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• Revenue: $218 million for Q1 fiscal 2025.

• Adjusted EPS: $0.79 per diluted share.

• Free Cash Flow: Approximately $63 million for Q1.

• Cash and Short-term Investments: Approximately $657 million at quarter end.

• Revenue by End Market: Industrial and defense: $97.4 million; Data Center: $65.3 million; Telecom: $55.4 million.

• Sequential Revenue Growth: Data Center up 16%, Telecom up 7%, Industrial and Defense up 5%.

• Book-to-Bill Ratio: 1.1:1 for Q1.

• Adjusted Gross Profit: $125.3 million or 57.5% of revenue.

• Adjusted Operating Expense: $69.9 million.

• Adjusted Operating Income: $55.4 million.

• Adjusted Net Income: $59.5 million.

• Accounts Receivable: $91.8 million, down from $105.7 million in Q4 2024.

• Inventory: $198.4 million at quarter end.

• Cash Flow from Operations: Approximately $66.7 million for Q1.

• Capital Expenditures: $5.3 million for Q1.

• Warning! GuruFocus has detected 3 Warning Sign with MTSI.

Release Date: February 06, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• MACOM Technology Solutions Holdings Inc (NASDAQ:MTSI) reported a record high revenue of $218 million for the first fiscal quarter of 2025, with an adjusted EPS of $0.79 per diluted share.

• The company achieved a strong free cash flow of approximately $63 million in Q1, contributing to a cash and short-term investments balance of $657 million.

• The data center market segment showed significant growth, with revenues up 16% sequentially, driven by strong demand for 800 gig optical products.

• MACOM's book-to-bill ratio was 1.1:1, indicating strong order activity and a record-level backlog.

• The company is strategically positioned to capture market share in its targeted end markets, with plans to introduce new product lines and technologies in 2025.

Negative Points

• Gross margins for the first quarter were below targets at 57.5%, impacted by lower wafer volumes and underabsorbed costs in the Lowell fab.

• The telecom market segment experienced some weakness, affecting overall utilization and contributing to lower gross margins.

• Despite strong growth in the data center segment, there is a potential slowdown in 800 gig demand as customers transition to 1.6T, which could impact future growth rates.

• The company faces challenges in maintaining high utilization rates in its Lowell fab, which is crucial for improving gross margins.

• There is uncertainty regarding the impact of government funding and CHIPS Act initiatives on MACOM's long-term investment plans and financial performance.

Q & A Highlights

Q: Can you update us on the progress with ACC in the data center market and the potential inflection point in mid-2025? Also, what are your thoughts on LPO and its opportunities compared to ACC? A: Stephen Daly, CEO: The data center market is performing well, with significant growth driven by our optical portfolio, particularly the 800 gig products. We anticipate a slowdown in 800 gig as customers transition to 1.6T. ACC remains a game changer, with interest from a broad customer base, despite some architecture changes. LPO, a solution without DSP, is also gaining interest, especially at higher data rates like 800 gig and 1.6T, and is expected to contribute in late 2025 and 2026.