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Macom Results Up After December Low Point

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Company looks forward to the next phase of global infrastructure spending driven by 5G, Cloud Services, defence and industrial capital investment

Macom Technology, a supplier of RF, microwave and lightwave semiconductor products, has announced its financial results for Q2 ended March 30, 2018.

"The December quarter marked the bottom of the cycle for Macom in terms of revenue and demand, as evidenced by our 15 percent sequential growth. Across our served markets, order intake and customer forecasts returned to more normalised patterns in our fiscal second quarter," commented John Croteau, president and CEO of Macom.

Revenue was $150.4 million, which is down 19.2 percent from $186.1 million in the previous year Q2 but shows an increase of 14.9 percent compared to $130.9 million in the prior fiscal quarter. Gross profit was $65.6 million down 4.7 percent compared to $68.9 million in the previous year Q2 and up 7.6 percent compared to $61.0 million in the prior fiscal quarter.

Gross margin was 43.6 percent, compared to 37.0 percent in the previous year Q2 and 46.6 percent in the prior fiscal quarter; Operating loss was $23.4 million, compared to operating loss of $33.6 million in the previous year Q2 and operating loss of $23.0 million in the prior fiscal quarter. Net loss from continuing operations was $15.5 million, or $0.50 loss per diluted share, compared to net loss from continuing operations of $134.3 million, or $2.21 loss per diluted share, in the previous year Q2 and net loss from continuing operations of $17.0 million, or $0.49 loss per diluted share, in the prior fiscal quarter.

Croteau said: "Following last year's cyclical downturn in China, we believe we are entering the next phase of global infrastructure spending driven by 5G Telecom, continued strong investment by Cloud Service Providers, and now, a surge in defence spending and industrial capital investment. We've spent the last couple of years developing a portfolio of disruptive products and technologies to service these targeted areas of secular growth. Major customers have validated our technology and capabilities and are actively sponsoring us as we work to ramp volume."

"Moving forward, we expect sales across all our end markets to contribute to top line growth quarter-by-quarter throughout calendar 2018. The exact slope will be paced by our ability to scale operationally, both with our strategic suppliers and in our own factories. We believe the future contribution from these sales can provide significant operating leverage as we monetize what were previously strategic investments for the company."

Croteau concluded: "Finally, last quarter we highlighted the impact that certain competitive developments had on our LR4 subassembly business. In response, we took proactive action to exit the manufacture and sale of optical subassemblies. Consistent with our overall goal of providing high-margin analog and photonic semiconductor components we will now sell chipsets. This action is expected to result in better overall cost structures for our TOSA customers, with improved gross margins for Macom."

Non-GAAP Results

Adjusted gross margin was 51.6 percent, compared to 58.5 percent in the previous year Q2 and 53.7 percent in the prior fiscal quarter; Adjusted operating income was $15.7 million, or 10.5 percent of revenue, compared to $48.6 million, or 26.1 percent of revenue, in the previous year Q2 and $13.4 million, or 10.3 percent of revenue, in the prior fiscal quarter. Adjusted net income was $8.5 million, or $0.13 per diluted share, compared to $39.4 million, or $0.63 per diluted share, in the previous year Q2 and $6.6 million, or $0.10 per diluted share, in the prior fiscal quarter. Adjusted EBITDA was $23.4 million, compared to $56.7 million for the previous year Q2 and $20.9 million for the prior fiscal quarter.

Outlook

For the fiscal third quarter ending June 29, 2018, Macom expects revenue to be in the range of $142 million to $150 million. Adjusted gross margin is expected to be between 54 percent and 57 percent, and adjusted earnings per share between $0.09 and $0.15 on an anticipated 66 million fully diluted shares outstanding.

For comparison, if Macom were to report Q2 financial results on a pro forma basis without the LR4 business, revenue would have been $138 million, adjusted gross margin 54 percent, and adjusted earnings per share of $0.09.


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