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MACOM (MTSI) Q1 Earnings & Revenues Beat Estimates, Rise Y/Y

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MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) reported first-quarter fiscal 2021 non-GAAP earnings of 46 cents per share, beating the Zacks Consensus Estimate by 9.5%. Further, the bottom line improved 15% sequentially. Also, the figure jumped significantly from 7 cents per share in the year-ago quarter.

Revenues of $148.5 million surpassed the Zacks Consensus Estimate of $147.9 million. Moreover, the top line rose 0.9% sequentially and 24.7%from the year-ago quarter.

The company’s solid momentum across data center, telecommunications, and industrial and defense markets drove the top line in the reported quarter.

Further, the strong performance delivered by the company across all the operating regions — United States, China, the Asia-Pacific and others — contributed well.

Coming to the price performance, MACOM has returned 95.1% over a year, outperforming the industry’s growth of 40.7%.

The company expects to strengthen 5G network deployments to continue driving revenue growth from the telecommunications market in the days ahead. Further, the rapid adoption of cloud-based services is likely to continue to aid the top line from the data center market.

Also, robust product offerings in the industrial and defense markets are other positives.

 

 

Top Line in Detail

Telecom Market: The company generated revenues of $51.5 million (34.7% of total revenues) from this market, up 13% from the year-ago quarter.

Data Center Market: This market generated revenues worth $35.5 million (23.8% of total revenues), which rose53.6% from the prior-year quarter.

Industrial & Defense Market: MACOM generated revenues of $61.6million (41.5% of total revenues), which grew 22.1% year over year.

Operating Details

In first-quarter fiscal 2021, non-GAAP gross margin was 57.5%, which expanded 400 basis points (bps) year over year.

In the reported quarter, non-GAAP operating expenses were $47.6 million, which declined 6.1% year over year. As a percentage of revenues, the figure contracted significantly from 42.6% in the prior-year quarter to 32.1%.

Consequently, the company’s non-GAAP operating margin was 25.4%, which significantly expanded from 10.9% in the prior-year quarter.

Balance Sheet & Cash Flow

As of Jan 1, 2021, cash equivalents and short-term investments were $354.8 million, up from $333.1 million as of Oct 2, 2020. Inventories were $89 million, down from $91.6 million in the last reported quarter.

Long-term debt obligations, excluding the current portion, were $650.9 million in the fiscal first quarter compared with $652.2 million in the previous quarter.

Cash generated from operations was $34.8 million, down from $74.4 million in the last quarter.

Further, the company’s free cash flow in the reported quarter was $31.9 million compared with $69.5 million in the prior quarter.

Guidance

For second-quarter fiscal 2021, MACOM expects revenues between $148 million and $152 million. The Zacks Consensus Estimate for the metric is pegged at $145.01 million.

Further, the company’s adjusted earnings per share are anticipated to be 46-50 cents. The Zacks Consensus Estimate for the same is pegged at 38 cents per share.

Moreover, non-GAAP gross margin is anticipated to be 57-59%.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the broader technology sector are Qorvo (QRVO - Free Report) , Synaptics (SYNA - Free Report) and Microchip (MCHP - Free Report) . All three companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Qorvo is set to report its quarterly results on Feb 3, while Synaptics and Microchip are scheduled to report their quarterly results on Feb 4.

Long-term earnings growth rates of Qorvo, Synaptics and Microchip are pegged at 15.8%, 10% and 14.9%, respectively.

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