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MACOM (MTSI) Q3 Earnings Beat Estimates, Revenues Rise Y/Y

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MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) reported third-quarter fiscal 2021 non-GAAP earnings of 57 cents per share, beating the Zacks Consensus Estimate by 7.6%. Further, the bottom line improved 72.7% year over year and 11.8% sequentially.

Revenues of $152.6 million surpassed the Zacks Consensus Estimate of $152 million. Moreover, the top line rose 1.4% sequentially and 11.2% from the year-ago quarter.

The company’s solid momentum across industrial and defense end-markets drove the top line in the reported quarter.

The strong performance delivered by MACOM across regions like the United States, the AsiaPacific, excluding China, and other countries contributed well.

However, sluggish performance in the telecommunications market and China in the reported quarter has been concerning.

Top Line in Detail

Telecom Market: The company generated revenues of $47.9 million (31.4% of total revenues) from the market, down 15.5% from the year-ago quarter.

Data Center Market: The market generated revenuesof$33.3 million (21.8% of total revenues), which rose 2.5% from the prior-year quarter.

Industrial & Defense Market: MACOM generated revenues of $71.4 million (46.8% of total revenues) from the market, which grew 48.6% year over year.

Operating Details

In third-quarter fiscal 2021, non-GAAP gross margin was 60.3%, which expanded 480 basis points (bps) year over year.

In the reported quarter, non-GAAP operating expenses were $48.1 million, which improved2.6% year over year. As a percentage of revenues, the figure contracted 270 bps to 31.5%.

Consequently, the company’s non-GAAP operating margin was 27.8%, which expanded from 730 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Jul 2, 2021, cash equivalents and short-term investments were $308.9 million, up from $268.1 million as of Apr 2, 2021. Inventories were $83.5 million, down from $84.5 million in the last reported quarter.

Long-term debt obligations, excluding the current portion, were $488.04 million in the fiscal third quarter compared with $492.2 million in the previous quarter.

Cash generated from operations was $44.9 million, up from $27.9 million in the last reported quarter.

The company’s free cash flow in the reported quarter was $39.3 million compared with $23.5 million in the prior quarter.

Guidance

For fourth-quarter fiscal 2021, MACOM expects revenues between $153 million and $157 million. The Zacks Consensus Estimate for the metric is pegged at $154.01 million.

The company’s adjusted earnings per share are anticipated to be 56-60 cents. The Zacks Consensus Estimate for the same is pegged at 53 cents per share.

Non-GAAP gross margin is anticipated to be 59.5-61.5%.

Zacks Rank & Stocks to Consider

Currently, MACOM has a Zacks Rank #4 (Sell).

Some better-ranked stocks in the broader technology sector are NXP Semiconductors (NXPI - Free Report) , Semtech Corporation (SMTC - Free Report) and Agilent Technologies (A - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Long-term earnings growth rates for NXP, Semtech and Agilent are currently projected at 10%, 12.5% and 13%, respectively.