MACOM Technology Solutions (MTSI) 4 May 232023 Q2 Earnings call transcript

Welcome to MACOM’s Second Fiscal Quarter 2023 Conference Call. This call is being recorded today, Thursday, May 4, 2023. [Operator Instructions]

I will now turn the call to Mr. Steve Ferranti, MACOM’s Vice President of Strategic Initiatives and Investor Relations. Mr. ahead. go please Ferranti,

our Good financial welcome fiscal for to Litigation harbor Reform differ XXXX. results results would everyone XXXX. Olivia. statements are Act statements, contain to the quarter our subject discuss as I that materially in remind the to MACOM’s may for like today morning, you, will to forward-looking discussed risks and of call of discussion certain which contained Thank the today. from uncertainties in and defined safe forward-looking Securities those Private Actual second

more and we result For adjusted detailed filings statements that discussions to also you call risks of with differences, certain uncertainties include those this financial SEC. of Management’s the during non-GAAP in information. MACOM’s the could refer will discussion

GAAP I’ll adjusted the President Steve the which was Daly, are provided of release related today. reconciliation SEC turn of and that, the CEO results to And Form in and non-GAAP with over filed X-K, MACOM. press company’s to A call with

Thank you, morning. and good

balance short-term $X.XX ended our quarter will investments some in begin the XXXX. was I Revenue share. XXXX call and third for will diluted $XXX fiscal Jack of Officer, guidance general our a sheet. million second million, in-depth Kober, $XXX.X is today’s Jack quarter, flow of fiscal be with update. revenue and was approximately then take for Financial that, a in quarter and fiscal of second and from After our quarter our Chief the more review will $XX we to results EPS per provide happy for When finished, provide our will earnings operations I on we Cash million adjusted questions. cash with was

targets. did an financial excellent to Overall, and our job our execution business meet on team

greater lower QX revenue, book-to-bill X was X% or quarter, Despite turns and our which as ‘XX total full shipped ratio was In book-to-bill booked remains book-to-bill QX of expected. our for weak than revenue FY X of the our was bookings, than backlog the strong X our had ratios below business, year approximately also for expectations. Our X.X. was the well and the have quarters X.X, past our within ratio

bookings, Given extraordinarily questions. would order the it QX and weak series important to I address be thought the current helpful a trends of discuss

First, were weak bookings. surprised we with the QX

-- our had we earnings As weak anticipated on be last would discussed call, that on last in QX. bookings

million However, our below $XX actual bookings were forecast. approximately internal our

the continue of some we the that occurred not customer softness, during caused channel So combination as channels the weak end we data of well our weakness. sales pockets the of customers bookings, center, cancellations did most while quarter. What and expect and high the excess to magnitude in We levels we a What of infrastructure the as have demand short-term inventory. associated number inventory. expected networking of believe weakness XG have and believe markets inventory

large products orders couple placed to of interruption. and ‘XX in risk Additionally, chain the and a Most broadband inventory, ‘XX in will have of FY minimize levels FY at supply not significant some cable lock least these of quarters. be more ordering of customers our to of for they or customers capacity

markets Are and any out or have end customers themselves push certain to of our constraints orders of resolved, find with delaying slowing target inventory supply been many new As asking down? these excess are or cancel therefore, backlog.

demand is parts data slowdown end believe of and We there the markets. telecommunication certain center in

year’s of are U.S.-based the only manufacture cloud example, they our at levels. to new For for optical XX% the XX% transceivers ISPs, receive us expect but that volume production telling customers prior orders to

any European weak issues weak defense market somewhat XGS-PON by not end the offset demand. moderate demand PON the slowdowns U.S. compared that and see believe also support MACOM-specific for bookings. notable to opportunities for Are any We there year. We is China causing in or currently last do markets.

DoD the orders, the of timing is weakness exception related. the we With short-term excess believe of end inventory demand and/or

believe do programs. have customers lost market or have losing lost we MACOM any major not share, share As market we or

design wins are sockets our products’ our on performance. of Most sole-source based

our and interest very Additionally, in products, high. our strong newest design-in activity is the

in is Given QX the weakness and our bookings, QX outlook for what QX.

We and bookings Therefore, major the canceled. next for remain are in X believe channel relatively associated to to and weak will X which inventory it levels reduced have identified to take customer orders we programs We expect or time delayed, return in or quarters. scale normal

is high-performance will compute satellite confident Where end said, in Further, to remain demand begin trends MACOM, improve do potential That medical, continues that for we growth to strong. our expect strong QX. defense, avionics, improve. we booking and communications are

expanding have near-term been and growth our markets. X The SAM confused long-term products latest are core our not should be with We potential our end weakness compelling. secular in the

our In summary, detail this extra of helps investors strength on the market the I QX current potential. portfolio reflect MACOM’s and long-term depth environment. growth do understand bookings not and the hope bookings the

million, additional in to and thus China be down traffic. we was in will far end factors, $XX.X subscribers XG and was opportunity few our XG center densification to on Based deployments over support flat market. a this growth telecom the Within year-over-year network will associated defense data as expansion Industrial QX. fiscal to the North Turning Telecom, and required led increases, increase $XX.X believe do invest was number markets penetrating we revenues these center capacity of are continue up million, next and X.X% the and IND remain XG will years, in down million, have data that Telecom America, $XX.X I’ll sequentially. down is and note and sequentially. year-over-year. Korea for revenue both XX.X% sequentially

sizable deployments telecom within market, shipments high-volume a representing and market X.XG approaching a globally, of million for the units PON and increase our very next continue MACOM years. to opportunity total coax Additionally, access create over broadband with fiber-based the fiber-to-the-home copper few networks based networks, XXX annually, XXG displacing large unit

Amazon, coverage alternative by seeing Lower are systems, Constellations viable global are a reality. a configured a or Satellite-based SpaceX, with as architectures terrestrial-based to network Orbit, supplement announced broadband broadband mesh [Earth] LEO, satellites or making resurgence networks Kuiper demand To systems, being the drive these LEO of with ground backhaul over satellites network. years. infrastructure new built the new and along fiber support will is associated OneWeb, for next station Telesat few thousands

All of directly these strengths. RF microwave platforms to play MACOM’s and

a the data associated systems early X.XT behind. deployments to for following emerging Turning by The XXXG bandwidth trends fueled the artificial is are and intelligence in and complex data challenges successive for Today, learning implications business, will number be see nodes higher-speed these each growth hyperscale are next with of the center. which and our closely positive grows designed the with ICs center. more We operators wave of within XXXG new beginning machine in drive technical demand. of stages to mixed-signal This just generation. high-speed has deployed, growing

many the as for systems across in for drive opportunity ground-based significant platforms semiconductor Radar, shipborne so areas. defense market electronic Finally, growth and our warfare type requirements of growth can MACOM products. a see we communication space, airborne, and

to technology our summary, competitive we capture contain to and across the during In QX. provide I’d differentiated markets business share. accomplishments target market advantage significant some will major review like drivers, believe a MACOM growth our

have XX programs will and systems. be X.XX target airborne telecommunication our production, we processed X GaN the shipborne SATCOM radar designs being Today, Fab. Initially, mimic on high-volume and semiconductor new applications released various we announced, in previously approximately silicon and process. carbide As the

related processes. completed equipment other of ETCH and note, and backside On Deposition ALD installation this an the team a support a Fab via GaN next-generation Layer our has to or tool new Atomic recently tool

production first our BAW, made we new Acoustic shipments quarter, the Bulk or Wave, During line. from product our filter

on to In the subarray in telecommunications demonstrated designed is March, technical Our defense and focus high-power BAW performance industrial high-performance team panel. strategy growth newly applications a our successfully transmitter of applications.

and the contract full milestone, important begin we an array. now on was will This work

expect designed months. RF in to program lead We XX with MACOM XXX% to transmitter XX similar Notably, content. next this almost is this will the opportunities

CWDMX is in demand few to LRX trends center market moving, more XXXG as for and new the systems include decline as demand product A are -- we Covering boring seeing PAMX. well are weak. demand AOCs products XXXG as for a NRZ data

expect this for X continue to We quarters. or more X

and applications. We computing are AI demand and supporting demand growth XXXG. DRX, of strengthening production in XXXG XXXG high-performance Most is seeing this and

with During subassembly. support a the wins XXXG-ZR a a for for design notable items few and secured on systems to amplifier we we L-band power defense applications. support Tier months, TIAs laser coherent radar for ZR prime and RF light selected the numerous drivers custom-designed have by products, past program data been And to few an center campus have X

We expect months. the begin production will within this large next to X ramp program

us initial enable QX, low pure silicon silicon during design qualified our we lower-cost designed heating carbide include from front-end amplifier long-term diode FET process. application, power industrial, IC numerous devices applications base for tactical and and delivered amplifier new to and newly that their STMicroelectronics customers from specifically power support OEM station and for on products a to production contract next-generation our GaN And FMCW, RF applications. revenue material pilot orders have potential, Tier RF products radio expanded new received support This to will module, its We cooking GaN including portfolio and LiDAR to a massive significant to a a orders support German X automotive long-range design Japanese order XG an programs. MIMO from initial both

significant PAMX booth. The DSP linear OFC, hosted the newest where X compared to product attended chip a of and we enables mode our Conference, at to of March, power our support cost gained optical was In live and retime products elimination One module. at the architectures demonstration, linear drive which multimode Fiber or and our demonstrations the the solutions reduction lot due a that attention Optical we savings products XXXG. architecture single highlighted drive from

with Light. with Broadcom’s post orders the Eoptolink over link of and FEC , error-free standards requirements. demonstrations X XXXG multiple performance Hisense by The using operation showcased and demonstration designed Our margin Cloud magnitude switch modules interoperability confirmed OSFP Tomahawk to

like demonstrated modules, be we applications we high-performance which believe NVIDIA’s will for artificial XXXG computing. ideal machine intelligence, learning and Additionally,

support independent The positioned is intellectual other this InfiniBand, and linear for interconnects. can as new adopted. growth architecture is as us We as linear protocol low-latency property Ethernet believe drive first-to-market products well drive architecture associated and our

in and custom we I our over microwave acquisition review or and is New customers. and defense of market microwave Linearizer the for In early products for and industrial defense Communications be SATCOM applications. a expert subsystems, space, discussion to company I Hamilton, over primarily located to Jack, U.S.-based, are customers are turn and electronics defense of Their segments. for Linearizer reported microwave Linearizer will the telecommunication photonic part fiber Before and RF as completed Jersey. designed satellite manufactures revenues would payloads linearization, recent pre-distortion X March, the like private in Group, acquisitions.

employees, for great great the I’m and a excited we is relevant component semiconductor create a MACOM. By to success. our welcome and customers entire subsystem team and profitable technology of to more our record design management, combining differentiated further their Linearizer solutions with penetrate and business track the even customers expertise, Linearizer with markets. combined well-run, XX-year proprietary can technology great

to January, IC expect agreement we a and of combination. quarter. wafer European Paris, acquisition semiconductor Together, bolster production technologies will operational announced epitaxial third a strengthen outside acquire wave powerful hurdles increase add The expertise, And line teams. manufacturer our and clear. This and our definitive a our X-inch an the our we in Mimics we located X-inch more of assets make of capacity few presence France. key currently, transaction our millimeter to GaN with a close process in fiscal and manufacturing semiconductor capabilities and manufacturing to has And frequency OMMIC, expand growth design portfolio, gas idle

position now goal will leadership and a our acquisition This very detailed supports processes our products. provide in establish frequency, review results. strategic mimic of Jack semiconductor a high financial more to

morning, Thanks, Steve, good everyone. and

center we second China-based Our to in to geographic quarter. of Revenue of by domestic driven Sales X% this on second quarters our decrease Sales fiscal down first growing flat were period. was XX% down customers basis, focused X% sales million, well mostly XX%, guidance in the a telecom represented end approximately results with Europe-based in represented our for X and revenue, the from approximately the approximate customers quarter-over-quarter. On The past market. $XXX.X data in a XX% revenue, sequential over sales XXXX customers fiscal sequentially. of quarter the region. for line are the as to was our as the decrease quarter for market

$X.X down million $XX.X anticipated, gross fees expenses, XX million Adjusted Total was by Total as down $XXX.X revenue, million, profit was adjusted compensation, expense of operating sequentially. $XX.X XX.X% due discretionary expense variable were sequentially or consisting million R&D SG&A of professional of points expense spend. to basis and million. $XX.X and operating of lower

in from XX.X% fiscal income $XX.X QX Adjusted was $XX.X margin QX from was XX.X% sequentially down fiscal in million operating in million up Adjusted QX. -- QX. fiscal fiscal operating for from

operating demonstrates we model continue compared higher in operating to Our to changes as the margin investments adjusted business cycles. internal to manage QX flexibility fiscal in our

was QX QX income investment compared fiscal $X was $XX.X million. QX months was in for roughly interest for expense $XXX.X fiscal fiscal fiscal million $X.X adjusted adjusted Depreciation net Adjusted was and from QX Trailing EBITDA million to on $XXX.X $X million XXXX. million million, up XX returns. higher portfolio EBITDA

income in X% million. approximately $X.X at in remained and non-GAAP rate an QX Our expense fiscal tax adjusted resulted of

fiscal million up payments tax $X.X XXXX. $XXX,XXX cash Our quarter were first from of the in

Adjusted year QX and million fiscal tax adjusted our Fiscal compared to remain to $X.XX adjusted compared income earnings utilizing $XX.X was share year of expect share of net fully $XX at shares We in to adjusted for QX. fiscal remainder million count fiscal into was fiscal XXXX. in QX. million X% income $X.XX per diluted of share earnings rate a XX.X XXXX the per

on and to items. balance moving cash Now flow sheet

million, was QX. $XXX.X from million fiscal Our $XXX up accounts receivable balance in

sales turns inventory shipments in in as the XX Linearizer were were at to XX of primarily a occurring AR sequentially, quarter. accounts in to up the quarter with the days our majority QX, Inventory on compared in $XXX.X with primarily As in from days to days in later increase prior linearity quarter. Xx outstanding prior million well due sequential X.Xx connection down the the result, by the Linearizer from quarter due were acquisition. receivable million acquisition. a slightly as Inventories additional end, shipment The basis $XX.X is

the totaled receivable reduce quality We an year decrease The into million during for we we result customer of flow QX. to as fiscal us and lead strong million timing Cash fiscal the $XX.X cash to remains inventory of QX, down continues changing to fiscal quarter. manage balance shortening from we is our was XXXX. operations through quarter. business generation the be payments do orders of XXXX important in through expect in as compared a and cycles. from expenditures mostly $X.X million as net feel our times, QX prior $X accounts priority and payable fiscal accounts inventory for year million Capital progress the despite approximately Fiscal and $XX.X lower

year fiscal to is full estimated million. XXXX Our $XX be CapEx now

the We critical fiscal capability profitability make with are carefully maintain business balancing to capital during spending and and the plan in fab and cash generation processes investments of our XXXX.

Next, to balance on sheet other items. moving

During to utilized we the acquisition. of quarter, available cash approximately fiscal $XX Linearizer second the close million

second cash, the result, a million XXXX. QX million, and investments equivalents fiscal $XXX.X cash were fiscal quarter for in As short-term down from $XXX.X

Our less remains debt second and X.Xx, net quarter gross million. leverage $XX our less than than is

have are back team discussion few the pleased turning Steve, we and MACOM. a the Before to acquisition first, in to March, items: with we like working would the to integrate closed are to additional I note Linearizer

will on a We accretive not impact our have and will Linearizer line. to modestly expect our be short-term significant revenue bottom that

Over MACOM’s when the and we offer opportunities. brand term, business with infrastructure, growth believe long will the long-term combined

We are to welcome MACOM. team the excited linearizer to

Second, and we workforce. toward work closing technology dedicated OMMIC to with its of continue the differentiated

not transaction, will and in expect dilutive revenue a slightly discussed, will short As impact it closing have on meaningful our previously to that the do of following our the term be we and EPS. the OMMIC then

growth drive it term, will and However, value. we stockholder profitability the invest expect business, over as the we and in long provide

product fiscal our compared XX% year plans more over support growth introductions we which continue Additionally, year, the revenue to term. make will to have we expect and this I’d progress that like products with last new long release to to note

X where goals targets We has process in-depth Also, as to looking comprehensive June strong entire the business and to develop our we and during X-year foundation, SAM, portfolio. our included growth, the forward technical view expand plan annual financial our quarter, the which we setting investment this updating product are on profitability our next plan, a important develop years. an capabilities for our plan build across strategic grow and an set to historically

business during carefully year. expenses manage Steve. And over finally, current I our of turn the back will given environment, now the the second discussion the plan fiscal to to half we

Thank you, Jack.

is does QX be XX%, in share million industrial include the earnings for down to per revenue expects diluted on and XX% to MACOM not XX.X in gross In be from expect up fully and QX, expected center be expected fiscal to planned $X.XX discussed. This or acquisition. million be defense range to of impact to any the OMMIC financial telecom based we’ve in revenue of Adjusted $XXX range revenues data previously contributions $XXX and guidance to between shares. the and million. adjusted $X.XX and reasons margin to revenues is be the we

long-term we on As perspective strategy. I’ve noted, executing maintain our a

portfolio product or than and can meet targets. exceed confident was we we is a Our our ago, are year it stronger

financials, expect ‘XX be Finally, XX%. as second over take I like to to X% to be revenues we any questions. the model we approximately full year earnings ask X% operator and our would to half gross to FY and down our now margins

[Operator Ramsay Matt the with line coming And up our first Cowen. Instructions] from question

appreciate, going the by the first in on you lot I the detail macro. there’s the could and script realize the spend extra and in I trends. question, guess Yes. if way, Steve, -- near-term about we stuff the the a

oftentimes orders the that not pushouts guys understand the What that is some really I’m orders. I’m different surprise guess, to really other mean full-on in does low macro extremely interested just environment obsolescence things that than digestion? trying you turned the is make have on just of sort of had single inventory it So source risk. have what you I there me, given cancellations. that I surprise and you into are Did anything going that

of should -- just So trying we a Or to segment? whole that temporary of push should program And what could this there cancellations real out and things programs a we all -- bunch as in resume? we I’m just will if were read this understand, is of consider? so,

for Thanks Matt. question, the

the fall would categories. had that into we’ve So X I probably say first, that cancellations

be lines The business. the lost the they or their put we and cancel more given managing decided operations inventory programs would along to the And first category customers the in business would today. then climate exposure, have category normal would of which the be that customers second

And they the demand, products, eliminating say, truly so those programs. were let’s those for for

most of we’ve saw be We say, of would supporting, where in products the noncancelable also that older been programs that category in and not returnable. networking would typically, I those

So of there’s fees. see we when oftentimes cancellations those type cancellation associated

really categories is dollar the little would period, in close be I total I are cancellations think $XX to on of the those should is It regular high. the in abnormally the that the range basis. $XX So which regarding out million, value about X a million X over call a

So will number X. were cancellations. over yes, that think surprised we drive we time, by And those to

for Thank it. guys expecting is at for you this follow-up my down of that end you’re the guess revenue year I Steve. -- Got you that script the question, you color. X%. the said there

much a think, little in would bounce imply, that but bit So September I the quarter. a of not back,

of on you in we a any think $XXX.X maybe ballpark. to things if Is then sort be we’re recovery the by get were but helpful. the -- some there from all this a helpful. business? order is of this from recovery timing of -- And $XXX sense that moving the run about to unexpected, I and normal rate that here any really here right million a have be just would of happened just million understand visibility lot last to the the guys of do -- how math? segment, ballpark that in recovery timing trying do quarter would So bookings quickly of at some how you level and Is to back that

Matt. Thanks,

very And book-to-bill lot one calls. fiscal What in that was metrics been X fiscal I about we And most important So I Jack close these X.X. highlight bookings I’d And year of do strength now bookings. back to the ratios was years -- that X.X. probably have think for talk think reporting about the just it’s certainly to our last X.X, about is to last important like on we ‘XX, that’s then years. we’ve X it past and seen in discuss first quarterly XXXX, ratio fiscal a X.X. it over book-to-bill about year, of the was in the

end suggests I down. build in also, our of X.X come seen of this a growing to allowed start that towards very, $XXX growing same really period, things around in period, had There It that over second then we like and backlog down, interest is X.X, we So us $XXX quarter first the very for we’ve the And backlog a to of the we’ve a over strong all had where MACOM’s that backlog was book-to-bill there still products. demand, a slow million. times when think, seen quarter million. it’s what but

we is of So XX backlog And a significant have months this backlog. within still delivery. high-quality amount

have deliver targets confidence the and we talked -- quarter when lot this so to about a weak ability want hit to. light And pretty our and still even in and the execute we good have we quarter of of next bookings, in we

the information And to some be helpful so are that fourth quarter comfort provide would in give very to think a we investors still we about did it directional position. strong

you highlight drive And I know, as certainly times. by So so less. manufacturing factors those the customers down. wanted And buys they’re to levels at is just seen ordering Inventory are the We’ve high, then, way, for course, new programs. cycle bookings coming risk the of that. that

in orders beginning smaller will of ramp targeting of the that really We new coming next. year, that of but end towards are only seeing not the fiscal programs are a lot our

rapid the strong at. work do We let’s forecast, don’t currently inventory say, bookings it’s because add to we then that look to at our all up a we to, have looking and we’re of that sales situation do through be will think So think slowly when going return we improve. we things

investors remarks think to in is very There see. markets. trends So I think certainly improving that as But is will what’s I have want probably for we’re We year-over-year, X% a to of it’s is QX decline that what to around the comments far important we today and don’t that, lot think prepared -- outcome bookings I a apply And ideal, I X% be. a able of the understand book-to-bill between strong but my We’ll a on sitting backlog. go. is I should the and very not given think on made wait uncertainty we market about know be as reasonable achieve top conservative when we in revenue, the environment. which I

the is question next O’Malley Tom Barclays. from of our And coming from line

also good the the where earlier. guys all ones appreciate script you took I

wanted midpoint step for making of points implies pretty side. down And the bottom think a margin I X% little you flattish gross leverage get from think how a the margin you that June just given X% kind that, bit is do of earnings, perspective? basis of well. Matt you hundred one, September do in at gross X%, on XX% today. covered for revenue math fact into do couple think us to the a that perspective? to margin ask, going is just from the then of the a that that just thanks just gross But you September good So up a I But address, as the revenue the if Could

is this Jack. Tom,

here that a that that QX, of we out view. as we’ve volume. I versus into we midpoint an June think at completed quarter just So over margin of going it obviously, gross the to guide QX, March bit the that step be from number somewhat the consistent and And of granular down with XX% down we revenue looked level, haven’t gotten just quarter seen lower but is a point that overall in would probably the

to going over the majority there I have probably been back think the quarter, volume I gross you exceeded time. margins back from quarters. mid-XXs XX to which with out that margins had, XX%, of the the if levels related. pleased that it upcoming of goes that highlight past for in period that put a end XXXX. X comparable our would And with think, the And probably gross we’ve a at the look early XXXX We’ve we’ve June were or I and very point is back also in revenue MACOM, or

been improve quite a the things past. that obviously saw margins that that seen the to in we’ve bit structurally years, which past the So of there’s the done gross of in increases we we’ve couple incremental

if gross that support help that will we get back, top line volume So can in margins. improvements

further new beyond. fiscal as of that about go we’ve the one Obviously, then years. and And the has the get that support of gross product introductions over past items margins that new in also other product had into will helped. we will continue introductions improvements ‘XX we’ve year talked is That the number as we forward, and

your that government? script, the there? have funds. it are in, seems chips you And receiving sideways the efforts just you up you Can Obviously, terms little then out not if brought the didn’t past. hearing from mention current that about as of to guys, not the in you a you’re there. would And participate act I’m intentionally the moving something of sure talk field like things you of kind in or something that’s and Helpful. one But left still What I view that that here. in

the chips on you act. Thank question the for

are -- strategy about -- active. a associated can’t paperwork, were engaged because that order basis. in talk approach we we under really strategy outlined we of calls, our engaged GAG we’ve about a our previous the We in a government. we the with of won’t details we public And said what as So sort on submitted have bit the are previously, go-forward talk now and on for looking various and we’ve government and

should investors we’re other really we but can’t looking know details go for any So opportunities, into forward. going

And our the Harsh Kumar with line Piper Sandler. from coming of next question

quick I you super color. is This the for Steve. Thank had Okay. helpful. question, a all

million you’re it words, to just enough $XXX shipping next is burning are other you’re of at end by sell that September the inventory of to, excesses number you quarter? that will Is First a you I’m say, September or into for you of the And kind Or level all, burn -- is sorry, and say you September revenues or the and to [June] the say in quarter. excess think get let’s in let’s significantly excess do as have the under inventory? fair $XXX this the year? million fiscal to some good the suggesting massively

think certain So are areas. shipping under we Harsh, I in

yes, So us point-of-sale but that of might our you call the what get report it’s all more aggressive we within channels. quarter. also difficult can tell the sense at the a sales being and for sell-through generally, are I September very in of happen we looking what to

that on bring because say, So important down, very, we at focused we’re aligns inventory is very on which also back that that would add, and becoming channel strategy as let’s is your well. want is such more sort in the of that question factor. an looking part cadence, I to data a our of regular our to half

is guidance. that into factored so And our

products. one, other you categories X Fair enough. Steve, from the of mentioned then of sort And

quarters as mentioned and several the You having of where might inventory term. cable longer be recovery more China PON

fiscal almost of the And a part of is some question fair the begs of spill follow to that your also it that two guess compute I the that year assessment that next a then analysts of particular lot follow companies. seems business? Is So question stock that into year.

I things a X or bit. views. that that they’re reported whereas difference? what your going days are saying going Or be seeing little timing not difference? long opinion? are ago, And just compute are data trying bit. it a going something that. saying, Is just yes, love that you’re too I’m a guys leave to Those on ago to So things Is timing X down both is to your statement slow hey, just I your with and I’d NVIDIA else AMD center guess suggesting to in accelerate to a there little let’s to seems think Or get string bottoming.

Sure.

infrastructure cable of have China well that PON slower the I to regarding is part a than first the recovery as as and question on market. cable, PON, broadband So think case the of in going your

expect we be little bit for volumes think We at out inventory. mainly be and customers significant multiple are environment lead cable sitting know year healthier to would going customers, our we more, stretched higher So into there’s PON. because next a or on will

orders So about they have X think be us up We burn for in seeing to that set to fiscal through. ‘XX. quarters help we’ll

data. center about sort want typically compute. script, on very your then customers is chips especially high of a These meters volumes active I less our applications. high the MACOM, XXX specifically talked the meters, high-speed regarding than area data as compute XXXG And inside question for where and supporting are less in our and That of high-performance to XXX than move

with that in And a an seeing we’ve where been SR unfortunately, some so are the of involved past. a CWDMX, with of the muted that’s area is we slowdown strength. the that programs lot by NRZ strength But the lot programs,

in as say, the down higher be on next center and and So that our will the let’s ramping nice causing significantly QX to to But customers ship setup up think those really to, doesn’t data of, is for our aggregate, us QX. pushing area speed year speed be speak higher weakness revenues what PAMX programs. in we are in outside a

on XX script, there. developed we’ve that are X are mentioned years. for in leadership a we position I products we in like working just These These feel not the months. that within the were products are over been As last

For suggests be NVIDIA. like deeply point, not companies with which the only to and operating been at us have OFC X working but modules manufacturers demonstrate module your manufacturers, that with switch, also switch to able Tomahawk we to

question And of Quinn from coming & line from Needham Company. Bolton next the our

than revenue, for thanks today, by could X.X guess, is color even the the echo lower trends normal a backlog about I you if I’ll help normal $XXX looks the on that Steve, the maybe company, quarters normal if as perhaps more just that? position million what you’re backlog, for it’s bookings of forward that position like backlog, the is us market. end

years, great almost year, been be, answer you we’ve almost the past every So the X and And enough driving And every guess that’s that I question. could up. fiscal backlog. have quarter every a over -- number would never

time, terms is would that growth in new long improving the over up. over of And so SAM, expect doing with with proprietary we’re technologies, all our things always the backlog term, products, we going launching

our that record is that about, so we’ve so we of And don’t numbers. new And have disappointed. happening, past we’re the from also consistently has is Jack that coming as been products. our mentioned And backlog see we year also hitting -- sort expectation. when about we XX% about that And I talked think of revenue talked or over

driving things units within put compelling our all products engineers the So growth is what’s are doing the market. in business the the clearly great very to

there not And say be normal up. up. it’s as twice up, always sure going go when fast going So we number pedaling does to level. I are make would The not a should is it

early fiscal business -- unit, the that leadership, market I teams, we taking on and this was you quarters for ago, road, sure customers, our priorities and highlighted so be -- And share. we’re them year, are sales our we’re can engaging the one our of about X

we’ll do our designs and having by so designers doing their customers at them. apps for custom And engaging facilities teams and that our

the And that long expectation are happening, that things term, so up. all always those our it’s goes and of number good over

question on And center. then Understood. more a data specific

center gig legacy set some and by to the in ‘XX this NRZ that be of down direct newer with of products business those business by something about sounds levels into You’ve fiscal get some XXX it talked CWDMX the to up now in offset XXX strength decline, business equalizers continuing what in you of you of in kind pretty still the that the represented year? you sense weakness fiscal you the like business. drive, or It September gig for several expect is the growth the of in that But data the the us end and would still the PAM, be more June to that as really or would NRZ, for the can quarters the fiscal XXX, consequential Is percentage short side the of reach. quarters, products. Or any give ‘XX? PAMX data for headwind a center or will exiting overhang an

Yes.

And a becoming lot the modules they’re or of pluggables. So smaller as deploying either NRZ building in a China-centric certainly, at is out percentage that is business our the AOCs of total. type XXG short-reach

eventually That it And XX might a so X know. the X take it’s next happen de to We point, or minimis may to let’s some it say. We months, X, that clear at not when would amount. over becomes expect, goes years. don’t just us

markets, as those we So industrial we’ve and resources are them I we can on the about including of getting highest-speed be talked the earlier primarily about applications about tell R&D you those want differentiated think we And and as defense. many in there so telecom the believe will that other some resources, opportunities same also term, other that taking over end and always defense and because when and working center deploying market we data to outgrow long telecom markets. engaged in talked

coming from Tore question next our And Stifel. from Svanberg

how on looks Telecom it question be both math data about on sort center of especially based sequentially. business like quarter, of a XX% center in you and telecom? XX%, the I my sort about Yes. level and think just the back and will had consumption June directionally the down in data Because

some below -- going you So to there’s potentially the still what are of quarter? of some what excess consumption? the are And some where running June inventory the be exiting now are segments think where areas that

Right.

for So Tore, the question. thanks

perhaps And XX% from industrial QX to certainly we over as and defense QX, we and X% sequentially, up XX% will You’re year-over-year. as move I to right. highlighted, believe be

the So telecom. probably data more down, about center data we’re happy will and that. Telecom be center down than

the the about number down. NRZ aggregate programs of a are legacy lot As we’ve talked dragging

are to the optical across weaker, is telecom, position And we this going side that of or whether strong pretty next on also in weak area talked Metro/Long-haul, cable certainly on is would have that the it’s much also where XG that -- side. board, we RF areas the an weakness. quarter. the current very In be in say a about I before TV the

play I in too when and bookings in September level significant when the of reduction us it’s might you let coming And as of why in it’s we saw a that here. So to so think down expect happen say. what about leading think across sort early the quarter mean there through markets, specific inventories of sort going to do on that’s begin is a was bookings our all have to indicator just be quarter. QX improve, we difficult to inventories to that we things very what’s but off, this highlighted QX, actually I and and we’ve for to happen

your now. stand I No, then that year. that’s great throughout And color. to think bring internal you intend the days on inventories, down right The said own at you XXX inventory

have target do we by dollars a So you either should track? or days by that

Jack. is Tore, this Yes,

We targeting We it to up some work X going an current over we work and majority quarter-over-quarter. try that our the things very on looked there. seen to probably number that our building over for had know past depend quarter, some overall the that do the we’re turns do as X We got we to had as increase from through extent were or analysis to so. see supplies also get of Obviously, the And some that of is We’re over quarters, some those. expect above a inventory the to targeting which bring our this. And that next We the couple We’ve flow something quarter, long inventory reductions. term. to had order get acquisition, we closer we’ve linearizer to we we in obviously we targeting feel drove at strategic to We year it’s way down. a work target standpoint, healthy. inventory. of have still through our

that drove absolute acquisition-related up from number activity our an that So an was dollars perspective.

our America. of Arya with Bank question Vivek from next coming And

This Freeman is on Vivek. for Blake

the guiding first last I were one, that back gross sales than margins more look time, If XXX much Just to quarter. June sequentially, kind the the of basis gross points going for you’re down margin. fell double digits at

second if curious gives kind margins since certainly you elaborate that of kind challenges. confidence half see changed but can gross of amid on has just further portfolio you declines the then, what the So won’t

I’ll Sure. comments, Maybe a for Thanks, Jack can add to make then the question. few Blake, those comments. and

portion do a in we have quarter significant talked we of our as current So about, backlog.

that So down we visibility levels fiscal Jack highlighted, ‘XX. also And in these some as range. revenue us gives back at were when the into

were margins but gross lower, Our that we favorable. is the mix know

Our favorable. cost structure is

execute within ability Our operations all favorable. are the and to efficiencies our

seeing the we’re the levels, revenue tailwind. same improvement of strength is those a portfolio of at in the And providing even margins. significant course, nice So gross a

more So be with that, maybe, specific. Jack, you could

was the have that impact manage than we’re has And a more much better have outside we’re of number overall summary that mix margin. ago our had again, products terms slight a a our are a were an where in gone products of are can the flexible significant think I mega we that manufacturing dip how years of costs, less position where impact once fab, in of on fabbed in we that Steve, not on revenue you we through, helpful even our through fab our margin. gross a gross model certain

some out peers there may be somewhat volume operators. our of that we that So from insulated versus that higher are are perspective

follow-up the it. on And then quick side as just well kind OpEx of just of things. a Got

also quantify how but As product the few through headwinds, forth. half so you kind quarters trend OpEx guess, next of just can in kind second prioritize you new of I you lines, think -- we as should investment and go through

the if bit probably of was midpoint think of million, our a we total from quarter, which in I which the where a OpEx. current $XX we’re is ended you this look million around to $XX-ish step-up guide, of

will area acquisition product to important is talked near new an investments. about full our coming that of for continue We’ve but for being we a introductions us. make online quarter, as Some

times we we’ll expenses focus we keep making that on forward we an So make operating of some many on sure close we a will continue before, appropriate manage as thing to where go in investments make our sense. one expenses they those manner. stated R&D eye and But those

the from Benchmark. line coming of with question next Williams our David And

the spending some that wanted that Are had the maybe if changes So carriers maybe see providers. I CapEx you seeing service shelved programs you or CapEx near maybe around term? being here the and you’re are any quickly, plans to just color in just maybe within major in seeing

for the question. Thanks Right.

I’m are sort probably ask their what best of question capital So regarding the industries doing that person the not the to with spending.

their business. see directionally have continuing data layoffs sides spending increased of of X of business, course. the centers are massive It of is We but having side the there seen on We equipment they’re other sort in with country, that invest. XG. depends that they’re mean, the their on to on investing I heavily

that certainly so investment down capital And will flow MACOM. like to companies

of -- to it’s think for secular favor level we’re -- growth I highlight there spendings very talk that MACOM. us difficult there those capital sort I of trends about So that so But are flow. dollars removed because would higher how it’s far is from those

not only is but in the growing, For industry defense internationally. here the example, also U.S.

many, All to countries their increasing equipment they if not that of equipment all, but build and the are the on locally. want not spending of most, defense NATO --

I in European script radios And so example. contractors. companies like MACOM can talked some for about for the customers, German support tactical in participating defense

high-frequency us high-frequency industry support we of and to with are semiconductors are can defense And companies that today those semiconductor about our When the can leader be moving strategy on technology And be the pretty for opportunity are those in tremendous companies. hand. companies technology. one When a we is the one have. number look a of to count with to those there’s much of deployed that we with that platforms being stronger systems so higher And the frequencies. start think most you at telecom,

layer and and gallium carbide It on of starts nitride you top those higher on frequencies. differentiated. When GaN, to at our arsenide GaN that really capabilities look silicon gallium

about continue the some the to is, LEO market growth constellations telecom of lots on opportunities. of exciting the So talked sort we to going of believe, script. grow. There’s We

rates. commoditized participate we center, resources will highest our areas. to and out that’s other the last, the when then in data data step data R&D become or moved we rates, things want lower And to as put And at we’ll

the spending the that highlight will capital in So end and -- of so not focused take would core the secular to position I growth X of while advantage next sort that. user we’re great decade over our community, markets on have we’re of a

there. color maybe great a for follow-up. was It And secondly,

that the issues terms in touched trends around that inventory China there kind -- seeing I of or but earlier, you there’s of there? thinking anything this maybe Just know even helpful. on just demand demand market and you’re would be just a bit about

of the the market Sure. coming dropped. for XX% us. China about or is quarter, very customers. This was about Chinese revenue it was a quarter, our In $XX past percentage from million -- important first

in dollars, so around And million. absolute now that’s $XX

what’s market that deployments I don’t I it’s would MACOM. opening represent potential going So and are even lot up, build-outs. that local and these around of as There’s it’s the is COVID of the a to volumes a lot of for behind sort would optical down. a things sense muted I like things the next. companies that’s certainly and market. XG happen a generally economy module now, generally improving of -- positive in very the sort say numbers come say now right speaking, are or of think trend uncertainty

that, that. sort there’s we add and addresses certainly we make last sure U.S. that recognize selling and strategy thing our into of the that I’ll is semiconductor will a against And products manufacturers China,

with Karl BNP from And line our Ackerman Paribas. next question coming the

noted XX% Jack, color helpful. is And it center? weighted that is just would more telecom? from new transceiver to would to Any the Is own be products? that way NRZ more optical and you that year. data Or orders that specific prepared be remarks, your Steve said in down your XX% have toward prior on toward your that partners

was would we and heavily have Metro/long-haul and TIAs very the detectors. about photo do last to more that I’ll on, thing start only products, strong haul with lasers is optical but telecom also very position towards that not quarters. will weak X PAMX CDRs right Metro all and statement the say data strengthen that have a excluding add think turns -- then products, across think X only PAMX, relatively I I when that NRZ our of center. rates -- say that including we not would and that a our we products. higher-end And sort that’s -- And broad with We in drivers data business electrical strong is in will front weighted to we now, and think

dovetail very that part. That’s to on Maybe helpful. last

wins for ZR. noted XXX-gig You growing design

that’s So you of but you’re opportunity, these your guess starting win opportunity I’m to not over this I maybe designs. year some if even could sure discuss metro reference on in to products X next or ZR a as the

I early, is seeing what certainly around coherent be mean, are are but customers center. Yes. developing and data used that the in -- we we products very it’s will

applications. we generally have with so our are these long-distance which semiconductor -- are generally processes And Metro/long-haul for high-end technology,

sort of things We to are reset on seeing like a technology ZR to it apply that XXX light.

how kilometers. That’s sort to of areas. segment, And generally, It TIAs. in say. applications drivers it’s and would XX primarily classify So for it’s X product around XX we let’s is that

Thank will at Mr. showing back further remarks. you. closing this the I Daly turn now time. call any queue I’m no in questions to over for the

employees results closing, these and which Thank to you. made In their Have nice day. would our all for hard dedication, all work I thank a possible. like

gentlemen, conference Thank and for conclude you Ladies that participation. your does today. our for

may disconnect. now You