MACOM Technology Solutions Holdings, Inc.

Welcome to MECOM's third fiscal quarter 2025 conference call. This call is being recorded today, Thursday, August 7, 2025. At this time, all participants are in a listen-only mode. I will now turn the call over to Mr. Steve Ferranti, MECOM's Vice President of Corporate Development and Investor Relations. Mr. Ferranti, please go ahead.

Thank you, Livia. Good morning, and welcome to our call today to discuss MECOM's financial results for the third fiscal quarter of 2025. I would like to remind everyone that our discussion today will include 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 a more detailed discussion of the risks and uncertainties that could result in those differences, we refer you to MACOM's filings with the SEC. Management statements during this call will also include discussion of certain adjusted non-GAAP financial information. A reconciliation of GAAP to adjusted non-GAAP results is provided in the company's press release and related Form 8K, which was filed with the SEC today. With that, I'll turn over the call to Steve Daly, President and CEO of Macom.

Thank you, and good morning. I will begin today's call with a general company update. After that, Jack Kober, our Chief Financial Officer, We'll review our Q3 results for fiscal year 2025. When Jack is finished, I will provide revenue and earnings guidance for the fourth quarter, and then we will be happy to take some questions. Revenue for the third quarter of fiscal 2025 was $252.1 million, and adjusted EPS was 90 cents per diluted share. We had a strong quarter of cash generation and ended the quarter with approximately $735 million in cash and short-term investments on our balance sheet. Overall, our team did an excellent job in meeting our business and financial objectives this quarter. Revenues by end market were as follows. Industrial and defense was $108.2 million, data center was $75.8 million, and telecom was $68.1 million. IND was up 10% sequentially, data center was up 5% sequentially, and telecom was up 4% sequentially. Our IND and data center quarterly revenues achieved record results. Our Q3 book-to-pill ratio was just over 1.1 to 1. As a result, our backlog remains at a record level. Our turns business, where orders booked and shipped within the quarter, was around 17% of total revenue. We believe our backlog growth is driven by our new products gaining market share, as well as the positive secular trends across our three major end markets. Our ability to provide competitive and leading solutions to our customers is what drives our financial performance. As a result, we continue to focus on technology differentiation across all our product lines. Simply put, Our strategy is to enable the highest power, highest frequency, and highest data rate applications within our three core markets, using proprietary semiconductor processes, IC design techniques, and package technologies. In addition, over the past six years, our strategy has included strengthening our RF, microwave, and optical systems engineering capabilities. As a result, we are better able to engage customers early on system architecture discussions rather than offer point product solutions after the schematics and block diagrams have been developed. This approach, when combined with the strength of our chip designers and manufacturing capabilities, allows us to have input on the system block diagram, which can translate into larger business opportunities and more cross-selling of products from our diverse portfolio. Industrial and defense remains strong, and we continue to see opportunities in the U.S. and European markets. We support a wide range of applications, including military space electronics, MILCOM, onboard drone electronics, and directed energy anti-drone defense systems. Electronic warfare has been very active within our IND business. EW systems typically contain complex, wide-band MIMIC semiconductors generally operating at the higher frequency bands. These precision, high-frequency applications often require high levels of integration in novel engineering solutions. Examples include components for radio and radar jamming, as well as optical electronics used in conjunction with microwave electronics to spoof radar systems. These requirements within the defense electronics sector play into MACOM's strengths. Our industrial and multi-market product lines had modest improvements in demand during the quarter. Standard product sales are increasing across a wide range of low and medium volume applications. Telecom orders remain solid, specifically in 5G infrastructure, broadband access, and metro long haul. While our lead 5G customers expect limited growth in the global radio access network market, Our strategy is to gain market share with new designs that outperform the competition. In support of this goal, over the past 18 months, we have developed our next generation high power GAN on silicon carbide semiconductor process at our RTP fab to support existing and future 5G applications. We call this process GAN4. I am pleased to report products from the GAN4 process have been sampled to several of our major customers, and we have received very positive feedback on product performance. We believe our GAN4 process will make us more competitive in massive MIMO applications, which we are not currently addressing well. Our Metro long haul and SATCOM businesses within the telecom and market continue to perform. Expansion of high-speed data transmission and increased ground-to-satellite and satellite-to-satellite communications are driving demand for our products, some of which operate at 130 gigawatt data rates and up to 80 gigahertz in frequency. And finally, our data center business continues to grow, driven by the global expansion of this market. Demand remains solid for our high performance connectivity IC portfolio supporting 800G and 1.6T deployments. In fact, we believe we will have a record 200G per lane product revenue in Q4. Additionally, we are seeing demand at the lower data rates, including 100G and 400G, supporting expansion links and more traditional data center architectures. As we look at our full year results for the data center, we expect significant growth across almost all data rates and platforms. Even our legacy 25G NRZ business is expected to grow year over year. We are also pleased to report our data center product revenue mix is expanding as two new product lines enter production. First, we recently transitioned our 200G per link photodiodes or photodetectors, also known as PDs, into high volume production. We have a strong market position with 200G per lane PDs as Macom is one of the few suppliers who can offer customers both the TIA and photo detector ICs and we can offer a chip scale stacked configuration with four PDs mounted on top of the TIA. Second, we have secured high volume production orders for 100G per lane linear pluggable optics or LPO chipsets. Our LPO customer is deploying an 800G network in a medium reach application. We believe this production order confirms that the market will continue to evaluate and adopt LPO architectures and roll out LPO solutions at scale. LPO is beginning to spread, which is good for Macom. Our R&D, product development, and operational execution ramping the PD and the LPO products represent a major technical accomplishment by our teams. We believe these two new product lines will support future revenue growth. Many investors ask us about our ACC, or Active Copper Cable, business and opportunities. Internally, we refer to these products as linear equalizers. As the data rates increase, we believe passive connectivity will coexist or be replaced with active solutions. Active connectivity solutions can be organized into three categories, active copper cable, or ACC, active optical cables, or AOCs, and active electrical cables, AECs. MACOM provides linear equalizers and TIA plus driver chipset solutions for ACC and AOC configurations. We do not support AECs, which are typically retimed DSP-like solutions. We believe the trends to electrify connectivity with equalization will continue to expand inside and around the data center, as well as in other applications. As an example, we see some connection protocol in the compute industry moving to higher data rates and therefore away from passive connections to active electrical or optical solutions. An example would be PCIe 7 to connect disaggregated GPUs, CPUs, and memory together using high speed connections. Disaggregated computing enables the efficient use of compute, memory, and storage resources, but it increases the need for fast, low latency connections. MACOM is addressing this high volume application with existing InfiniBand and Ethernet devices and developing ICs with PCIe-specific protocol features for plug-and-play compatibility with existing cabling and multiple connector form factors. We have developed PCIe solutions for both single-mode and multi-mode fiber applications and demonstrated these at recent OFC and ECOC conferences. While MACOM is focused on supporting current generation applications, we are also looking ahead at future applications. As an example, at the last OFC, we demonstrated a 300 gig per lane PAM6 driver IC. As we work on advanced ICs like this, we engage with the industry leaders so we can properly understand future system requirements. Another example of advanced work includes our active design efforts and product sampling on our 400G per lane products, which we anticipate will support revenues starting about two years from now. During Q3, MACOM exhibited at the International Microwave Symposium in San Francisco. This exhibition is a great venue to highlight our latest microwave, millimeter wave, and optical technology innovations and to introduce new product lines to our customers. At this year's show, MACOM featured 16 live technology demonstrations, showcasing our newest products for electronic countermeasures, radar, and SATCOM applications. I want to highlight three noteworthy new products. First, a 1-kilowatt X-band pulsed power amplifier module developed for electronic countermeasures and directed energy applications. This is a great example of the type of high-value-add system-level offerings that I mentioned earlier. Second, a wideband front-end module, or FEM, covering 2 to 18 GHz. This multi-chip transmit-receive module solution is ideal for wideband phased array architectures. And third, a new product solution for RF over fiber applications. MACOM's MAT61M transmit-receive module offers up to 70 GHz of bandwidth, making it ideal for antenna remoting. The module provides a complete solution for transporting wide bandwidth signals over optical fiber within a compact form factor. I'll mention a few other noteworthy items. Our RF power business continues to perform well with an attractive mix of defense and commercial applications. Supporting this activity is our wafer fab located in RTP, North Carolina. On July 25th, this FAB came under MACOM's full control, almost six months ahead of the original schedule. We felt it was in our best interest to accelerate the transfer to remove risk given the seller's bankruptcy situation. The accelerated transfer will create a modest near-term gross margin setback, which Jack will review. However, now that we have full control of the FAB, we can intensify yield enhancement efforts and optimize performance and operational metrics of the fab. We have recently executed a plan to increase fab output capacity by up to 30% with the purchase of heavily discounted fab equipment. The equipment installation and qualification will take 12 to 15 months to complete. Our lead high volume customers are excited for this capacity to come online and we expect that this move will lead to additional high-volume program wins starting in 2026. Our business development activities, based out of MECOM's European Semiconductor Center, or MESC, continues to gain momentum in the market. We believe we are better able to penetrate the major European industrial, defense, space, and telecom accounts with the design and manufacturing site in France. Our goal is to be the premier designer and manufacturer of high-frequency and high-power gas and GaN IC semiconductors in Europe, and I am confident our talented team in France can make this happen. And last, our six business units continue to engage customers on significant programs at the IC, module, and subsystem level in all three of our target markets. We continue to strategically expand our workforce with industry-leading talent to meet the challenge to be first to market with best-in-class performance. Jack will now provide a more detailed review of our financial results. Thanks, Steve.