MACOM Technology Solutions Holdings, Inc. Q4 FY2024 earnings call

• Strategic focus: Focus on supporting high power, high frequency, and high data rate applications in core markets. Align R&D and product development around these themes and use strategic planning to set goals.
• 2024 accomplishments: Awarded large purchase orders/contracts, expanded data center leadership with record revenue and >30% growth, received $29M in government funding for semiconductor development, and strategic acquisitions expanded portfolio.
• Areas not meeting targets: Fell short of introducing 50% more IC products year-over-year and did not achieve optimal utilization of Lowell wafer fab.
• 2025 priorities: Extend leadership in gallium arsenide and GaN MMICs, lead in 200G per lane data center solutions, develop microwave/millimeter wave processes, complete European semiconductor center 6-inch wafer production line qualification, ramp high-speed photodetector and CW laser products, accelerate new product introductions, and recruit industry-leading talent.

For the fourth fiscal quarter of 2024, revenue was $200.7 million. For the full year 2024, revenue was $729.6 million. The data center segment had a record full year 2024 revenue with greater than 30% growth. The defense and industrial end market had an annual and quarterly record revenue. The telecom end market saw growth with some market variations. Data center revenue contribution in 2024 was a record, defense/industrial had strong performance, and telecom had mixed trends with some bright spots like satellite communications.

• MACOM expects Q1 FY2025 revenue to be in the range of $212 million to $218 million.
• Adjusted gross margin is expected to be 57% to 59%.
• Adjusted earnings per share is expected to be between $0.75 and $0.81.
• Sequential revenue growth is expected in all end markets, with data center leading at approximately 15% sequential growth, followed by telecom and industrial/defense with low to mid single-digit sequential growth.

• Semiconductor industry volatility: The industry has cycles, and a down cycle could be a headwind to growth plans.
• Market variations: Some submarkets like industrial and certain telecom remained weak, and market dynamics can impact revenue and growth trajectories.

Q: Talk about the LPO opportunity and active copper cable deployment.

A: On LPO, the MSA organization has grown, interest from the industry is increasing, and deployments are early but expected to take market share. On active copper cable, the data center market is volatile with customers changing solutions, and MACOM's data center revenue is diversified supporting various solutions.

Q: Clarification on 2026 $1 billion revenue and Wolfspeed margin normalization.

A: Reaching a $1 billion run rate by 2026, equating to $250 million per quarter. Wolfspeed integration is ongoing with improvements, but more work is needed for margin normalization.

Q: Terms requirement for the December quarter and 200gig per lane market.

A: Terms requirement has hovered in the 20% range. In the 200gig per lane market, MACOM is a merchant supplier engaging customers with various approaches, and the team is focused on co-designing solutions to support customers.

Q: Data center SAM and gross margin.

A: SAM expands due to increased systems deployed, but product set is situational. Gross margin guide is 57%-59%, with efforts to improve towards 60% through fab loading and NPI metrics.

Q: Data center ACC and telecom growth.

A: Interest in ACCs at lower data rates, and telecom growth includes SatCom and 5G with some wireline recovery.

Q: Trajectory to $1 billion revenue and data center buying patterns.

A: Growth needs all end markets, including telecom, with semiconductor cycles being a caveat. Data center has volatile buying patterns, but MACOM's long-term view includes secular growth in next-gen architectures.

Q: Data center contributions and OpEx.

A: 1.6T solutions will be a fast-growing area, and OpEx has stepped up due to design capabilities, new acquisitions, and merit processes.

Q: ACC applications and DOCSIS 4.0.

A: ACCs used in various rack and NIC connections, and DOCSIS 4.0 has a multiyear design cycle with new platform backlog and additional product opportunities.