extinguishment costs		143			0.1				—			—				—			—				143			—				—			—
Adjusted income from operations (Non-GAAP)	$	37,195			24.7			$	36,986			24.9			$	56,926			32.0			$	189,577			29.2			$	210,978			31.2
Depreciation expense		6,218			4.1				5,827			3.9				6,141			3.4				23,846			3.7				23,798			3.5
Adjusted EBITDA (Non-GAAP)	$	43,413			28.9			$	42,813			28.8			$	63,067			35.4			$	213,423			32.9			$	234,776			34.8
	Three Months Ended																					Twelve Months Ended
	September 29, 2023							June 30, 2023							September 30, 2022							September 29, 2023							September 30, 2022
	Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue
Net income - GAAP	$	24,450			16.3			$	11,853			8.0			$	239,336			134.4			$	91,577			14.1			$	439,955			65.2
Amortization expense		7,433			4.9				7,107			4.8				8,036			4.5				28,104			4.3				33,431			5.0
Share-based compensation expense		10,569			7.0				8,718			5.9				11,859			6.7				43,589			6.7				44,873			6.6
Non-cash interest, net		328			0.2				412			0.3				412			0.2				1,563			0.2				1,692			0.3
Acquisition and integration related costs		3,443			2.3				3,855			2.6				—			—				10,341			1.6				—			—
Equity method investment gain, net		—			—				—			—				—			—				—			—				(114,908	)		(17.0	)
Debt extinguishment costs		560			0.4				—			—				—			—				560			0.1				—			—
Tax effect of non-GAAP adjustments		(6,698	)		(4.5	)			6,576			4.4				(204,503	)		(114.8	)			17,601			2.7				(204,037	)		(30.2	)
Adjusted net income (Non-GAAP)	$	40,085			26.7			$	38,521			25.9			$	55,140			31.0			$	193,335			29.8			$	201,006			29.8
	Three Months Ended																					Twelve Months Ended
	September 29, 2023							June 30, 2023							September 30, 2022							September 29, 2023							September 30, 2022
	Net income			Income per diluted share				Net income			Income per diluted share				Net income			Income per diluted share				Net income			Income per diluted share				Net income			Income per diluted share
Net income - GAAP diluted	$	24,450		$	0.34			$	11,853		$	0.17			$	239,336		$	3.36			$	91,577		$	1.28			$	439,955		$	6.18
Adjusted net income (Non-GAAP)	$	40,085		$	0.56			$	38,521		$	0.54			$	55,140		$	0.77			$	193,335		$	2.70			$	201,006		$	2.82
	Three Months Ended																					Twelve Months Ended
	September 29, 2023							June 30, 2023							September 30, 2022							September 29, 2023							September 30, 2022
	Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue				Amount			% Revenue
Interest (income) expense, net - GAAP	$	(3,843	)		(2.6	)		$	(2,344	)		(1.6	)		$	372			0.2			$	(8,423	)		(1.3	)		$	4,300			0.6
Non-cash interest expense		(328	)		(0.2	)			(412	)		(0.3	)			(412	)		(0.2	)			(1,563	)		(0.2	)			(1,692	)		(0.3	)
Adjusted interest (income) expense (Non-GAAP)	$	(4,171	)		(2.8	)		$	(2,756	)		(1.9	)		$	(40	)		—			$	(9,986	)		(1.5	)		$	2,608			0.4

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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