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MACOM (MTSI) Q3 Earnings & Revenues Top Estimates, Rise Y/Y

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MACOM Technology Solutions Holdings, Inc. (MTSI - Free Report) reported third-quarter fiscal 2022 non-GAAP earnings of 73 cents per share, beating the Zacks Consensus Estimate by 4.3%. Further, the bottom line improved 28.1% year over year and 7.4% from the previous quarter.

Revenues of $172.3 million surpassed the Zacks Consensus Estimate of $170.2 million. Moreover, the top line rose 12.9% from the year-ago quarter and 4.3% sequentially.

Strong growth in the telecom market drove the top-line improvement in the reported quarter. Growing momentum across the data center, and industrial and defense markets contributed well.

MACOM’s growing investments are expected to aid it in developing advanced technologies and products, which, in turn, will continue to drive its top-line growth in the days ahead.

Top Line in Detail

Telecom Market: The company generated revenues of $61.9 million (36% of the total revenues) from the market, up 29.2% from the previous quarter.

Data Center Market: The market generated revenues of $34.8 million (20% of the total revenues), up 4.5% from the prior-year quarter.

Industrial & Defense Market: MACOM generated revenues of $75.5 million (44% of the total revenues) from the market, which increased 5.8% year over year.

Operating Details

In third-quarter fiscal 2022, the non-GAAP gross margin was 62.2%, which expanded 190 basis points (bps) year over year.

In the reported quarter, non-GAAP operating expenses were $53.1 million, which increased 10.3% year over year. As a percentage of revenues, the figure contracted 70 bps to 30.8%.

Consequently, the company’s non-GAAP operating margin was 31.4%, which expanded 270 bps from the prior-year quarter.

Balance Sheet & Cash Flow

As of Jul 1, 2022, cash equivalents and short-term investments were $536.3 million, up from $503.02 million as of Apr 1, 2022. Inventories were $110.2 million, up from $93.4 million in the last reported quarter.

Long-term debt obligations, excluding the current portion, were $565.5 million in the reported quarter compared with $565.1 million in the previous quarter.

Cash generated from operations was $40.4 million, down from $42.4 million in the last reported quarter.

The company’s free cash flow in the reported quarter was $33.8 million.

Guidance

For fourth-quarter fiscal 2022, MACOM expects revenues between $175 million and $180 million. The Zacks Consensus Estimate for the same is pegged at $176.6 million.

The company’s adjusted earnings per share are anticipated to be 74-78 cents. The Zacks Consensus Estimate for the same is pegged at 74 cents.

The non-GAAP gross margin is anticipated to be 61.5-63.5%.

Zacks Rank & Stocks to Consider

Currently, MACOM has a Zacks Rank #3 (Hold).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Aspen Technology (AZPN - Free Report) , Keysight Technologies (KEYS - Free Report) and Asure Software (ASUR - Free Report) , each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Aspen technology has returned 18.9% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 16.3%.

Keysight Technologies has lost 26.8% in the year-to-date period. KEYS’ long-term earnings growth rate is currently projected at 9.1%.

Asure Software has lost 27.2% in the year-to-date period. The long-term earnings growth rate for ASUR is currently projected at 14%.

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