Welcome to MACOM’s Fourth Fiscal Quarter 2024 Conference Call. This call is being recorded today, Thursday, November 7, 2024. At this time, all participants are in a listen-only mode. I will now turn the call over to Mr. Steve Ferranti, MACOM’s Vice President of Corporate Development and Investor Relations. Mr. Ferranti, please go ahead.

Thank you, Olivia. Good morning and welcome to our call to discuss MACOM’s financial results for the fourth fiscal quarter and full fiscal year of 2024. I would like to remind everyone that our discussion today will contain 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’s statements during this call will also include discussion of certain adjusted non-GAAP financial information. A reconciliation of GAAP to adjusted non-GAAP results are provided in the company’s press release and related Form 8-K, 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, will review our Q4 and full year results for 2024. When Jack is finished, I will provide revenue and earnings guidance for the first quarter of our fiscal 2025 and then we will be happy to take some questions. Revenue for the fourth quarter of fiscal 2024 was $200.7 million and adjusted EPS was $0.73 per diluted share. For the full year, FY 2024 revenue was $729.6 million and EPS was $2.56. We ended our fiscal year with record quarterly revenues and our Q4 free cash flow of just over $57 million. At fiscal year-end, we held approximately $582 million in cash and short-term investments on our balance sheet. Our Q4 book-to-bill ratio was 1.1:1, and our turns business, where orders booked and shipped within the quarter, was 22% of our total revenue. Our backlog entering fiscal 2025 is at a record level, inclusive of some of our recent large program awards. New order demand was strongest at our data center and defense customers, while industrial and certain telecom submarkets remained weak. Given we are at the start of a new fiscal year, I would like to review our long-term strategy, briefly recap some of last year's accomplishments, and then highlight some of our top priorities for fiscal 2025. Simply put, our strategy is to focus on supporting the highest power, highest frequency, and highest data rate applications in our core three markets. We align our R&D and product development resources around these themes and then, using our annual strategic planning process, establish near- and long-term goals to strengthen our portfolio's competitiveness and position the company for future success. Our goal is to have our technical teams work closely with customers and provide unique options for them to consider. By leveraging a wide breadth of unique technologies with world-class manufacturing strength, we believe we can attract many new customers and gain market share. Fiscal year 2024 was a busy year for MACOM, and I would like to highlight four notable accomplishments. First, we are pleased that we were awarded several large purchase orders and contracts by industry-leading customers in each of our three major markets. We expect these program wins will help support our growth over the next 12 months and beyond. Second, we expanded our leadership position in high-performance connectivity solutions for data center customers, and we continue to provide advanced solutions to the leaders in this space. Our full year fiscal 2024 data center revenue was a record and we posted greater than 30% data center growth for the year. Third, we continue to execute our strategy to develop industry-leading microwave and millimeter-wave frequency processes, products and solutions. Many of our advanced semiconductor development projects have U.S. government support as we highlighted in a press release that we issued earlier this week. In total, in recent times, we have been awarded funding of approximately $29 million to develop advanced semiconductor technology. And last, the recent strategic acquisitions have resulted in MACOM being larger, stronger and more competitive. Expanding our portfolio has increased our serviceable addressable market, or SAM, significantly. And while we are pleased with the numerous achievements during the past fiscal year, there are some areas that we recognize we did not meet our targets. First, we fell short of our goal to introduce 50% more IC products year-over-year. More work needs to be done to increase our new product introduction or NPI capacity and efficiencies, including expanding automation, streamlining NPI processes and accelerating fab cycle times. Second, we did not achieve optimal utilization of our Lowell wafer fab. MACOM's financials are strongest when our internal fabs are fully utilized. We maintain a continuous improvement mindset, and we will certainly be addressing these two important areas in fiscal 2025. As we turn our attention to fiscal 2025, our priorities include extending our leadership in gallium arsenide and GaN MMICs and taking market share in RF and microwave applications; leading the market in 200G per lane high-speed analog solutions for data center applications across copper cable and optical interfaces; further expanding our optical capabilities within aerospace and defense applications; growing our module and subsystem business in key high-performance applications while leveraging our domestic and international operations; completing the qualification of our European semiconductor center 6-inch wafer production line before the end of calendar 2025; ramping our high-speed photodetector and CW laser products to support 800G and 1.6T applications; accelerating the pace of new product introductions, which can drive increased fab utilization; and finally, continuing to recruit and attract industry-leading talent to ensure we stay on track with executing our comprehensive strategy. Turning to our end markets. Q4 revenue performance by end market was as expected, with Industrial and Defense at $92.8 million, Telecom at $51.7 million and Data Center at $56.2 million. For the quarter, Data Center was up 14.7% sequentially and I&D and Telecom were both up 2.1% sequentially. I'll note, our I&D revenue level was an annual and quarterly record. We continue to identify growth opportunities in the industrial and defense market, spanning radar, electronic warfare, secure communications and integrated battlefield systems. The trend across all these applications is towards higher frequencies, higher power levels, wider bandwidth and higher levels of integration. Threats from UAVs, more sophisticated targeting systems and dramatically more complex electromagnetic environments on the battlefield are driving systems towards higher frequency ranges, including X-band and V-band to increase system performance. I am pleased to report that earlier this month, MACOM delivered a large S-band, high-power GaN-based phased array transmitter to a Navy customer. This was a major milestone for MACOM, and I congratulate our dedicated team on completing this complex project. Our system engineering team was supported by our RF power components team, which resulted in an efficient design and build of this high-performance system. We are pleased that our efforts resulted in a new contract at twice the value to design and build a higher-frequency next-generation high-power GaN transmit array. We believe the trends for the I&D market play directly into MACOM's strength. In particular, we are focused on supporting U.S. and certain international markets with our very high-frequency semiconductor MMIC process technologies and products. For example, the opening of our MACOM European semiconductor center expanded our wafer manufacturing capacity, added epitaxial growth expertise and bolstered our presence with European defense customers. Our telecom end market revenues continue to grow with some MACOM-specific bright spots emerging. While many expect global 5G spending to decrease modestly in 2025 compared to 2024, we are currently seeing strength due to demand from the North American market. Demand from Europe and India remains weak, although we have seen some large 5G award announcements in India, which may benefit MACOM. We are also receiving new demand on older products as inventory at our lead customers has normalized. But more importantly, we believe that we are gaining market share in new platforms for the 5G markets we participate in. This is mainly driven by the need for higher power, multi-band radios where MACOM's products can offer unique advantages over our competitors. The satellite communications market remains very robust. In particular, the market for Low Earth Orbit or LEO satellite-based broadband access provides a significant growth opportunity for MACOM. Satellite-based broadband access is increasingly being a more viable solution for rural areas, broadband service for ships and planes and emergency services. Some networks are incorporating direct-to-subscriber capabilities, which MACOM also supports. LEO networks are typically constructed in a mesh architecture involving thousands of satellites. For example, one of the leading satellite-based internet service providers has launched over 6,000 satellites to date and some believe this number could more than double. We anticipate other large LEO constellations will be designed and deployed over the next few years. I'll note on the DoD side, new satellite constellations are also being developed to support secure communications, robust GPS and space-based radar systems. Within these satellite networks, MACOM provides semiconductor and module solutions for satellite-to-satellite links, as well as satellite-to-ground links. These typically use a combination of microwave, millimeter-wave radio frequencies and free-space optical communications. In some cases, the satellite-to-ground links require linearization to boost the power efficiency of the link. We also provide solutions for ground-based gateway networks. MACOM is executing on multiple programs today, involving our MMICs, RF power, lightwave and linearizer product lines. Finally, the cable TV infrastructure market is in the midst of a transition from DOCSIS 3.1 to DOCSIS 4.0. Demand typically goes through a lull during these transitions as new systems are designed and go through qualification. We have seen that lull in demand over the last one to two years. But during that time, we continue to release new products and work with customers on new design wins. We are now starting to see modest demand on our new DOCSIS 4.0 products as certain U.S. providers begin their rollouts. We supply amplifiers, baluns, couplers and filters for the line amplifiers and nodes in these deployments. And we expect some modest revenue growth in fiscal year 2025 from our cable TV customers. The data center market continues to be dynamic with significant growth opportunities. We see favorable trends continuing as the internet service providers are accelerating capital expenditures to deploy next-generation data centers. In some cases, new data centers may deploy a large number of processors, which can require increased optical and/or copper interconnects and we support these areas with our products. We remain agnostic as to whether customers select electrical or optical solutions. In certain applications, our market position is strong and I note that our 800 gig products are in full production and 1.6T designs are starting to ramp. In fiscal year 2024, we executed shipments to support 800 gigabit-per-second optical modules, which in some cases was eight lanes of 100-G. We expect certain parts of this market will transition to the 1.6T products and we are well-positioned with key design wins and have started to support customers with these 8x200G solutions. While our products support both retimed and linear architectures, DSP-based technologies require higher power consumption to perform retiming and signal processing functions, creating major thermal and cost challenges for customers. To address this, linear pluggable optics or LPO and linear copper equalizer technologies keep getting mindshare and we are seeing new customers joining the LPO MSA, which MACOM is a founding member. We expect to see these technologies starting to take some share to support 800G applications. MACOM is also supporting new applications that have disaggregated computing where pools of processors and memories are interconnected via computing interfaces. The longer-reach PCIe interfaces will operate at higher data rates of 64 and 128 gigabits per second per lane, or PCIe 6 and 7, respectively. MACOM can service these links with our linear TIAs, laser drivers and copper equalizers as successfully demonstrated at the recent CIOE and ECOC trade shows. One of our areas of growth is related to data center interconnect or DCI, specifically 400G ZR and ZR+ and the emerging 800G ZR and ZR+ due to rapidly growing demand for more bandwidth that supports cloud computing and content delivery. MACOM's 400G and 800G ZR and ZR+ coherent driver and TIA families are well-positioned within the market to support this growing demand. Another area of increasing interest from customers is the use of coherent within the data center campus network, also known as Coherent Light. MACOM is supporting efforts to enable the use of coherent optics in less-than-15-kilometer lengths with low-power, cost-effective drivers and TIAs and CW lasers for 400G ZR and eventually 800G. Deployments of these 400G networks have already begun with volume ramps anticipated in calendar year 2025 and an expectation that 800G will be deployed after that. In summary the data center market continues to be an exciting area for our high-speed analog designers. And finally, in support of our strategy to strengthen and expand our design capabilities, I'm pleased to announce that this week we completed the acquisition of ENGIN-IC, a small, privately established IC design company with offices located in Dallas, Texas and San Diego, California. ENGIN-IC has approximately 20 employees who are experts in microwave IC and module design. Since their inception more than 10 years ago, the team has primarily focused on supporting defense applications. The three co-founders Steve Nelson, Chris Eisen and Jack Giles are industry veterans who have helped define what's possible in gallium arsenide and gallium nitride circuit and module design. We are excited to welcome the talented ENGIN-IC team to MACOM and we look forward to collaborating for the benefit of our mutual customers. ENGIN-IC’s wideband amplifier design capabilities and know-how complement MACOM's strengths around narrowband amplifier design suitable for radar and communication applications. I invite everybody to visit our website and learn more about ENGIN-IC. In summary, our strength is to build a unique best-in-class and diversified semiconductor portfolio which enables us to capture a larger share of the market. Our speed and agility help us address opportunities and ultimately beat competitors that are often larger and have more resources. Jack will now provide a more detailed review of our financial results.

Thank you, Steve and good morning everyone. Before getting into the details of our quarterly results I would like to summarize a few items associated with our fiscal year 2024 financials. Fiscal 2024 was the year that included sequential quarterly revenue and EPS increases with our total revenue increasing more than 12% over fiscal 2023. During fiscal years 2024 and 2023, we have maintained solid and consistent cash flow generation which has allowed us to fund acquisitions with available cash and to also accumulate cash for future corporate priorities. Now on to our Q4 quarterly results as well as some additional commentary on our full fiscal year 2024 and our outlook on fiscal year 2025. Revenue for the fourth fiscal quarter was a quarterly record high of $200.7 million, up 5.4% sequentially based on growth across all three of our end markets. On a geographic basis revenue from U.S. domestic customers represented approximately 45% of our fiscal Q4 results, consistent with Q3. For fiscal year 2024 revenue from U.S. domestic customers represented 45%, down slightly from 48% in the prior year. We've been working to geographically diversify our business and are pleased to have a healthy mix of U.S. and international-based revenue opportunities. Adjusted gross profit for fiscal Q4 was $116.6 million or 58.1% of revenue, 60 basis points higher than the third quarter. Total adjusted operating expense for our fourth fiscal quarter was $65.9 million, consisting of research and development expense of $43.9 million and selling, general and administrative expense of $22 million. The sequential increase in adjusted operating expense of $2 million was primarily driven by higher compensation-related expenses as we continue to grow the business. Depreciation expense for fiscal Q4 was $7.3 million and $28.1 million for fiscal year 2024, approximately $4.3 million higher on an annual basis, primarily due to investments in acquired equipment. Adjusted operating income in fiscal Q4 was $50.7 million, up 11% sequentially from $45.6 million in fiscal Q3. For fiscal year 2024, adjusted operating income was $175 million compared to $189.6 million for fiscal 2023, resulting in a 520 basis point reduction in adjusted operating margin compared to fiscal 2023. We recognize that initially, some of the incremental revenue from our recent acquisitions has reduced our adjusted operating margin from a year-over-year perspective. However, we note that our adjusted operating income and associated margin have been improving over the past few quarters as we expected. For fiscal year 2025, our team plans to further optimize our acquisitions, executing on incremental operational efficiencies and yield enhancement activities. As Steve highlighted, our team operates the entire business with a continuous improvement approach, and we will work to further increase our operating margin over the course of the year. For fiscal Q4, we had adjusted net interest income of $5.3 million compared to net interest income of approximately $4.8 million in Q3. Fiscal year 2024 adjusted net interest income was $19 million compared to income of $10 million in 2023. As we move into fiscal 2025, we expect quarterly net interest income to be consistent with Q4 levels as we increase investment balances through additional quarterly cash flow, offset by expected lower interest rates and yields. Our adjusted income tax rate in fiscal Q4 was 3% and resulted in an expense of approximately $1.7 million. Our net cash tax payments were approximately $1.6 million for the fourth quarter and $6 million for fiscal year 2024. We expect our adjusted income tax rate to remain at 3% for fiscal year 2025. As of September 27, 2024, our deferred tax asset balances were $212 million as compared to $218 million at the end of fiscal 2023. We anticipate further utilizing our deferred tax asset balances, including R&D tax credits through fiscal 2025 and into 2026, helping to keep our cash tax payments relatively low over these periods. Fiscal Q4 adjusted net income increased to $54.2 million compared to $48.9 million in Q3. Adjusted earnings per fully diluted share was $0.73, utilizing a share count of 74.5 million shares compared to $0.66 of adjusted earnings per share in fiscal Q3. Now, moving on to operational balance sheet and cash flow items. Our Q4 accounts receivable balance was $105.7 million, down from $106.8 million in fiscal Q3 due to improved shipment linearity and strong collection activity during the quarter. As a result, days sales outstanding were 48 days compared to 51 days in the prior quarter. Inventories were $194.5 million at quarter end, up sequentially from $190.7 million. Inventory turns were flat sequentially at 1.7 times. The quality and mix of our inventory is strong and continues to support our strategic backlog and our growth plans for fiscal 2025. As we move through fiscal 2025, we expect to see improvements in inventory turns. In addition, this marks the fifth quarter in a row where we have reduced channel inventories held at certain of our partners. Fiscal Q4 cash flow from operations was approximately $62.3 million, up $13.3 million sequentially. Capital expenditures totaled $5.2 million for fiscal Q4 and fiscal 2024 annual CapEx of $22.4 million decreased slightly from $24.7 million in 2023. As we move into fiscal year 2025, we expect our capital expenditures to be approximately $35 million for the full year. Next, moving on to other balance sheet items. Cash, cash equivalents and short-term investments for the fourth fiscal quarter were $581.9 million, up $60.4 million from Q3. I'm pleased to note that we were able to utilize available cash for our RF business acquisition earlier in the fiscal year and comparing our cash and short-term investments to the book value of our convertible notes, we are in a net cash position of more than $133 million as of September 27, 2024. Our balance sheet and cash generation remain sound and we continue to exercise leverage over our operations and discretionary spending to support MACOM's target margins through ongoing cyclical pressure. Fiscal 2024 was a solid year for MACOM and we are pleased with the company's performance and accomplishments and believe the diverse resilient portfolio we have built will support future growth of the business. As we begin fiscal 2025, we've established financial goals: one, continue to build a company that can achieve an annualized revenue run rate of $1 billion or more in fiscal year 2026; two, carefully manage and allocate our discretionary spending and capital expenditures to growth areas of the business; three, sequentially improve quarterly operating margins and increase EPS; four, generate quarterly cash flow from operations that exceeds fiscal year 2024 levels; and five, ensure our capital structure is optimized to provide operating flexibility at a low cost. In addition, we remain committed to investing in our employees through career development opportunities, annual merit increases, promotions, bonus and equity programs, as well as offering competitive health care, retirement and other benefits. I will now turn the conversation back over to Steve.

Thank you, Jack. MACOM expects revenue in fiscal Q1 ending January 3, 2025 to be in the range of $212 million to $218 million. Adjusted gross margin is expected to be in the range of 57% to 59% and adjusted earnings per share is expected to be between $0.75 and $0.81 based on 75 million fully diluted shares. We expect sequential revenue growth in all of our end markets. We expect data center will lead with approximately 15% sequential growth followed by telecom and industrial and defense with low to mid single digit sequential growth. I'll note that ENGIN-IC will not contribute materially to our Q1 financial performance. I would now like to ask the operator to take any questions.

Thank you. The operator provided instructions on how to ask questions. And our first question is coming from the line of David Williams with The Benchmark Company. Your line is now open.

Hey, good morning and congrats on the solid performance here.

Thank you.

I guess maybe first Steve, you talked a little bit, of course a lot of nice opportunities in the data center. But I wanted to see maybe first if you could talk about the LPO opportunity you mentioned in the script and you talk about some of the new technology starting to take share to support 800G. Any more color around that and just where you're seeing that develop?

On the LPO, what we've seen really over the last four months, maybe six months, is increased interest from the industry. We've seen the growth in the MSA organization from about 10 to 12 members now up close to 19 members. And we're starting to see customers begin testing of interoperability of LPO solutions. So we find that very attractive, but we have to also just note that it's very early for deployments of LPO solutions. And we think that over the next one to two years, LPO will definitely begin to take a certain portion of the market. So, we are in a very strong position. We've been, as you know, one of the founding members of the MSA and we have a very strong design team and product portfolio that supports these types of solutions. And the last point I'll make on LPO is we believe it will intersect the market at 800G data rates. So that seems to be a very good sweet spot for this application. In terms of some of the newer technologies, obviously as the data rates go higher and frequency increases, the landscape changes. We feel like we are very well positioned not only on the high-performance silicon side but also with our optical solutions. I mentioned in my remarks introducing photodetectors as well as CW lasers. So we believe that 2025 and 2026 will be good years for these particular product lines.

Great. Thanks for the color there. And then maybe just secondly for me, have you noticed any changes maybe on the active copper cable side in terms of deployment or maybe customers thinking about different strategies and ways to deploy there? Or does everything still maybe the same as it was six months ago or even 30 days ago? Thank you.

I think it's important to highlight and we say this often to investors and analysts that the data center market is very volatile and our customers are constantly changing solutions, changing architectures, ramping programs up quickly and ramping programs down quickly. We always emphasize that this is one of our most volatile end markets. In terms of your question specifically, I would say that there has been some discussion among some large customers about using less copper cable in certain architectures. So we certainly follow that commentary. But from our point of view, our data center revenue is very diversified. So we're supporting not only active optical cables but also active copper cables and various pluggable modules. And so we don't really get too hung up on any one particular portion of the market and what customers may or may not be deploying because of the diversity within our overall data center portfolio. Remember, our strength has been historically short reach; you're seeing now even the short reach and medium reach becoming more complicated with new protocols including ZR and coherent light. These types of solutions that start to overlay the short and medium length connections again are an opportunity for growth for MACOM. So we don't get too overly excited about any one particular area; we're trying to address all of them and make sure that our customers are successful.

Thank you. And our next question is coming from the line of Harsh Kumar with Piper Sandler. Your line is now open.

Hey, guys. First of all, let me congratulate you guys on some fantastic guidance here. Steve, to that end I'm seeing the growth pick up materially here for the December guide relative to the last two or three quarters that you've guided to. And I know it's coming from data center. But is it fair for me to think that maybe data centers hit that sustainable level of growth where we could expect these kinds of numbers — maybe not quite 15% sequentially but, you know, good solid growth for the next several quarters — particularly as opportunities like ACC and maybe eventually down the line LPO come to fruition, you grow double-digits for example, sequentially for a couple of quarters in data center?

I would temper expectations on continuous double-digit growth. I generally don't believe that would be sustainable. I do think that our fiscal 2025 will be a very strong year for the data center. In fact I think it may be one of our fastest growing end markets and it certainly should deliver double-digit growth for the full year, very strong double-digit growth, but I would never set expectations that things will be linear and constant sequential growth. And for the reasons I stated on the last question, which was about the volatility, those points are very important to highlight — it is a volatile market. And as a result, we can see variability on a quarter-by-quarter basis. Now with that said, I would add one other comment: we are definitely seeing fast movement to 1.6T and we are seeing some very strong growth opportunities in this area. So we think that 2025 will be very strong for 1.6T, and behind that of course will be more solid performance at 800G as well. So between these two factors I do believe we could have a very strong year. However, while we may have very strong near-term visibility, I would say as we look to the back half of our fiscal year, obviously that visibility is less clear.

Of course. And for my follow-up, maybe I've got a follow-up question or clarification. So let me ask the clarification for Jack: you talked about 2026, $1 billion. Did you mean a run-rate basis which is $250 million a quarter? Or are you suggesting that you might actually hit a billion dollars for the whole company? And then for my question, Wolfspeed was acquired — that's probably an area that you guys are working on improving the gross margin. Now we're seeing some RF business come through your way, you're taking share — maybe help us think about when those margins could normalize relative to your core business.

Thanks, Harsh. From a clarification standpoint, yes, it was reaching that run rate of $1 billion which would equate to $250 million in any one particular quarter, and not attaining that until sometime in fiscal year 2026. From a recent acquisition standpoint, we're continuing to work through some of the integration items. Things have been going quite well so far. We have been seeing improvements in the business from a top-line and a bottom-line point of view. We've touched upon some of the things within our prepared remarks where there's still a bit more work for us to work through there. But overall we've been quite pleased with what we've seen thus far.

Thank you. And our next question is coming from the line of Tore Svanberg with Stifel. Your line is now open.

Yeah. Thank you and congratulations on the strong results. First of all, could you talk about your turns requirement for the December quarter? I think you said 22% turns this last quarter, just trying to understand if that number will be fairly consistent next quarter.

It's — Tore, this is Jack. As we've gone through the past year or so it's hovered in that 20% range. Some quarters it will tick up a little bit higher and others it'll go below. But that's kind of where we've been hovering. I don't think there's any expectation that that will change as we go forward.

Very good. And that's my follow-up. I had a question for you Steve. So the market is moving quickly to 200 gig per lane as you said. And there's sort of a big debate going on between all these various technologies — optical versus copper, linear versus DSP and so on and so forth. The great thing for you is that you have exposure to everything. So I'm just wondering from your perspective, and especially in relation to optical versus copper, how do you think the market is going to play out for 200 gig per lane?

I'm probably the wrong person to ask which technology will win. We are a merchant supplier to the industry and we engage customers that are focused on designing the highest-performance, lowest-cost modules or solutions they can. All of our customers take a different approach. Some of them want to use traditional DSP-based solutions, others want to experiment with LPO, others are moving towards silicon photonics. Some are looking at thin-film lithium niobate. Our philosophy is we will tackle all of those and we want to leverage our circuit design capability to support our customers where we can provide value. There are so many unique implementations of these higher data-rate solutions. Our team is extremely busy keeping up with the requirements. At a fundamental level we are very good at high-speed interconnect design. Whether it's any one of the previously mentioned solutions, our team is able to work with customers and essentially co-design solutions so that they have a high probability of success the first time the solutions are designed and MACOM has the strength to put things into high-volume production very, very quickly. We see some of the larger industry leaders looking at MACOM as a company that has tremendous depth. You're seeing that with the 30% growth year-over-year for our data center business and the fact that we have leading technology in some areas integrated, including on the lasers and photodetector side, which makes our ability to do fast learning cycles and quick deployments of solutions to market very appealing to our customer base. So we don't know which will win the day, but we want to make sure that we're present on both sides of that question.

Thank you. Our next question is coming from the line of Srini Pajjuri with Raymond James. Your line is now open.

Thank you. Good morning guys. Steve, on the data center business, as you go from 400 to 800 then from 800 to 1.6, could you speak to how that impacts your SAM and also the content? Is it doubling or is it somewhat less than that? Any color on that I think would be helpful?

Generally speaking, as you go to higher data rates the pricing of the individual components is higher. Ultimately, the SAM is defined by the number of connections, number of ports, the deployments of the data centers and the overall architectures. It seems based on the information we're reading that the SAM is expanding. Our product solution set is a finite number of functions that we sell into the market. That's why we say over the long-term the data center market will probably be one of our smaller markets as we grow other parts of our business. I would say that there's certainly SAM expansion going on within the data center due to the increased number of systems being deployed. But from a product-set point of view it's situational. For example, many systems are using integrated drivers inside the DSP, which shrinks the SAM in certain applications. However, there are other applications where you can't put the driver inside the DSP and those opportunities are growing. So you really have to net all these items out to get a handle on what the SAM is doing. We have our own internal models and we use them as guiding information regarding our long-term strategic plan and where we want to invest in new product development as these higher data-rate solutions come to market.

Got it. Thank you. And maybe a follow-up for Jack. On the gross margin side sequentially, I think you're guiding for a relatively flattish gross margin. Just curious if the expectation is still for hitting that 60% level by the end of, I guess, you said that this fiscal year or next calendar year. And in terms of where the improvement might come from — is it primarily going to be mix driven? I know you talked about some of the factory loadings being suboptimal. If you could give us some color as to how we should think about gross margins over the next few quarters that would be helpful. Thank you.

With regard to our gross margin guide, the 57% to 59% number is how we guide with round numbers. We've been pleased with some of the gross margin improvements that we've seen over the back half of our fiscal year 2024. We've talked about a number of initiatives that we have underway to help improve our gross margins as we work through 2025 and into 2026. If you look at where we're projecting things as we work our way through the year, we're looking to exit 2025 with a 59% gross margin. We're still targeting that 60% number, but it's probably going to be a little bit further out in time as we work through some of the mix issues we've referred to. You've picked up on some of the things we were talking about from a fab perspective. These are critical initiatives for us for fiscal year 2025: focus on loading our fab, focus on improving some of our NPI metrics. We still feel pretty good about the new product introductions and those products are enhancing our overall gross margin. So that's another area that will help support improving towards that 60% number as we look out a little bit further into the future.

Thank you. Now, our next question is coming from the line of Karl Ackerman with BNP Paribas. Your line is now open.

Yes, thank you. Within data, I wanted to speak on data center product. Within data center, are you seeing breadth of ACC customers beyond the primary customer? And similarly, active electrical cables are also seeing an expanding opportunity set within the copper domain. So I was hoping you could also speak to the opportunity you see with AECs, active electrical cables, given the demand for both of those products. Thank you.

At the lower data rates we are seeing interest from the broad market on ACCs, so yes on that point. Regarding the terminology, internally we think of the market as bifurcated: active optical cables, which we call AOCs, and the electrical side, which we call ACC. We know some competitors that manufacture cables refer to the chips that go in those cables as AECs and we don't typically view our solutions or categorize them that way. Therefore, we generally put that revenue in an ACC bucket.

Thanks. Another one then: as you think about the trajectory toward a $1 billion run rate, if we can narrow on the telecom portion of your market for a second, does most of that growth come from the SatCom opportunity that you speak to today or are you also seeing opportunities within wireline and wireless where those can become a larger portion of your mix? And as you address that maybe if you could discuss some of the dynamics you have seen within wireline and wireless as you think about the December quarter guide. Thank you.

In the near term, a lot of the strength within telecom in the December guide is coming from SatCom and also 5G deployments, primarily here to support radios in the U.S. Long-term, yes, SatCom has tremendous growth potential for MACOM. We're providing solutions from chips up to modules and subsystems, and more and more optical content as many LEO constellations use free-space optics to communicate. We have solutions that can support that application. Wireline is slowly coming back; we would consider both PON and cable as wireline, and we're seeing a little bit of strength. We expect some year-over-year growth in our CATV business. Our PON business we think will be flat to slightly up for the full year. Generally, we haven't seen a lot of catalysts in the PON market. As we think about 2025, we have a muted expectation. Over the long-term, we think we can dominate in the RF and microwave telecom industry. We're seeing companies exit certain segments, and our goal is to pick up that business and roll it into our operations. One way we're going to win more market share is by increasing our engineering capacity. You've seen MACOM do that over the past three to four years. I highlighted the acquisition earlier this week of ENGIN-IC, which opens up new regions for us and brings a team of leading chip and module designers that will bring immediate IP and experience to MACOM. While we were disappointed with our new product introduction rate — we wanted 50% more and we ended up with about 15% more — we recognize we need more products faster to win market share at a faster rate. Bringing in resources like ENGIN-IC will help us do that. They are experts in wideband, high-efficiency amplifier design and have experience using MACOM's semiconductor processes, so they should be able to hit the ground running and help us gain market share quickly in areas such as wideband electronic warfare which is complementary to our microwave radar-based business.

Thank you. And our next question is coming from the line of Peter Peng with JPMorgan. Your line is now open.

Good morning and thanks for taking my questions and congratulations on the strong results and guidance. From the December quarter guidance to your analyzed run-rate of $1 billion, it's $35 million of quarterly incremental revenue to quarterly. Can you get there if telecom doesn't recover? Is there enough juice in your data center business and defense to get to that number, or do you think that telecom needs to recover to get to that $1 billion run-rate?

To get to that number we'd want to see growth from all of our end markets, including telecom. Just looking at the math, if you apply somewhere between 3% and 5% sequential growth on a quarterly basis, you're at a $1 billion run-rate sometime in Q1 or Q2 of fiscal 2026. Getting there is a lot harder than the math, and we're not suggesting we'll have 5% or 6% sequential growth for the next six quarters. We need to continue launching products that are more competitive, the markets have to be in a reasonable state so customers spend on new designs, and we need to keep winning share. There are tailwinds with defense and data center and we believe we're gaining market share in 5G. That said, the semiconductor industry is volatile and has cycles, and if there's a down cycle that would be a headwind to our plans.

Got it. And then my follow-up on your data center. If I look at some historical trends it's like up three, four quarters and then down one, two quarters. Given that including your guidance we're going to be up three quarters consecutively, do you see buying patterns changing or do you have enough new products coming in that could potentially offset some of these lulls in the data center? Because if you just leave it to volume we probably just model this up every quarter. So maybe you can give some color on how you're seeing buying patterns and then new products drive this kind of pattern?

It's an important question because the data center industry is very volatile and you do see periods of growth and then steep declines — that has been the history not only with MACOM but the industry in general. I don't expect that to change. I would suggest pulling back from the quarterly view and looking at annual growth rates. MACOM has been growing data center revenue since fiscal 2019 when it was about $114 million and in fiscal 2024 we ended just under $200 million. In that five-year period we've doubled the revenue. With the movement to next-generation data center architectures there is a transformational moment where customers need to move to higher data rates quickly with very large, complex data centers that have more interconnectivity. That thematic growth should continue for a couple more years, and with migration to higher data rates the products are getting more complicated and expensive to deploy, which plays to MACOM's strengths. But expect volatility: at some point our data center revenues will go down in a future quarter. That's a given. We have a long-term view and we don't focus on those dips.

Thank you. Our next question is coming from the line of Richard Shannon with Craig-Hallum. Your line is now open.

Good morning, guys, and thanks for taking my question. Steve, maybe I'll ask a question on data center. As we think about fiscal 2025, I wonder if you could characterize — I know you won't quantify it, but characterize how much contribution we might see from a few different elements. I think most people would love to hear your thoughts on 1.6T. But also, you've talked about photodetectors and CW lasers and other things here. How much contribution will we see there be noticeable, material, meaningful? Any way you can characterize would be great, please.

We believe our 1.6T solutions will be one of our faster-growing areas for fiscal 2025 on a year-over-year basis. There will continue to be solid growth and expansion of our 800G base business. On the optical side, we have some very high-end photodetectors that are interesting to many customers right now, and we have good timing. It's possible that our photodetector and CW components could have meaningful contribution in fiscal 2025, but it's a little early to tell. We do have good timing for both those solutions. When we say 1.6T, we're thinking of all the products that are 200G per lane: TIAs, linear equalizers, drivers and photodetectors. Our team is already working significant time and resources on 400G per lane solutions as well.

Okay. Thanks for that perspective. Very helpful. My follow-up probably is for Jack here. If I run the numbers on the guide it seems like OpEx is going up a couple million dollars here. Just want to verify I'm doing the math right, and is there a longer-term perspective here? Obviously your revenues look excellent for the December quarter guide. It looks like there's some really good momentum here — wondering if you're opening up the spigot just a little bit more than you have in the recent past.

That's a fair point. We have seen a little step-up in operating expenses. Some of that is related to additional design capabilities that Steve mentioned. The new acquisition will add a couple of dollars to that operating expense item. We're also looking to invest in our employees with additional design activities. We go through a merit process which hits us in the December quarter. There's a culmination of things to support that growth. We do take a hard look at our operating expenses and try to manage them closely in our strategic planning and budgeting processes. We also look at operating expenses primarily from an R&D point of view and make sure we're allocating dollars to growth areas of the business. That will continue as we go forward.

Thank you. Our next question is coming from the line of Quinn Bolton with Needham & Company. Your line is now open.

Hi, Nick Doyle on for Quinn Bolton. Thanks for squeezing me in. Just following up on Karl's ACC question, what application would be using these lower data rates outside rack-to-rack and NIC-to-ToR connections? And would those also be taking share from direct-attach cables (DACs)? Thanks.

At a high level, we are seeing international interest in our ACC products for various implementations, whether it's top-to-bottom of a rack or rack-to-rack. In some cases, ACCs can take share from DACs depending on the application and deployment choices of the customers.

Okay, thank you for that. And then on the DOCSIS 4.0 demand, you're expecting modest CATV revenue growth next year. I understand we've been in a lull and kind of inventory digestion, but is there anything about technological advancements or supply chain that's kind of pulling in the transition now?

Not so much from a supply chain standpoint. There's been a multiyear design cycle on next-generation DOCSIS platforms. Across the industries we serve, the cable infrastructure market probably did some of the most overbuying during the COVID cycle, and it's taken some time for that inventory to burn down. That's been happening over the past couple of years. Meanwhile, they've been working on the next-gen systems. We are starting to grow our backlog for product sets that we know are for new platforms, and we would expect to generate some revenue this year with that business. Also, the DOCSIS architecture is a little different than prior architectures, and in some cases that brings additional product opportunities to MACOM.

Thank you. I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Daly for any closing remarks.

Thank you. In closing, Jack and I would like to thank the entire MACOM team for their continued dedication, which has made our FY 2024 results possible. We will continue to work as a team to meet our customers' needs and execute our strategy as we start fiscal year 2025. Thank you very much.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation, and you may now disconnect.