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MACOM's (MTSI) Q3 Loss In Line, Revenues Miss Estimates

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MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) reported fiscal third-quarter 2019 non-GAAP loss of 42 cents per share, which came in line with the Zacks Consensus Estimate. Notably, the company reported earnings of 13 cents per share in the year-ago quarter. Further, the reported loss is wider than the loss of 18 cents per share in the previous quarter.

Adjusted revenues decreased 25.2% year over year and 10.8% on a sequential basis to $108.31 million, which missed the Zacks Consensus Estimate of $110 million.

The top-line decline can be attributed to weak performance of the company across all the end-markets, especially in the data center market. Further, the suspension of shipments to Huawei, which resulted in reduction in MACOM’s sales to not only Huawei but also its affiliates, remained a major concern during the reported quarter.

Additionally, lower shipments into the company’s distribution channel affected revenues.

Coming to the price performance, shares of MACOM have lost 11.8% over a year against the industry’s growth of 3.6%.



End-Market in Details

Telecom Market: The company generated $43.9 million revenues (39% of total revenues) from this market, which were down 13.2% year over year.

Data Center Market: This market yielded $17.6 million revenues (19% of total revenues), which declined 54.8% year over year.

Industrial & Defense Market: MACOM generated $46.8 million revenues (42% of total revenues), which decreased 3.3% from the prior-year quarter.

Operating Details

In the fiscal third-quarter 2019, non-GAAP gross margin came in 39.4%, which contracted significantly from 56% in the year-ago quarter.

Non-GAAP operating expenses came in 59.9% as a percentage of revenues, which jumped up from 44.6% in the prior-year quarter.

The company reported adjusted operating loss of $22.3 million in the fiscal third quarter against the year-ago quarter’s income of $16.5 million.

Adjusted EBITDA was ($15) million against $24.1 million in the year-ago quarter.

Balance Sheet & Cash Flow

As of Jun 28, 2019, cash equivalents and short-term investments were $185.8 million compared with $192.4 million as of Mar 29, 2019. Inventories were $110.5 million, down from $119.9 million a year ago.

Long-term debt obligations, excluding current portion, were $656.05 million in the fiscal third quarter compared with $656.8 million in the previous quarter.

Cash flow from operations was $1.4 million, down from $23.9 million in the last quarter.

Further, the company’s free cash flow in the reported quarter came in ($7.9) million compared with $12.9 million in the previous quarter.

Guidance

For fiscal fourth-quarter 2019, MACOM expects revenues between $108 million and $112 million. The Zacks Consensus Estimate for revenues is pegged at $113.44 million.

Further, the company’s adjusted loss per share is anticipated to lie in a range of $0.00-$0.04. The Zacks Consensus Estimate is pegged at a loss of 9 cents per share.

Moreover, non-GAAP gross margin is anticipated to lie within the range of 52-54%.

Zacks Rank & Key Picks

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

Some better-ranked stocks in the broader technology sector are Rosetta Stone (RST - Free Report) , Oracle (ORCL - Free Report) and CACI International (CACI - Free Report) . While Rosetta Stone sports a Zacks Rank #1 (Strong Buy), Oracle and CACI 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 Rosetta Stone, Oracle and CACI is currently projected to be 12.5%, 9.8% and 10%, respectively.

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