Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue for the third quarter of fiscal 2024 was $190.5 million, up 5.1% sequentially.
- Adjusted EPS was $0.66 per diluted share, indicating strong profitability.
- Generated over $40 million of free cash flow during the quarter.
- Ended the quarter with approximately $521 million in cash and short-term investments.
- Book-to-bill ratio was 1.1 times, indicating strong future revenue potential.
Negative Points
- Telecom market remains weak with no signs of a broad recovery.
- Inventory turns were down sequentially from 1.8 times to 1.7 times.
- Total operating expenses increased by $600,000 sequentially.
- Adjusted income tax rate is expected to remain at 3% through fiscal year 2025, indicating a consistent tax burden.
- Data center market, while showing growth, is noted for its potential volatility.
Q & A Highlights
Q: Could you share where you are in the qualification process for active copper cables?
A: The qualification process varies depending on the customer, data rate, and specific application. We have customers at different stages: ramping up, qualifying, and starting to design with our products.
Q: Can you size the market share gains in the 5G base station power end market?
A: The 5G RF power market is significant, with opportunities to double our RF power revenue over the next three to five years. The GaN RF power market is estimated at $2 billion to $3 billion, with half in industrial and defense and the other half in telecom, primarily 5G.
Q: What are the low-hanging opportunities for growth in the telecom space post-Wolfspeed acquisition?
A: The acquisition has allowed us to scale up and see more opportunities. Growth will come from better customer engagement, improved execution, and next-generation GaN processes. This applies to both telecom and defense markets.
Q: How do you segment your data center business between AI and non-AI applications?
A: We don't publicly parse our revenue by end application. However, we see opportunities in both traditional Ethernet and higher data rate products like 100G and 200G, which are more aligned with sophisticated applications.
Q: What is driving the recent growth in your telecom segment?
A: Growth is driven by SATCOM and increased volume shipments into 5G radios on the transmit side. The wireline market remains muted.
Q: Can you provide an update on the SATCOM opportunity and its timing?
A: We are actively engaged with a wide range of customers in SATCOM, both at the chip and module levels. We see opportunities in direct-to-cell systems and ground stations, with significant growth expected in the next 12 to 18 months.
Q: How do you see the mix evolving between optical and copper in data center infrastructure as we move to 1.6T and beyond?
A: It's too early to tell definitively. Copper has limitations but offers cost savings for shorter reaches. We believe we can get copper to work at 200G per lane, but higher data rates will present new challenges.
Q: What are the key factors driving your gross margin improvement, and how likely are you to get back to 60% levels?
A: Improvements are driven by operational activities, new product introductions, and better utilization of our wafer foundries. We expect sequential improvements and aim to get back to 60% or better over time.
Q: How do you view the recovery in the telecom market, and when do you expect it to pick up?
A: We believe the demand is currently not there, and we expect low-single digit growth next year. New cycles and products, including those from the Wolfspeed acquisition, will drive future growth.
Q: What is your visibility into the data center market, and how do you manage potential volatility?
A: Our visibility is good due to high-volume sockets and secure backlog planning. While the data center market can be volatile, we are at the beginning of a switch to higher data rates, which should provide a good setup for MACOM.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
