MACOM Technology Solutions Holdings (NYSE:MTSI) Q3 2020 Earnings Conference Call - Final Transcript

Jul 29, 2020 • 05:00 pm ET


MACOM Technology Solutions Holdings (NYSE:MTSI) Q3 2020 Earnings Conference Call - Final Transcript


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Good afternoon and welcome to MACOM's Third Fiscal Quarter 2020 Conference Call. This conference call is being recorded today, Wednesday, July 29, 2020. [Operator Instructions]

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

Stephen Ferranti

Thank you, operator. Good afternoon, and welcome to MACOM's third fiscal quarter 2020 earnings conference call.

I would like to remind everyone that our discussion today will contain forward-looking statements, which are subject to certain risks and uncertainties as defined in the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those discussed today.

For more detailed discussions of the risks and uncertainties that could result in those differences, we refer you to MACOM's filings with the SEC. Management's statements during this call will also include discussion of certain adjusted non-GAAP financial information. A reconciliation of GAAP to adjusted non-GAAP results are provided within the company's press release and related Form 8-K, which was filed with the SEC today.

With that, I will turn over the call to Steve Daly, President and CEO of MACOM.

Stephen G. Daly

Thank you and good afternoon. I will begin today's call with a general company update. After that, Jack Kober, our Chief Financial Officer, will provide a more in-depth review of our third quarter financial results for fiscal year 2020. When Jack is finished, I will provide revenue and earnings guidance for Q4, and then we would be happy to take some questions.

Revenue for our third fiscal quarter was $137.3 million and adjusted EPS was $0.33 per diluted share. We are pleased with these results, and we are pleased that demand for our products continues to increase, primarily from the Data Center and Telecom markets. Equally important, as Jack will discuss later, our Q3 gross margins have improved, and our operating expenses were well controlled, and the net result was continued improvement at profitability and cash generation.

Notably, our operating margin exceeded 20% for the first time since 2017. Our strategy is to execute on product and technology developments so that we may take full advantage of the growth opportunities in front of us, while also improving profitability. Q3 revenue by end market was as follows: Data Center was $32.4 million; Telecom was $56.8 million; and Industrial & Defense was $48 million.

Data Center and Telecom had sequential growth rates of 21% and 10%, respectively, while our Industrial & Defense business was essentially flat. On a geographic basis, approximately 40% of third quarter revenue was from domestic customers and 60% was from international customers.

Our book-to-bill ratio was approximately 1.4 to 1. In our turns business, or business booked and shipped within the quarter, was approximately 25% of total revenue. Our book-to-bill ratio was exceptional, driven in part by the current 5G infrastructure and data center spending cycles. We also estimate that COVID-19 pandemic motivated some customers to order ahead of end demand due to concerns of future