No Surprises In MACOM Technology's (NASDAQ:MTSI) Q4 Sales Numbers

Radek Strnad /
2021/11/04 7:52 am EDT

Network chips maker MACOM Technology Solutions (NASDAQ: MTSI) reported results in line with analyst expectations in Q4 FY2021 quarter, with revenue up 5.4% year on year to $155.2 million. The company expects that next quarter's revenue would be around $159 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. MACOM Technology made a GAAP profit of $17.1 million, down on its profit of $17.4 million, in the same quarter last year.

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MACOM Technology (MTSI) Q4 FY2021 Highlights:

  • Revenue: $155.2 million vs analyst estimates of $154.9 million (small beat)
  • EPS (non-GAAP): $0.61 vs analyst estimates of $0.58 (4.98% beat)
  • Revenue guidance for Q1 2022 is $159 million at the midpoint, above analyst estimates of $158 million
  • Free cash flow of $35.7 million, roughly flat from previous quarter
  • Inventory Days Outstanding: 116, in line with previous quarter
  • Gross Margin (GAAP): 58.1%, up from 52.7% same quarter last year

“We remain focused on growth and profitability as we enter our next fiscal year,” said Stephen G. Daly, President and Chief Executive Officer.

Founded in the 1950s as Microwave Associates, a communications supplier to the US Army Signal Corp, today MACOM Technology Solutions (NASDAQ: MTSI) is a provider of analog chips used in optical, wireless, and satellite networks.

Sales Growth

MACOM Technology's revenue growth over the last three years has been slow, averaging 4.08% annually. But as you can see below, last year has been stronger for the company, growing from quarterly revenue of $147.2 million to $155.2 million. Semiconductors are a cyclical industry and long-term investors should be prepared for periods of high growth, followed by periods of revenue contractions (which can sometimes offer opportune times to buy).

MACOM Technology Total Revenue

While MACOM Technology beat analysts' revenue estimates, this was a very slow quarter with just 5.4% revenue growth. This was the third straight quarter of decelerating growth for MACOM Technology, potentially indicating a coming cycle downturn.

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Product Demand & Outstanding Inventory

Days Inventory Outstanding (DIO) are an important metric for chipmakers, as it reflects the capital intensity of the business and the cyclical nature of semiconductor supply and demand. In a tight supply environment, inventories tend to be stable, allowing chipmakers to exert pricing power. Steadily increasing DIO can be a warning sign that demand is weak, and if inventories continue to rise the company may have to downsize production.

MACOM Technology Inventory Days Outstanding

This quarter, MACOM Technology’s inventory days came in at 116, 26 days below the five year average. Flat on last quarter, there is no indication of an excessive inventory buildup at the moment.

Key Takeaways from MACOM Technology's Q4 Results

With a market capitalization of $5.06 billion MACOM Technology is among smaller companies, but its more than $344.9 million in cash and positive free cash flow over the last twelve months give us confidence that MACOM Technology has the resources it needs to pursue a high growth business strategy.

We were very impressed by the strong improvements in MACOM Technology’s gross margin this quarter. And we were also glad to see the improvement in operating margin. On the other hand, it was less good to see that the revenue growth was quite weak. Overall, this quarter's results seemed pretty positive and shareholders can feel optimistic. But the market was likely expecting more and the company is down 0.63% on the results and currently trades at $73.14 per share.

Should you invest in MACOM Technology right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.