Press release

MACOM Announces Restructuring Initiative, Updates Fiscal Third Quarter 2019 Guidance

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Technology Solutions Holdings, Inc.
(“MACOM” or the “Company”)
(NASDAQ: MTSI), a leading supplier of semiconductor solutions, today
announced it has implemented a restructuring plan that will provide an
expected annual expense savings of approximately $50 million dollars
once fully implemented.

The Restructuring Plan Includes:

  • A permanent reduction in MACOM’s hourly, salaried and management
    workforce of approximately 250 employees, or 20% of the total
    workforce—including personnel in Research and Development, Production,
    Sales and Marketing and General and Administrative functions.
    Substantially all affected employees have been notified and customary
    transition assistance will be provided as a result of the
  • The closure of seven product development facilities, including
    locations in France, Japan, the Netherlands, Florida, Massachusetts,
    New Jersey and Rhode Island.

The Company also announced it will no longer invest in the design and
development of optical modules and subsystems for Data Center
applications. Going forward, MACOM will be a merchant supplier of
semiconductor integrated circuits (ICs) and photonic devices and will
support optical module manufacturers at the semiconductor component

“We do not make these decisions lightly, however, these actions are
necessary in order to strengthen our strategic plan,” said Stephen Daly,
President and Chief Executive Officer.

The Company expects approximately $14 million in restructuring charges
including $7 million for employee severance obligations, a majority of
which are expected to be incurred during the third fiscal quarter of
2019. In addition, the Company is performing a recoverability assessment
for its long-lived assets, most specifically its intangible assets that
may be impacted by the restructuring plan. As of March 29, 2019, MACOM’s
intangible assets had a carrying value of $472 million. To date, the
Company has identified approximately $15 million of non-cash impairment
charges in addition to the restructuring charges discussed above,
associated with these restructuring actions.

Updated Third Quarter Fiscal Year 2019 Guidance:

  • Revenue in the quarter is expected to be between $107 million and $109
    million, compared to prior guidance of $120 million to $124 million.
    The updated guidance reflects the impact of discontinuing shipments to
    Huawei Technologies Co., Ltd. and certain of its subsidiaries and
    affiliates as a result of the U.S. Department of Commerce action of
    adding Huawei to its “Entity List.” In addition, the updated guidance
    also reflects reduced shipments to certain of MACOM’s distribution
    channel partners.
  • Non-GAAP gross margin is now expected to be between 39% and 41%, which
    includes approximately $14 million in inventory reserves, or 1,300
    basis points of gross margin impact. These inventory reserves are
    primarily associated with certain Data Center products and products
    that would otherwise be shipped to Huawei. This compares to prior
    non-GAAP gross margin guidance of 53% to 55%.
  • Non-GAAP adjusted earnings per share is now expected to between be a
    loss of ($0.41) to ($0.45), and does not include any restructuring- or
    impairment-related charges. This compares to prior guidance for
    non-GAAP adjusted earnings per share of ($0.08) to ($0.04).

MACOM designs and manufactures semiconductor
products for Data Center, Telecommunication and Industrial and Defense
applications. Headquartered in Lowell, Massachusetts, MACOM has design
centers and sales offices throughout North America, Europe and Asia.
MACOM is certified to the ISO9001 international quality standard and
ISO14001 environmental management standard.

Special Note Regarding Forward-Looking Statements
This press
release contains forward-looking statements based on MACOM management’s
beliefs and assumptions and on information currently available to our
management. These forward-looking statements include, among others,
statements about MACOM’s strategic plans, the expected impact of the
proposed restructuring plan, the estimated financial results for our
fiscal third quarter and the stated business outlook and future results
of operations.

These forward-looking statements reflect MACOM’s current views about
future events and are subject to risks, uncertainties, assumptions and
changes in circumstances that may cause those events or our actual
activities or results to differ materially from those expressed in any
forward-looking statement. A number of important factors could cause
actual results to differ materially from those indicated by the
forward-looking statements, including those factors described in “Risk
Factors” in MACOM’s filings with the Securities and Exchange Commission
(“SEC”), including its Annual Report on Form 10-K, its Quarterly Reports
on Form 10-Q and other filings with the SEC. These forward-looking
statements speak only as of the date of this press release, and MACOM
undertakes no obligation to publicly update or revise any
forward-looking statement, whether as a result of new information,
future events or otherwise.

Discussion Regarding the Use of Historical and Forward-Looking
Non-GAAP Financial Measures

This press release includes
financial measures that have not been calculated in accordance with
GAAP. This forward-looking non-GAAP information cannot be reconciled to
the most comparable GAAP measures without unreasonable effort because we
do not have and cannot reliably estimate certain key inputs required to
calculate the most comparable GAAP financial data. For further
information regarding our use of non-GAAP financial information, please
see our earnings releases previously furnished to the SEC.