Q2 2021 Maxlinear Inc Earnings Call
Greetings and welcome to the Max linear incorporated second quarter 2021 earnings Conference call.
At this time all participants are in a listen only mode.
Brief question and answer session will follow the formal presentation.
If anyone should.
Would require operator assistance during the conference please.
Star Zero on your telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host Brian Nugent.
Thank you Sir you may begin.
Thank you operator, good afternoon, everyone and thank you for joining us on today's conference.
<unk> call to discuss Max linear second quarter, 2021 financial results.
Today's call is being hosted by Dr. Kishore, <unk>, CEO, and Steve Litchfield, Chief Financial Officer, and Chief Corporate strategy Officer.
After our prepared comments, we will take questions. Our comments today include forward looking statements within the.
Meeting of the applicable securities laws, including statements relating to our guidance for third quarter 2021 revenue revenue growth expectations in our principal target markets GAAP and non-GAAP gross margin GAAP and non-GAAP operating expenses tax expenses and effective tax rate and interest and other expense.
In addition, we will make forward looking statements relating to trends opportunities and uncertainties in various products and geographic markets, including without limitation statements concerning opportunities arising from our wireless infrastructure and connectivity markets and opportunities for improved revenues across our target markets.
These forward looking statements involve substantial risks and uncertainties, including risks arising from competition supply constraints facing the semiconductor industry.
Global trade and export restrictions the impact of the COVID-19 pandemic, our dependence on a limited number of customers average selling.
<unk> price trends and risks that our markets and growth opportunities may not develop as we currently expect.
And that our assumptions concerning these opportunities may prove incorrect more information on these and other risks as outlined in the risk factors section of our recent SEC filings.
Including our form 10-K for the year ended December.
December 31, 2020, and our second quarter 2021 form 10-Q, which was filed today.
Any forward looking statements are made as of today and Max linear has no obligation to update or revise any forward looking statements second quarter 2021 earnings release is available in the Investor Relations section of our website.
<unk> Max linear dot com.
In addition, we report certain historic.
Historical financial metrics, including net revenues gross margins operating expenses income or loss from operations interest and other expense.
Income taxes, net income or loss and net income or loss per share on.
On both a GAAP and non-GAAP basis, we encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in the press release available on our website, we do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges.
<unk>, including stock based compensation and its associated tax effects.
Non-GAAP financial measures discussed today do not replace the presentation of Max on years GAAP financial results.
Providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis.
<unk> of our business Lastly, this call is also being webcast and a replay will be available on our website for 2 weeks.
And now let me turn the call over to Kishore <unk> CEO.
Thank you, Brian and good afternoon, everyone. Our Q2 financial results highlight revenues of $205.4 million.
Non-GAAP.
Margin of 62% and non-GAAP earnings per share all 53 cents.
Broadband revenue stood at 55% connectivity at 15% infrastructure at 14% and industrial and multi market at 15% of overall revenue respectively.
While Q2 revenue was up 215% euro.
Growth for you.
Steel was muted by the ongoing industry by manufacturing supply chain challenges.
Our robust Q3 revenue guidance shows that we are steadily overcoming the impact of the supply constraints.
Turning to some of the Q2 business highlights.
Broadband revenue was $113 million down.
Year on 9% due to the impact of supply constraints, even as bookings in end market demand growth strongly.
Operators are accelerating new near and long term capital spend to upgrade infrastructure and CPE technologies to support bandwidth intensive services and for additional subscriber gains.
Don we are well positioned to strongly benefit from this upgrade cycle you had an approximate 3 times increase in the value of our silicon content in the next generation <unk> platforms.
Include Gateway Soc Axis modems, Wi Fi Ethernet and power management solutions.
Our broadband growth is expected.
Outpace the market for next several years as we gain share in existing markets and expand into fiber Paul on hybrid corporate pawn and fixed wireless access.
Connectivity revenue grew strongly to $31 million up 14% sequentially.
Recovering nicely versus Q1 as supply improved.
We foresee sustained strong momentum for our Wi Fi products as consumer demand for higher bandwidth connectivity rises.
Tax rate of our Wi Fi on our existing broadband platforms accelerates and operators rollout more robust broadband access and connectivity services.
Our significant wave of 6.
100, and we have 600 released through product design wins in next generation turbine platforms, which also offer tri band Wifi capabilities.
Begin ramping in 2022 and anchored growth for the next couple of years.
Moving to infrastructure Q2 revenue of $29 million was up 2% sequentially.
<unk> versus Q1.
Wireless backhaul revenue grew to greater than twice Q4.2020 levels.
<unk> wireless access also grew owing to initial shipment revenues of our <unk> RF transceivers.
We expect 5 new wireless access to maintain sequential growth throughout 'twenty 1 on into 2022 based.
On the backlog and anticipated supply improvements.
Our optical data center business continues to progress as we prepare for our module customers to ramp shipments of our 400 gigabit.
Pam 4 DSP in late 2021.
In me at optical fiber conference. We also formally announced our 800 gigabit Pam 4 DSP.
Product family in 5 nanometer Cmos technology called Keystone.
A significant power and power performance advantages over competitive solutions.
Based on strong customer sampling on interest we expect a strong design win cycle per Keystone in next generation cloud data center platforms.
Excitingly overall, our increased scale and industry, leading technology portfolio have generated momentum for strategic partnerships with key players across our infrastructure end markets.
Which include large and R&D investments to support our development of new products for them.
Target volume shipment schedule.
Yeah.
In Q2, we signed 1 set strategic agreement with an industry leader and expect much more such arrangements in the future.
Finally, our industrial multi market revenue also grew strongly by 10% to $32 million in Q2.
As solid end market pull through and customer demand.
<unk>.
Further our distributor channel inventory levels are also lean.
As we steadily improved supply for our industrial customers to keep up with the demand and as our design win funnel for existing and new products continues to grow on industrial revenues are expected to grow very strongly.
In closing we are focus.
Scheduled on developing new technologies, and launching new products across all of our 4 end markets.
It will enable us to expand our addressable market share markets gain market share with new and existing customers and increase our silicon footprint content per platform.
These company specific growth drivers are solidly in place and we hope to.
Focus on the semiconductor industry growth rates in a sustainable fashion over the long term.
With that let me turn the call over to Mr. Steve Litchfield, Our Chief Financial Officer, and Chief Corporate strategy Officer.
Thanks Kishore.
I will first review our Q2.2021 results and then further discuss our.
For Q3.2021.
Total revenue for the quarter was $205.4 million down 2% versus Q1.
Broadband declined by 9% quarter over quarter at supply constraints with <unk> gateway Src's hampered our ability to meet end market demand connect.
Connectivity revenue increase.
Our outlet at 14% sequentially as Wi Fi shipments rebounded from Q1 levels and Moca revenue increase by double digits versus Q1.
Infrastructure revenue increased by 2% compared with Q1, largely driven by continued recovery in wireless backhaul and increased contribution from our 5 key access.
Increased from it.
Lastly, our industrial and Multimarket business was up 10% sequentially as we saw strength in both high performance analog and component demand during the quarter.
GAAP and non-GAAP gross margins for the second quarter were approximately 54, 8% and 62% of revenue.
Non-GAAP gross margin was up 160 basis points versus the previous quarter and we were successful in exceeding the 60% level faster than expected following the Intel connected home acquisition in Q3 of 2020.
The delta between GAAP and non-GAAP gross margin in the second quarter is primarily driven.
$10.7 million of acquisition related intangible asset amortization. In addition to <unk> 3 million of stock based compensation and performance based equity.
Second quarter GAAP operating expenses were $110.3 million up sequentially and above the high end of our 100.
Given by 5 to $106.5 million guidance range.
GAAP operating expenses included stock based compensation and stock based bonus accruals of $25.4 million combined.
Amortization of purchased intangible assets of $5.8 million and excluded a $3.8.
<unk> dollar payment that we received during the quarter for a jointly funded broadband infrastructure project, which reduces our internal R&D cost.
We will receive milestone payments in the next 2 years subject to certain contingent repayment obligations that we don't believe we will trigger.
We don't expect to receive any.
$8 million related to this project in Q3.
Non-GAAP operating expenses were $75.2 million up $2.6 million versus Q1 and at the midpoint of our guidance range of $73 million to $77 million.
Non-GAAP operating margin for Q2.2021 of 24 percentage.
Payment was essentially flat quarter over quarter, despite lower revenue and slightly higher operating expenses due to the strong performance of gross margin.
During Q2, we had a $5.2 million GAAP expense due to loss related to the extinguishment of debt, while GAAP and non-GAAP interest.
<unk> during the quarter was $4.3 million and $4.1 million respectively.
Our cash flow generated from operating activities in the second quarter of 2021 was $7.9 million. This was down from Q1 levels largely driven by an increase in accounts receivable due to the supply driven linearity.
<unk> of shipments during the quarter.
We generated $68.1 million of operational cash flow in the first half of 2001 up from $15.9 million in the first half of 2020.
We exited Q2 of 2021 with $131 million 131.4.
$4 million in cash cash equivalents and restricted cash.
Notably during the quarter, we executed upon our new $350 million senior secured term loan b.
The funds were primarily used to repay and terminate our existing credit facilities and pay fees and expenses and the remaining.
Proceeds are available for general corporate purposes.
The new loan facility will extend our loan maturity and will lower our interest and amortization expense at <unk>.
The more we have already made a principal payment of $20 million during the month of July against this new debt facility.
We also established a 100 million.
Main involving credit facility, which expands our borrowing capacity and provides us with additional strategic flexibility to execute on our key growth initiatives going forward.
We remain consistent in our intentions around use of cash with priorities on debt pay down and strategic acquisitions, We also purchased $4.5 million of.
Stock during the quarter as we continue to utilize our $100 million buyback program.
Our days sales outstanding for the second quarter was approximately 60 days up from 38 days in the prior quarter due to shipment linearity.
We expect linearity to improve going forward and for our Dsos to return.
Turn to historical levels in the next couple of quarters. Our inventory turns were 3.9 times essentially flat with Q1 levels.
With that let's turn to our guidance for Q3.21.
We currently expect revenue in the third quarter of 2021 to be approximately 200000.
$15 million to $225 million up approximately 7% at the midpoint of the range versus the previous quarter.
While a difficult supply environment continues to inhibit our shipment profile. We have seen some early stage improvements in product availability that are allowing us to better support our customers we believe.
And we will continue over the next several quarters.
Looking at Q3 by end market, we expect broadband revenue to be up quarter over quarter as modest supply improvement is enabling us to better fulfill our cable fiber in hybrid hybrid operator backlog.
Connectivity is expected to be.
This fleet up versus Q2, driven by broad based strength across Wi Fi Mocha and Ethernet.
We expect infrastructure revenue to be flat to slightly up sequentially in Q3 as strength in our wireless access business is offset by near term lumpiness in our wireless backhaul business, which has ramped materially year.
Year to date.
Lastly, we expect industrial multi market revenue to be up sequentially as this market continues to improve.
We expect third quarter GAAP gross profit margin to be approximately 54, 5% to 56, 5% and non-GAAP gross profit margin to be between <unk> 50.
9.5% to 61, 5% of revenue with the midpoint slightly higher than Q2 levels. As a reminder, our gross profit margin percentage can vary plus or -2% within a given quarter, depending on product mix and other factors.
We continue to fund strategic development programs.
Grams targeted debt delivering strong topline growth in 2021 and beyond with particular focus on infrastructure broadband and connectivity initiatives and our stated goal of increasing operating leverage within the business.
We expect Q3 to 2021 GAAP operating expenses to decrease approximately 2.
$2.3 million quarter on quarter to a range of $106 million to $110 million we.
We expect Q3.2021, non-GAAP operating expenses to be up approximately $2.3 million versus Q1 to a range of $75.5 million to $79.5 million.
We expect GAAP tax expense.
To be approximately zero and non-GAAP tax rate up 6%.
We expect GAAP interest and other expense to be $2.9 million to 3 million and non-GAAP interest and other expense to be $2.8 million to $2.9 million.
In closing, we continue driving towards our ambition.
To deliver sustainable and profitable growth ahead of the semiconductor industry average over the long term. This will be achieved by demonstrating technology leadership, which will allow us to expand our addressable markets, while increasing our silicon content and improving our market share positions. Our end markets are also poised to demonstrate solid growth profile.
<unk> due to proliferation of global networking and the trend towards expanding customer dependency on reliable and robust connectivity.
Beyond revenue growth, we remain committed to demanding value for our products as evidenced by recent gross margin expansion and driving operating leverage with modest spending growth.
Being focused on high return R&D projects. These initiatives, coupled with our disciplined capital allocation strategy will allow us to continue scaling Max linear while creating meaningfully meaningful value per shareholders.
With that I'd like to open up the call for questions.
Greater.
Ladies and gentlemen, we will now be having a question and answer session.
If you'd like to ask a question. Please press star 1 on your telephone keypad.
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1 moment, please where we now poll for questions.
Our first question comes from tore Svanberg with Stifel. Please proceed with your question.
Yes, Thank you and congratulations on the strong results could you talk a little bit about your relative visibility.
I assume you're you're fairly booked for Q3 are but but but even beyond Q3.
Especially when thinking about the but the broadband business because obviously you have some delinquent backlog there.
So yes, I don't we literally start there first.
Hi, yes.
Good to chat with you.
Absolutely I mean, so lead times have continued to be quite stretched and customers have.
And we've been booking out all through.
Next year.
We've got multiple quarters of very strong visibility and yes, we are working hard to do.
To improve our on deliveries and we've made some as you can tell some modest improvements, but we definitely have more to go.
Definitely and you also announced.
And our customer this quarter can you just elaborate a little bit on that I mean, obviously, you probably can't talk about the you know who it is on the exact amount but.
Is this a 1 quarter seeing how should we think about it impacting the P&L.
Yes.
So this is something that.
We're talking about a little bit as the industry has consolidated we're seeing more of these in our E payments and so we do expect to see more going forward and we've seen them increase over the years, but we'd expect to see more going forward I can't go into this 1 specifically, but but there are.
We've been above them there over multiple quarters.
As you know these projects take a couple of 3 years, often and you would expect some of these <unk> dollars to be spread out over that time frame.
Okay and just 1 last question Kishore you mentioned, the <unk> business contributing.
Beating 2 revenues end of this year.
Just hoping you could add a bit more color, there and especially as we start thinking about 2022.
Early revenue late this year so at the beginning for pretty Big event next year.
So very good question and we've maintained that.
They are qualified.
<unk> module customers.
And cloud service provider has taken longer than we had expected. This is not surprising given that we had a new entry into this market and we feel that we're on a good place right now where we should start generating revenue at the end of Q4.
Having said that given the strength lead times.
In other other factors, especially with the <unk> and all of these high speed components.
Have a specialist substrates and packages. So you would expect that we would have good visibility on orders.
For the lead times to either company's lead times are.
Extend several quarters, so we should expect goodwill.
Good visibility.
That should generate revenue into into 2022.
The 1 caveat to keep in mind that.
Likewise incumbents also have.
Our expectations on the air lead times in the air bookings. So we clearly be only sharing the revenue streams as we move.
With our customers.
Despite having you know.
A good visibility on what the demand patterns are there for next year. So yes in chart at the end of Q4, we should expect to see ramps in 2022 related to our 400 gig Pam per product.
Great. Thank you and congrats again.
Fall ranks.
Thank you.
Our next question comes from Quinn Bolton with Needham <unk> Company. Please proceed with your question.
Hey, guys, congratulations on getting the margins over 60% and a strong outlook.
First wanted to start to Kishore you mentioned, the Keystone 800 gig.
Yes P. Wondering if you could give us any update on is that sampling now and when do you think you might start to see that ramp to production could you see that go into production next year or is that a 2023 event just given the long qualification and ramp time.
So on.
So first I wanted to say that.
Good.
Beginning to sample the 800 gig <unk> product, it's looking by all that home is very good. So we are seeing a strong traction for the next generation platforms.
And you know the the input optical speeds are aided by 100 gig and the output would also be.
Aid by hundreds.
And come back or even compatible to the day preceding generation of 50 gig Pam pool. So I want to emphasize that is all about 100 gig Pam 4 bolt on electrical and optical links so.
We all know the 400 gig Pam 4 is yet to ramp in a meaningful way.
And.
And so you should expect <unk> to come after that but the great. The great story about 800 gig Pam 4 is almost all data is a converging on this particular.
Technology, which is basically 800 gig.
With the 4.8 leans on wages gig reported or at least a 100 gig.
We expect this to be the biggest you know I'm able opportunity on the data center for cloud Interconnects.
And we don't expect revenue therefore in the next year I expect this to be.
On the latter 2023 type of revenue ramps or if you're if you're lucky earlier than that but I would.
B.
That would be more cautious amid.
Mid 2023 type of activity okay.
Got it. Thank you second question is you.
You had previously.
Previously you announced your second generation API Gateway and cheaper I know the first Gen is ramping now, but could you give us any update on on traction in.
Electric progress Youre, making with the second Gen 8 by 8.
So obviously, we are garnering design wins.
For our second generation.
<unk>.
<unk> radio transceiver.
Hollywood the slowdowns in the ramps of the infrastructure in China and.
In general.
General.
This is not ramping as fast as we had hoped.
But the design win traction continues and combined with the.
Really high performance digital pre distortion technology from <unk> and so on debt.
We have we have.
We acquired.
Nano semi acquisition, we are getting very strong momentum towards that right on the development activities clearly.
There are 2 prongs to this as well.
The propriety of tier 1 radio transceivers.
The <unk> market, but also there's a big momentum towards next generation platforms on the open on platform.
You have seen our announcement of a partnership with Facebook on open ran platform and we are part of the certification platforms. When our Oberland solution is available. So we feel that we're on a very very well positioned with the success of generation products as well. So yes, the 16 by the $8.8.
Platform <unk>.
<unk> RF transceiver.
Given the momentum continues.
<unk> continues but the ramps are going to be moving later than earlier okay.
Got it and then just a quick 1 for Steve on Steve You mentioned some supply constraints in the.
Broadband business.
I think you <unk> some of those products.
Or manufactured by Intel Summer manufactured by third party foundry, just wondering if youre seeing the constraints.
From 1 supplier or.
Another you know meeting as Intel kind of meeting its manufacturing.
Yeah.
Commitments or are you are you seeing just tightness in the overall foundry space.
Just wondering if you can provide any color on that those broadband.
Broadband supply constraints.
Yes Quinn.
I would just say that we see tightness across the board right.
All of our suppliers are on the wafer side be it Intel or others.
Based on its all as you know.
On the back end side as we as we've mentioned before so really across the board.
Okay. Thank you.
Thank you.
Our next question comes from Gary Mobley with Wells Fargo. Please proceed with your question.
Hey, guys.
Congrats on the strong quarter strong outlook on.
Thanks for taking my question what.
I want to ask about how you guys are managing this.
Volatile supply chain environment that we're in or tight supply chain, probably a better way of saying it.
And.
You mentioned you've got book.
Some bookings.
Next year lead times are stretched.
Presumably some customers are trying to jockey per pole position to get adequate supply, maybe maybe some double ordering but maybe not double fulfillment. So I'm wondering what you guys are doing to make sure that demand is firm are you implementing sort of cancellation.
I'll do penalties, extending your Kent cancellation flexibility et cetera.
Hey, Gary it's a good day.
Good to talk with you.
So clearly this these supply chain challenges continue we are doing everything we can within our power to kind of work with our suppliers. We're also looking.
To bring on new suppliers to recall product.
You know much like many of our peers I mean wafer substrate.
Test capacity wire Bonder as these have all been challenging and I think we've done a great job. The team has been working non stop trying to mitigate some of these.
These risks that are out there and I think I think we're making good progress, but but still.
I wouldn't say, it's enough I mean, I think Budd, but at the same time I think we'll see nice improvements throughout the second half of the year.
They will I think you're still going to see them next year definitely in the first half.
But hopefully.
You know, we'll start to see them subside anyway.
Yeah, I mean with regard to the overall industry and whether there is double ordering or bringing.
Bringing on more inventory I think there is any doubt about that I think everyone has seen that.
We.
Like many others I mean, these are noncancelable orders for the most part and so we mitigate that to some degree but.
As far as the overall industry I mean, we will do our best to manage through this time, so Gerry 1 more thing going on there is that.
You know.
You know we.
You know the greatest.
Uh huh.
The challenge, we have and the most important job is to make sure that our customers are happy.
And in this constrained environment as happiness is a relative term, having said that we do a very diligent work on us.
And the end demand for our customers, we work with our customers to figure out their true demand.
And while we all would like to have more products.
Customers, who like to have more product. They are also very sensitive to the fact that to make sure that they can fulfill their customers' demands. So we really worked on a very collaborative environment.
And for US all customers are important so we're just trying to make sure that we.
At some point in time or whether it's an immediate we have <unk> understanding as to who gets fulfilled at 1 time, so that we don't leave any revenue.
That's perishable out.
Secondly, regarding managing our suppliers, it's really toward managing our suppliers. They are really in a very good position right, having strategic relationships and partnerships and on.
I know some revenue.
I'm Super excited even though they had also constraining constrain how to support as they are very excited that we're a growing company. This.
1 of the only mixed signal company that has a chance to have a very outsized growth in front of it.
So they are also very motivated to make sure that we are successful.
And I think to that extent I would like to thank our suppliers right now and I think together, we are doing wonderful things together and Thats why.
He is 1 of the Inc. They help we're getting from our suppliers as well so I think that book with the essence of the story, it's a very collaborative process.
Nobody's managing nobody we're all working together to make sure that we all.
Capture the.
The full value in the supply chain.
All the way to the end consumer consumer okay.
I appreciate it appreciate the color guys just had a follow up question about your Wi Fi sales.
Your expectation was for your Wi Fi sales to perhaps double this year is that something you're still comfortable with that maybe if you can just give us some.
Some feeling of how Wi Fi 6 is going to impact that revenue this year.
Do you see looking out into the future.
Yes, we are absolutely on track very excited we're getting great traction attachment as you know.
Continue to be very good we've been working through I mean, this is another area, where we had supply chain supply constraints in Q1, we saw that mitigated a little bit in Q2.
And definitely have further to go and I think youll continue to see nice growth throughout the year a lot of that in our connectivity bucket, but driven by driven by Wi Fi I mean, Wifi 6 is a big opportunity for us and frankly Wifi in general I think it's something that we're very excited about it's something that.
Net we see a growing demand for.
It's 1 of the big drivers on this content increase that we're seeing in our gateways today right. We've talked about doubling tripling of content within these within these gateways and a lot of that is driven by Wi Fi and so youre seeing Wi Fi asps going from $5.
$7, and Youre seeing going up to 15% and $20 in the future. So this is exciting it is.
Also a very demanding environment, we've got our engineering teams are working diligently to support customers through this time not just on the operation side, but really on next generation product as well.
And I want to really sort.
Sort of.
Uh huh.
The highlight of Wi Fi you're right, it's not just any value.
The top III Wi Fi.
Access platforms in the world with the latest generation.
And so it is a premium platform and.
And the top of the breed.
Here, So I think the tracks the traction sort of speaks for the value of the Wi Fi that debt.
We are giving our customers here and I think frankly, there's a lot more opportunity we could be using that we are choosing how will it a little bit of.
Caution here to ensure that we supply our customers both existing ones as we bring on.
On more and more suppliers more and more customers and procure more supply capacity from auto suppliers, but as far as seeing that double this year and quite frankly, I think we're even more confident that we'll see that happen again next year.
Thanks, guys.
Thank you.
Our next question.
Cash from Ananda Baruah with loop capital markets. Please proceed with your question.
Hi, Good afternoon, guys. Thanks for taking the question I really appreciate it yeah.
Just wanted a quick follow up if I could on on the demand pick up nice nice really nice demand pick up on.
The guidance for September.
Timber quarter any sense.
Any sense, how much of that would be from some of these demand dynamics.
Really starting to amplify and pick up versus the supply constraint.
Getting to mitigate a little bit.
So.
How to answer that question, obviously already amount is coming from share gains right and on the broadband platform. When you talk on the broadband business and it's really being amplified by operators spending lot more money on premium platforms and so we look at.
<unk> the demand is the totality over several quarters non a particular quarter. So I think this is a true.
That's going to be there for a while you do have any capex investment from our operators and so I don't look at it as really anything to do with supply other than supply not keeping track.
What we could do any particular period of time, but.
We look at recovery, because we didnt ship enough in Q1 for example, so you can imagine is into our.
Demand really.
They are with us and because that your share gains in content increase.
We are trying to catch up with the demand rather than really.
Having a fixed demand and falling down because we didn't.
It's not lie and then be catching up on Q2, there is nothing of that sort here. It is really an amplification of the larger spend by the operators.
That's really helpful to sure and I guess, you know if I do some quick math I know youre not guiding December quarter and seasonality historically is kind of.
It's Ben Yeah.
So it's up and down but if I do some quick math. It suggests you could grow anywhere year over year, you know, 10% to 20% I guess really the question is for December quarter, and I guess when you start to go apples to apples with Intel and I guess the question is is it isn't appropriate given your what you guys are seeing do you think of your guidance.
As a consistent 10% plus revenue growth company is that really who the company is doing force for the foreseeable future.
Yeah.
So it's a good try to get me to try to guide Q4, but in all seriousness.
The only setup, Steve you guys.
Kind of a bunch of bolt on stuff and there's nothing there's no headwinds literally in any of your remarks, that's why by the way.
Good to hear good day here.
With our intent.
So look I feel very confident that we're continuing to see very strong demand I mean to kishore points earlier I mean this.
Is it does very much feel like kind of this multiyear cycle, it's not a kind of a 1 time thing we're seeing strong demand we continue to see more share.
Share gains the content growth that we were just speaking of on the Wi Fi side, I mean, youre going to continue to see really strong growth.
As I said on it we've never had before and that's on top of very strong market growth as well. So our Q4 feels very good and 2022 it looks like it's gonna be a really strong growth year. So look our intentions, absolutely are going to be to grow double digits over the next several years.
And I think that's consistent with what the outlook is.
With this broadband infrastructure build that we're expecting to see that theres not just broadband right. If we look forward into 2022, I mean infrastructure will come on more and more into the highlight and.
You know if you're really recall.
This is a business that.
He is now on track to exceed $100 million.
<unk>, which is which was only 3 years old right and it's been slower than what we expect especially on the optical side.
However, we have built it and we are and there's a lot of growth ahead in front of us in the infrastructure as well. So how do you think there's a lot of organic growth.
With engine drivers and 1 of the things that are most most inc.
Investors don't seem to really are completely family as we have the premier fiber upon platform for.
So <unk>.
X gene is bond solution in the World and you know that.
That has been adopted.
Premier North America.
Carrier and it's like the it's it is a showcase platform with the rest of the world and and we're getting a lot of adoption of that and if you think about on penetration in the bond markets with the carrier markets as it is to start deploying more fixed wireless access and fiber outlays.
Okay.
Huge limit because a huge upside because our share is very very tiny in that market and on those platforms tend to be pretty robust high content platforms as well so I think.
I now would like to call a particular number is.
Sustainable growth percentage of 10% power I believe.
As our.
Several factors in play.
Broadband connectivity and infrastructure and even our industrial multimarket analog products are coming to life sales could last few years, we've been investing in it and then now the growth is coming with new launch of new products as well so.
I think the opportunity is.
The vector for us.
And you can tell that we're very excited about all of these growth vectors for the company.
That's really really helpful guys I really appreciate it thanks a lot.
Thanks.
Thank you.
Our next question comes from Ross Seymore with Deutsche Bank. Please proceed with your question.
Hi, guys. This is Melissa weathers on behalf of Rod.
Ross. Thank you for letting US ask a question I have a couple more nearer term questions.
First question on the industrial Multimarket business. It looks like that grew 10% sequentially and last quarter, you guided for it to be flat to down sequentially.
So any other color you can provide us why that upside to your expectations.
On the last 90 days and then.
You sounded a little more incrementally positive on that market.
On.
So just what is your outlook on that I am on space.
Yes.
Yeah, absolutely. We are excited about industrial multi market. We are seeing from nice improvement frankly with regard to the guidance and we mentioned this in last quarter's call I mean with the supply constraints, it's very difficult to call a lot of our end markets.
Exactly.
Perfectly.
Kind of given some.
Some of those supply constraints. So yeah, so theres a little bit of movement. There as we try to navigate our supply chain, but going forward I think we do feel good we've talked about this market growing at you know kind of GDP, plus and I think we're seeing that plus right now right now we just can't keep up with demand and so we're working very hard.
To meet those customer demand with.
Lower inventory levels, but we're working.
Very hard to make that up as fast as we can and the.
The demand itself.
While it is growing but also gaining share because we've done several things to bring.
You know.
To our parks are in line to be very competitive relative to the competition and they're also gaining a lot of solid.
Design win pipelines, which are beginning to yield results now and we are especially focused on the distribution channel and a wild value launching new products. So that our sales people can go and get.
More market share right now so that ultra is playing in our favor.
Got it okay. Thank you and then another more nearer term question, but you guys upside to your expectations on the gross margin line as well on and you're now in like the 60 per cent range. So on BT.
Between.
2.2 and 3 Q and then going forward is there anything structurally that you think.
<unk> has raised the bar for your gross margins and any color on why those were so strong.
Yes. So this is something that we're excited about we've seen some really nice improvements.
Going into the acquisition or post acquisition rather.
That number did come down a little bit.
And so we've been working diligently to kind of get our operational efficiencies back in order. This has been particularly challenging as we've seen price increases from a lot of our suppliers and so we're doing our best to navigate.
If I get that.
And as you can tell we're ahead of plan here book, but it.
It doesn't end here I guess is the way that I would put it given the continued constraints that we see in the industry.
We're going to continue to see price increases and so we're gonna have to work hard.
To manage.
Manage that I mean mix will continue to be an issue as well as we look out into next year.
And we're always looking to manage that as you know when we brought on the.
The Intel assets, they were definitely running significantly below our numbers, but.
Again.
On a with a lot of work.
Are going to continue to make those improvements, but its a multi year improvement that debt. It will take in order to get back up into those mid sixties, which we aspire to be so the other thing is that.
Steve referred to mix.
We're also on a lot of new products ramping and the new products timing.
Cost improvements that are within our control non non based on suppliers any of those those factors.
Garden, a better handle of it earlier than we had expected that's a big factor as well. So I just wanted to be careful here, saying that while our costs are increasing a lot of our improvements have come ahead of schedule.
You.
Based on all the new product ramping and cleaning up internally on.
And big part of it is testing yield improvements and so on and so forth right. So on.
As our new barge keep ramping we are a greater and greater opportunity due to fine tune the cost.
<unk>.
The cost line, if you will and that should improve our gross margins on a go forward basis.
Okay. Thank you guys and congrats.
Thank you.
Our next question comes from Tim <unk> with Northland Capital markets. Please proceed with your question.
Okay.
And I'll add my congratulations.
Wanted to focus on the broadband.
Business, along a couple of lines here.
First.
Yeah, I don't know if you can quantify.
What you might have kind of left on the table from a supply standpoint in Q.
Good afternoon and broadband.
And.
Any color on booking and backlog net metrics as a result of that would be.
Welcome and then should we think of catching up on that with your strong Q3 guide through the second half of the years.
Kind of recouping.
Some of that or.
Or is there a better way to think about it and I have a cash.
Longer term follow up.
Yeah.
Yes, Tim.
Difficult to quantify exactly what was.
Left on the table in Q2, we continue to make good progress we're pleased with that.
Definitely not keeping up with demand.
And as we said earlier.
But we are making really good progress.
We're going to have to continue to make good progress what I mean by that is that as we win new business.
Kishore I spoke earlier about some of the newer programs that we have ramping and so we've got to be able to get more.
Why in order to meet those demands and we're making good progress and we will continue to focus on that.
Okay and that kind of leads into my next question, which is that the comment about the new platforms.
Kishore mentioned ramping in 'twenty, 2 I think on the last call.
Paul you kind of increased.
Baseline growth expectations for the broadband business kind of into the mid to high single digits.
I Wonder if you still see it that way and you know given.
Commentary around.
Suppressing contents, the new platforms you mentioned.
With that type of market growth and your plans to outgrow what it would it be fair to expect double digit growth.
In broadband.
Next year as a result of all those factors and maybe you can throw some throw market.
Inc. Are in there I don't know if there's been any comments on that about your.
Thoughts on your you did the direction of market share is in broadband is another potential driving factor.
So Tim.
I'll start I'm sure Kishore.
Love to speak to the longer term.
View here, but.
Look I think our outlook is very consistent with what we shared last quarter.
We continue to see the market continue to expand and we continue to see a lot of our customers and I guess I'll say operators and carriers are starting to really put a lot of capex dollars to work over the next you know 3 to 5.
Years as I know you've pointed out several times, so we see the market growing.
We're penetrating new markets with new offerings that we haven't had historically, we're in a unique position with some of our products just from a pure performance standpoint, whether that be on the gateway sse's or.
Or wifi or even Ethernet for that matter, so I'm really optimistic and were really.
More than comfortable with that outlook that we adjusted the last quarter.
And really excited about our future.
Okay. Thanks very much.
Thank you.
Our next question is from Richard Shannon with Craig Hallum. Please proceed with your question.
Hi, guys. Thanks for taking my question, maybe a follow up on the on the last 1 here regarding the broadband business and love to get a sense of when do you start to see benefits from some of these new newer technologies that you haven't been in the floor like on.
On the fiber and I think even mentioned fixed wireless I don't remember here net 1 from before from you. So when do we start to see that and how do we think about the context of <unk>.
Contribution relative to the broadband market share already in.
Yeah, I mean, we're seeing it we're seeing revenues this year as we've pointed out previously I mean, it's relatively small.
But it is a very it's a growing portion of our business is probably growing well in excess of twice the rate that our our more what were known for in the cable area, but it's absolutely growing faster. So it's a big market, it's something that we're on.
Underpenetrated for sure with you know with respect to share.
Share anyway, so I do expect to see us improving.
With our market share there, but it's going to I mean, this is something that we see playing out over the next 2 to 3 years.
But I just.
We're not waiting on anything we're selling these products today, but but the real growth is probably over the next 2 to 3 years.
Okay. That's helpful.
Last question, probably has something to do with just this topic here, but no 1 will get it from a different perspective and that being the <unk>.
The Broadcom FTC investigation, there wondering if you if youre seeing any changes in behavior either from your competitor here or customers.
In the weeks that this has come out and whether you expect.
Any real changes on the market that could be even more beneficial for you.
So Richard are you know I was kind of expecting somebody who asked the question and this is this is our position right you know.
What we control is what we do.
So and what we have to do is be the strongest.
Supplier to our customers, where they want to buy product from US I think we've always worked hard on that we've tried that in the past the weaknesses of being there at the end of our full platform complement if it does.
So competitor competitors have done what they have done but now in the.
Now the industry is very consolidated.
<unk>.
We have a pull back on mineral obsolescence and competent there does too. So I think it's fair game on game on.
And regarding what the FTC does really is is not in our non in our control right and.
How it affects the behavior of our competitors and our customers.
Really hard to fathom and projected on debt, but at this point I think we have got as powerful a portfolio as a competitor and I think.
We feel very good about our opportunity to really win in the marketplace.
On.
<unk>.
On the strength of our products right.
Okay, Great. That's all the questions you guys I appreciate the thoughts.
Yes.
Thank you.
Our next question comes from Christopher Roland with Susquehanna Financial Group. Please proceed with your question.
Hi, good afternoon to say stocks on Chan on for Chris.
Chris and thanks for taking the question.
I just had a follow up question to your earlier, China slowdown commentary.
It seems like China has offered a few more tenders right now.
Also in the U S. It seems like <unk> build out is accelerating.
Would you expect this to be any time of any.
Any sort of on near term driver for infrastructure.
So toxin.
So I think thats consistent I mean, what we had mentioned before that we were behind 8 by 8 frankly, we were really expecting to see most of that ramp happen in 'twenty 2 to begin with and so most of that revenue.
That was planned for this year is coming by the 4 by 4 market I think I know you guys have commented on this I mean, I think it's consistent to say that <unk> is definitely pushed out in China. That's that's had an impact it is exciting to see what's going on in North America with.
These mid.
And auctions now complete I think we can definitely see some things pick up on that.
Front end and we're very excited you know kind of going into next year to.
Do you see those revenue start to grow from here.
Great. Thank you.
Also some of our PC companies.
Bad debt Wi Fi chips are under a short supply.
Have you heard this as well and would you say there are opportunities for you guys to serve this market at all.
Well, we're definitely familiar with being short Wi Fi chips.
But I think you're probably referring to more client side products.
Just I mean, we've definitely struggled as far as getting enough product ourselves and we've seen shortages across the industry I don't know that we can call this out specifically.
But as far as our products and then the gateways and the like I mean, we're seeing those challenges as well yes.
Okay. Thank.
And then just a last quick 1.
Great to hear that Wifi is kind of double this year and perhaps also next year.
But coming back to the September Guide you said, it's kind of on infrastructure.
Activity is going to be solidly up.
Could give us a bit more color on that commentary.
And.
Any more details on low calorie Ethernet would also be helpful. Thank you.
Yes, no problem look we're very excited I mean connectivity is a is a strong growing market, we're going to see very significant I mean very significant growth. This year a lot of that is driven by Wifi on Ethernet, but our moca and G. HN is performed.
Increasingly well I think well beyond what the expectations were say a year or so ago and we expect to see that continue throughout the rest of this year and into next year on all of those fronts. So I mean, there's going to be strong double digit growth. This.
This year as well as next year for sure.
And we're very excited about that.
Thank you.
Our next question comes from Sujit de Silva with Roth. Please proceed with your cash.
Hi, Kishore Hi, Steve Congratulation on the progress a couple of questions on the broadband until acquisition.
Sure.
Excuse me describe kind of the the cost efficiencies and margin improvement there, it's kind of ongoing but would you kind of would you what do you want to say at this point a couple of quarters into the acquisition. What inning you are in sort of kind of the plan you had when you acquired it just understand how far along you are there or if that's already kind of kind of you have not moved on from that or if.
<unk> sales sort of opportunity here.
Yeah, well I mean.
So it is going very well I mean, we're ahead of plan here.
And we're pleased about that but I mean, frankly this has been up against headwinds in the market, where it's been very difficult to bring on new suppliers or.
Uh huh.
Theres still make some of the you know get some of the negotiated cost reductions that we would've liked to have seen right going into the acquisition.
That being said I think we've done a really good job I don't know that I can give you an exact inning, but I would mentioned that very much part of our plan all along was be on next generation products.
You know you're very confident that we will continue to see margin improvements over the next 2 to 3 years right. So as we have new products that will come to market that we are participating in and are collaborating on a.
Designing some of these parts.
With.
Debt with a broader set of our supplier base with often a different architecture. So you know we've talked a little bit about multi chip modules go into monolithic chips. I mean these are things that we can do to improve yields on a go forward basis, and so I do feel like it's very much early days with regard to.
With margins and so well I feel like it's early days I think over the next couple of 3 years Youre going to continue to see improvements on that.
On the CHD business.
In the short term, we still have to navigate some of the supply chain challenges right and the pricing environment that we're in but.
To grow the pleased with the progress.
I appreciate the challenges there and then my follow up questions on on the product set for the combined connected home business I mean, Wi Fi incremental content at its been very very clear to us watching you guys, but how do you maybe have a couple of quarters now and you can work on work on this consolidated product and design.
But their products going forward are there incremental areas of content gain that you could highlight that might be coming along with what you're already targeting today that may.
May help you with them the growth here.
So obviously some of this information is quite confidential right, we have to be careful about that Ah I would say that.
The general guideline for you would be if we look at any any broadband platform.
If you want to examine all of the content of the platform.
The power is an area that we are increasingly investing in that should that should complement what we're doing already and you're not seeing enough of that growth.
The bomb on the platform per power right and then you also have other componentry.
On the platform.
Net debt.
We are taking a very aggressive look at and that could become part of our road map at day at this point, that's all I would like to share and the rest I believe to your imagination.
Nation.
Great. Thanks Sue.
Sushi on I'm, just going to add 1.
Point.
But I think as is sometimes overlooked I mean, we've talked about Wi Fi attach as an additional.
Content increase on that gateway, but I think often.
It's underappreciated about the increase in Wi Fi content.
Go on from Wifi, 5 to Wifi, 6 Tri band and even moving into Wi Fi 7 and so you're seeing are you.
Italy, a doubling of that Wi Fi.
ASP dollar anyway in a gateway.
It's very interesting.
Even in such powerful platforms.
Like <unk> or <unk>.
The cable DOCSIS 3.
3 main moving to full point tool when it does.
Total volume provided by swamps, the Bom content of the non Wi Fi right, which is a very strange paradigm.
What what was supposed to be a benefit to the main main.
Processor and front end front end now that becomes a small piece in the bigger puzzle Wi Fi. However, you need that processor and the modem.
You need to have full control of that in order to cellular by 5 so it's.
Yes.
It's not like you know the.
<unk> all in the.
All in the world even meet the smallest the tip of the whole thing you know okay. This is maybe for non Americans okay.
[laughter], alright, I definitely want to ask how the FTC charges might further open my imagination.
On the loan as well thanks guys.
Thank you.
With that.
I would say thank you operator, and we believe party inc. Beating in the falling upcoming conferences. During Q3 Oppenheimer's, 24th annual technology Internet and Communications Conference on August 11th BMO Technology Summit on August.
The Jefferies semiconductor hardware and communications infrastructure summit on August 30, <unk> and Deutsche banks.
Technology Conference on September 9.
I want to thank you all for joining us today and I look forward to reporting on our progress to you next quarter. Thank you very much.
Ladies and gentlemen. This concludes today's conference you may now disconnect your lines at this time.
Thank you for your participation and have a great day.