Q2 2024 MaxLinear Inc Earnings Call

Greetings and welcome to the MaxLinear 2nd Quarter 2024 Earnings Conference Call.

Speaker Change: At this time, all participants are in a listen-only mode.

Speaker Change: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad.

Speaker Change: As a reminder, this conference is being recorded.

Speaker Change: It is now my pleasure to introduce your host.

Beth Reliefian: Leslie Green, Investor Relations

Leslie Green: If anyone should require Thank you, Alicia. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's second quarter 2024 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take your questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for the third quarter of 2024, including revenue, gap and non-gap gross margin, gap and non-gap operating expenses, gap and non-gap interest and other expense, and gap and non-gap diluted share count.

Speaker Change: Thank you, Leslie. You may begin.

Beth Reliefian: Thank you, Alicia. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's second quarter 2024 financial results.

Leslie Green: In addition, we will make forward-looking statements relating to trends, opportunities, execution of our business plan, and potential growth and uncertainties in various product and geographic markets, including, without limitation, statements concerning future financial and operating results, opportunities for revenue and market share across our target markets, channel inventory turnover, new products, including the timing of production launches and of such products, demand for and adoption of certain technologies, our total addressable market, and the effects of cost reduction measures. These forward-looking statements involve substantial risks and uncertainties, including risks outlined in the risk factor section of our recent SEC filings, including our Form 10-Q for the quarter ended June 30, 2024, which we filed today.

Speaker Change: Today's call is being hosted by Dr. Kishore Seendripu, CEO , and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take your questions.

Steven G. Litchfield: Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for the third quarter of 2024, including revenue, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses,

Speaker Change: GAAP and non-GAAP interest and other expense, and GAAP and non-GAAP diluted share count.

Steven G. Litchfield: In addition, we will make forward-looking statements relating to trends, opportunities, execution of our business plan, and potential growth and uncertainties in various product and geographic markets, including, without limitation, statements concerning future financial and operating results.

Steven G. Litchfield: opportunities for revenue and market share across our target markets.

Speaker Change: Channel Inventory Turnover, new products including the timing of production launches and of such products.

Speaker Change: Demand for and adoption of certain technologies, our total addressable market, the effects of cost reduction measures.

Speaker Change: These forward-looking statements involve substantial risks and uncertainties, including risks outlined in our risk factors section of recent SEC filings, including our Form 10-Q for the quarter ended June 30, 2024, which we filed today.

Speaker Change: Any forward-looking statements are made as of today, and MaxLinear has no obligation to update or revise any forward-looking statements.

Leslie Green: The second quarter 2024 earnings release is available in the Investor Relations section of our website at MaxLinear.com. In addition, we will report certain historical financial metrics, including but not limited to gross margin, operating margin, operating expenses, and interest and other expense on both a GAAP and non-GAAP basis.

Speaker Change: The second quarter 2024 earnings release is available in the investor relations section of our website at MaxLinear.com.

Speaker Change: In addition, we will report certain historical financial metrics, including but not limited to growth margin, operating margin, operating expenses, and interest and other expense on both GAAP and non-GAAP basis.

Leslie Green: We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations and the press release available on our website. We do not provide reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future changes, including stock-based compensation and its related tax effects, as well as potential impairments. The non-GAAP financial measures discussed today are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures.

Speaker Change: We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations and the press release available on our website.

Speaker Change: We do not provide reconciliation of non-GAAP guidance for future periods because the inherent uncertainty associated with our ability to project certain future changes, including stock-based compensation and its related tax effects, as well as potential impairments.

Speaker Change: non-GAAP financial measures discussed today are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. We are providing this information because management believes it is useful to investors as it reflects how management measures our business.

Leslie Green: We are providing this information because management believes it is useful to investors as it reflects how management measures our business. Lastly, this call is also being webcast, and a replay will be available on our website for two weeks. And now, let me turn the call over to Dr. Kishore Seendripu, CEO of MaxLinear. Kishore?

Speaker Change: Lastly, this call is also being webcast and replay will be available on our website for two weeks.

Speaker Change: And now, let me turn the call over to Dr. Kishore Seendripu, CEO of MaxLinear. Kishore? Thank you, Leslie, and good afternoon, everyone. Our Q2 revenues were $92 million with a non-gap gross margin of 60.2%.

Kishore Seendripu: Thank you, Leslie, and good afternoon, everyone. Our Q2 revenues were $92 million with a non-gap gross margin of 60.2%. In our infrastructure and market, we continue to make good progress with design interaction optical data center, as well as wireless access and backhaul products, but it is on track to exceed the high end of our expected optical revenue target range of $10-$30 million for 2024. We are disappointed by the weakness in our broadband demand due to the prolonged burn-off of the excess customer inventory build-up during the supply chain crisis. We're also seeing continued softness in our telecom markets with added pressure from U.S.-China tensions and regulatory compliance requirements.

Speaker Change: In our infrastructure end market, we continue to make good progress with design, interaction, optical data center, as well as wireless access and backhaul products. We're on track to exceed the high end of our expected optical revenue target range of $10 to $30 million for 2024.

Speaker Change: We are disappointed by the weakness in our broadband demand due to the prolonged burn-off of the excess customer inventory build-up during the supply chain crisis.

Speaker Change: We're also seeing continued softness in our telecom markets with added pressure from U.S.-China tensions and regulatory compliance requirements. This is impacting our ability to make shipments, which affects our Q2 results and Q3 guidance.

Kishore Seendripu: This is impacting our ability to make shipments, which affects our Q2 results and Q3 guidance. Despite the discouragingly slower business recovery than anticipated, multiple factors give us confidence that we are well positioned to resume growth in 2025. Owing to our concerted R&D spend over the last three years, we have launched several new products in high-value markets, including optical data center interconnect, enterprise ethernet, and storage accelerators, 5G wireless, multi-gigabit PON broadband access, and Wi-Fi 7 connectivity.

Speaker Change: Despite the discouragingly slower business recovery than anticipated, multiple factors give us confidence that we are well positioned to resume growth in 2025.

Speaker Change: Owing to our concerted R&D spend over the last three years, we have launched several new products in high-value markets, including optical data center interconnect, enterprise Ethernet and storage accelerators, 5G wireless, multi-gigabit PON broadband access, and Wi-Fi 7 connectivity.

Kishore Seendripu: These products not only open significant new opportunities but are now poised to drive a sustained cycle of revenue growth for the next several years. As a result, we expect strong profitability growth as these products ramp and our large R&D investment spend starts to moderate considerably. Additionally, even though demand in our primary markets remains weak, channel inventory continues to come down and is expected to bottom in the second half of the year.

Speaker Change: These products not only open significant new time, but are now poised to drive a sustained cycle of revenue growth for the next several years.

Speaker Change: As a result, we expect strong profitability growth as these products ramp, and our large R&D investment spend starts to moderate considerably.

Speaker Change: Additionally, even though demand in our primary markets remains weak, channel inventory continues to come down and is expected to bottom in the second half of the year.

Kishore Seendripu: Our sell-through revenues continue to run above our sell-in revenues, and we have seen meaningful improvements in our bookings for four quarters in a row, along with both expedites and orders within lead times for certain parts. Now, turning to our markets, our infrastructure business, particularly high-speed optical interconnect, remains exciting, where we are solidly positioned to exceed $30 million in revenue this year and to deliver meaningful run rate growth in 2025. We expect to be in production in the second half of the year with one of our lead data center customers and are progressing well through qualification with others.

Speaker Change: Our sell-through revenues continue to run above our sell-in revenues, and we have seen meaningful improvements in our bookings for four quarters in a row, along with both expedites and orders within lead times for certain parts.

Speaker Change: Now, turning to our markets, our infrastructure business, particularly high-speed optical interconnect remains exciting, where we are solidly positioned to exceed $30 million in revenue this year and to deliver meaningful run rate growth in 2025.

Speaker Change: We expect to be in production in the second half of the year with one of our lead data center customers and are progressing well through qualification with others.

Kishore Seendripu: We are on track to deliver our Rushmore family of 200 gigabit per lane PAM430s and DSPs in time for the early market adopters of 1.6 terabits per second data speeds. Built on Samsung's leading-edge CMOS, Rushmore delivers best-in-class power consumption and performance across optical transceivers, active optical cables, and active electrical cables.

Speaker Change: We are on track to deliver a Rushmore family of 200 gigabit per lane PAM430s and DSPs in time for the early market adopters of 1.6 terabits per second data speeds.

Speaker Change: Built on Samsung's leading-edge CMOS, Rushmore delivers best-in-class power consumption and performance across optical transceivers, active optical cables, and active electrical cables.

Kishore Seendripu: Rushmore not only solidifies our long-term optical data center market competitiveness, but it will also significantly grow our revenue over the next several years. Industry estimates currently forecast a 50% compounded annual growth rate for PAM-4 market shipments through 2027. In 5G wireless infrastructure, revenue grew strongly in Q2 versus the prior quarter in the face of a continuing difficult environment for service provider capital expenditure. This growth was driven by hybrid microwave and millimeter wave backhaul technologies that are required to support the increasing transport data rates needed in a slowly but definitively densifying 5G network.

Speaker Change: Rushmore not only solidifies our long-term optical data center market competitiveness, but it will also significantly grow our revenue over the next several years.

Speaker Change: Industry estimates currently forecast 50% compounded annual growth rate for PAM-4 market shipments through 2027.

Speaker Change: In 5G wireless infrastructure, revenue grew strongly in Q2 versus the prior quarter in the face of a continuing difficult environment for service provider capital expenditure spend.

Speaker Change: This growth was driven by hybrid microwave and millimeter wave backhaul technologies that are required to support the increasing transport data rates needed in a slowly but definitively densifying 5G network.

Kishore Seendripu: We continue to believe wireless access and backhaul can be a $200 million product line over the next three to five years. Also, within our infrastructure revenues, our Panther 3 series hardware storage accelerators for the enterprise all-flash array and hybrid storage enterprise appliance systems are providing exciting incremental growth opportunities, particularly in light of the growth in high-speed computing and AI. We are currently in production with a large enterprise OEM and expect additional product ramps later this year with continued growth in 2025 and beyond.

Speaker Change: We continue to believe wireless access and backhaul can be a $200 million product line over the next three to five years.

Speaker Change: Also, within our infrastructure revenues, our Panther 3 series hardware storage accelerators for the enterprise all-flash array and hybrid storage enterprise appliance systems is providing exciting incremental growth opportunities, particularly in light of the growth in high-speed computing and AI.

Speaker Change: We are currently in production with a large enterprise OEM and expect additional product ramps later this year with continued growth in 2025 and beyond.

Kishore Seendripu: In Ethernet connectivity, we continue to expand TAM for our 2.5 gigabit Ethernet product family in Q2 with the announcement of 7 and 10 port switches and 8 port 5s for the enterprise and small and medium business switch markets.

Speaker Change: In Ethernet connectivity, we continue to expand TAM for our 2.5 gigabit Ethernet product family in Q2 with the announcement of 7 and 10 port switches and 8 port 5s for the enterprise and small and medium business switch markets.

Kishore Seendripu: Our German North American Enterprise OEM customer is expected to ramp to production mid-2025 and contribute to significant Ethernet revenue growth next year. We believe our Ethernet business, including gateways and routers, could reach $100 million in run rate over the next 18 to 24 months. Shifting to the broadband front, we are focused on PON for new TAM growth in broadband and are excited by the design interaction for our platform based on our single-chip integrated fiber PON and 10-gigabit processor gateway SOC coupled with our tri-band Wi-Fi 7 single-chip solution.

Speaker Change: Our German North American Enterprise OEM customer is expected to ramp to production mid-2025 and contribute to significant Ethernet revenue growth next year.

Speaker Change: We believe our Ethernet business, including gateways and routers, could reach a $100 million run rate over the next 18-24 months.

Speaker Change: Shifting to the broadband front, we are focused on PON for new TAM growth in broadband and are excited by the design interaction for our platform based on our single-chip integrated fiber PON.

Speaker Change: and 10 gigabit processor gateway SOC coupled with a tri-band Wi-Fi 7 single-chip solution.

Kishore Seendripu: We have multiple promising ongoing engagements currently, including a second year of a North American carrier, which we believe can become a major opportunity for us in 2025 and 2026. In conclusion, we are excited and confident in our progress in the infrastructure market with our wireless and optical interconnect products, even as we await broadband recovery. In addition, our Ethernet, Storage, Wi-Fi 7, Fiber PON, and Gateway products are all in the market today and are addressing additional new TAM.

Speaker Change: We have multiple promising ongoing engagements currently, including a second year of a North American carrier, which we believe can become a major opportunity for us in 2025 and 2026.

Speaker Change: In conclusion, we are excited and confident in our progress in the infrastructure market with our wireless and optical interconnect products, even as we await broadband recovery.

Speaker Change: In addition, our Ethernet, Storage, Wi-Fi 7, Fiber Pond, Gateway products are all in the market today and are addressing additional new TAM, they have strong customer traction and are poised for meaningful growth.

Speaker Change: We are optimizing our efforts around these opportunities which will be transformative for our future business by driving maximum value for our customers and shareholders.

Kishore Seendripu: They have strong customer traction and are poised for meaningful growth. We are optimizing our efforts around these opportunities, which will be transformative for our future business by driving maximum value for our customers and shareholders. With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.

Speaker Change: With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer. Steve.

Steven G. Litchfield: Thank you, Kishore. Total revenue for the second quarter was $92 million, down 3% from $95.3 million in the previous quarter. Broadband revenue for the second quarter was $22 million, connectivity revenue was $13 million, infrastructure revenue was $32 million, and our industrial multi-market revenue was $25 million. Gap and non-gap gross margin for the second quarter were approximately 54.6 and 60.2% of revenue. The delta between GAAP and non-GAAP gross margin in the second quarter was primarily driven by 5.1 million of acquisition-related intangible asset amortization. Second quarter GAAP operating expenses were $91 million, and non-GAAP operating expenses were $74.8 million.

Steven G. Litchfield: The delta between GAAP and non-GAAP operating expenses was primarily due to stock-based compensation and performance-based equity accruals of $14.7 million combined and restructuring costs of $0.9 million related to the workforce reduction initiated in Q4. Non-gap loss from operations for Q2 2024 was 21% of net revenue. Gap and non-gap interest and other expense during the quarter were $0.5 million and $0.4 million, respectively.

Steven G. Litchfield: Thank you, Kishore.

Steven G. Litchfield: Total revenue for the second quarter was $92 million, down 3% from $95.3 million in the previous quarter.

Steven G. Litchfield: Broadband revenue for the second quarter was $22 million, connectivity revenue was $13 million, infrastructure revenue was $32 million, and our industrial multi-market revenue was $25 million.

Steven G. Litchfield: Gap and non-gap gross margin for the second quarter were approximately 54.6 and 60.2 percent of revenue. The delta between gap and non-gap gross margin in the second quarter was primarily driven by 5.1 million of acquisition-related intangible asset amortization.

Steven G. Litchfield: Second quarter GAAP operating expenses were $91 million and non-GAAP operating expenses were $74.8 million.

Steven G. Litchfield: The delta between GAAP and non-GAAP operating expenses was primarily due to stock-based compensation and performance-based equity accruals of $14.7 million combined and restructuring costs of $0.9 million related to the workforce reduction initiated in Q4.

Steven G. Litchfield: non-GAAP loss from operations for Q2 2024 was 21% of net revenue. GAAP and non-GAAP interest and other expense during the quarter was $0.5 million and $0.4 million, respectively.

Steven G. Litchfield: In Q2, cash flow used in operating activities was approximately $3 million. We exited Q2 of 2024 with approximately $186 million in cash, cash equivalents, and restricted debt. Our day sales outstanding were down meaningfully in the second quarter to approximately 84 days.

Steven G. Litchfield: In Q2, cash flow used in operating activities was approximately $3 million. We exited Q2 of 2024 with approximately $186 million in cash, cash equivalents, and restricted cash.

Steven G. Litchfield: Our day sales outstanding was down meaningfully in the second quarter to approximately 84 days. Our gross inventory was also down versus previous quarter as we continue to make improvements with inventory turns at 1.1 times.

Steven G. Litchfield: Our gross inventory was also down versus the previous quarter as we continue to make improvements with inventory turns at 1.1 times. This concludes the discussion of our Q2 financial results. With that, let's turn to our guidance for Q3 of 2024. We currently expect revenue in the third quarter of 2024 to be between $70 million and $90 million. Looking at Q3, by end market, we expect broadband and infrastructure to be flat to slightly down, industrial multi-market to be down, and connectivity to be slightly up. We expect third quarter GAAP gross margin to be approximately 52.5 to 55.5 and non-GAAP gross margin to be in the range of 57 to 60% of revenue.

Steven G. Litchfield: This concludes the discussion of our Q2 financial results.

Steven G. Litchfield: With that, let's turn to our guidance for Q3 of 2024.

Steven G. Litchfield: We currently expect revenue in the third quarter of 2024 to be between $70 million and $90 million. Looking at Q3, by end market, we expect broadband and infrastructure to be flat to slightly down, industrial multi-market to be down, and connectivity to be slightly up.

Steven G. Litchfield: We expect third quarter GAAP gross margin to be approximately 52.5 to 55.5 and non-GAAP gross margin to be in the range of 57 to 60 percent of revenue.

Steven G. Litchfield: Gross margin continues to be relatively stable, with the expected range being driven by the combination of near-term product, customer, and in-market mix. We expect Q3 2024 GAAP operating expenses to be in the range of $102 million to $108 million. We expect our Q3 2024 non-GAAP operating expenses to be in the range of $70 to $76 million. We expect our Q3 gap and non-gap interest, and other expense to be in the range of approximately $0 to $2 million each. We expect our Q3 GAAP and non-GAAP diluted share count to be approximately $84.1 million.

Steven G. Litchfield: Gross margin continues to be relatively stable with expected range being driven by the combination of near-term product, customer, and in-market mix.

Steven G. Litchfield: We expect Q3 2024 GAAP operating expenses to be in the range of $102 million to $108 million.

Steven G. Litchfield: We expect Q3 2024 non-GAAP operating expenses to be in the range of $70 to $76 million.

Steven G. Litchfield: We expect our Q3 gap and non-gap interest and other expense to be in the range of approximately $0 to $2 million each.

Steven G. Litchfield: We expect our Q3 gap and non-gap diluted share count to be approximately $84.1 million.

Steven G. Litchfield: Based on the slow recovery and the pushouts in certain end markets, we have started the process to align our cost structure with the current environment. We expect to realize meaningful savings and operating expenditures, and we'll begin to see this benefit in Q3. We feel confident that we can achieve an approximately 20 to 25 percent reduction in operating expenses for fiscal 2025 over fiscal 2024 while still accelerating our top-line growth in the coming years. The estimated reduction includes the finalization of several key product initiatives for which our investment is now complete. MaxLinear has a solid track record of managing our business through downturns with strong physical discipline and focused spending.

Steven G. Litchfield: Based on the slow recovery and the pushouts in certain end markets, we have started the process to align our cost structure with the current environment.

Steven G. Litchfield: We expect to realize meaningful savings in operating expenditures and will begin to see this benefit in Q3. We feel confident that we can achieve an approximately 20-25% reduction in operating expenses for FY20-25 over FY20-24.

Steven G. Litchfield: while still accelerating our top-line growth in the coming years.

Steven G. Litchfield: The estimated reduction includes the finalization of several key product initiatives for which our investment is now complete.

Steven G. Litchfield: MaxLinear has a solid track record of managing our business through downturns with strong physical discipline and focused spending.

Steven G. Litchfield: In closing, we continue to navigate a dynamic environment, but we are laying important groundwork and strategic applications that will drive our future growth. Our solid product innovation and execution and optical high-speed interconnects, wireless infrastructure, storage, Ethernet, Wi-Fi, and fiber broadband access gateways are positioning us well across a number of exciting markets. As always, we will continue our strong focus on operational efficiency, fiscal discipline, and shareholder value as we optimize for today and plan for an exciting future. With that, I'd like to open up the call to questions. Alicia?

Steven G. Litchfield: In closing, we continue to navigate a dynamic environment, but we are laying important groundwork and strategic applications that will drive our future growth.

Steven G. Litchfield: Our solid product innovation and execution in optical high-speed interconnects, wireless infrastructure, storage, Ethernet, Wi-Fi, and fiber broadband access gateways are positioning us well across a number of exciting markets.

Steven G. Litchfield: As always, we will continue our strong focus on operational efficiency, fiscal discipline, and shareholder value as we optimize for today and plan for an exciting future.

Steven G. Litchfield: With that, I'd like to open up the call for questions. Alisha?

Alicia: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue.

Alicia: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.

Alicia: One moment, please, while we poll for questions.

Speaker Change: Thank you. Our first question comes from the line of Tore Svanberg with Stiefel. Please proceed with your question.

Alicia: Yes, thank you. For my first question, Kishore, could you elaborate a little bit more on what you said about not being able to do telecom, and how much are we talking about here? Had the restrictions not been in place, how much revenue could you have... Hey, Tori, that's exactly right. You know, later in the quarter, we got the revocation of a government license to ship some low-technology industrial products and some high-technology products as well.

Tore Egil Svanberg: Yes, thank you. For my first question,

Tore Egil Svanberg: Kishore, could you elaborate a little bit more on what you said about not being able to make shipments in telecom and how much, you know, are we talking about here, sort of the, what, you know, have the restrictions not been in place, how much revenue could you have shipped? Thank you. Thank you.

Kishore Seendripu: Hey Tori, that's exactly right you know towards later in the quarter we got revocation of

Speaker Change: government license to ship some low technology industrial products and some high technology products as well.

Alicia: We were very surprised by it, so that prevented us from shipping revenues in the quarter. You know, with regard to how much it impacted us, Steve, would you want to join? Yeah, Tori. I mean, I don't have a hard number.

Speaker Change: We were very surprised for it, so that prevented us from shipping.

Speaker Change: Revenues in the quarter. You know, with regard to how much it impacted us, Steve, would you want to join?

Steven G. Litchfield: But it's probably in the $5-8 million range for last quarter or Q2 results, and it will have an impact in the second half of the year, probably on the order of $10-15 million. And as far as the guidance by SEGWED, so I understand why broadband is still... I'm a little bit surprised with your comment about infrastructure being flattened down, especially given your momentum in PEMP for DSP.

Steven G. Litchfield: Yeah, Tore, I mean, I don't have a hard number, but it's probably in the five to eight million dollar range for last quarter or Q2 results, and it will have an impact in the second half of the year, probably on the order of 10 to 15 million.

Speaker Change: Very good. And as far as the guidance by segments...

Speaker Change: So I understand why broadband is still sort of flat to down, but I'm a little bit surprised with your comment about infrastructure being flat to down, especially given your momentum in PAM-4DSP. So does that mean that Q4 will actually be a very strong quarter for...

Kishore Seendripu: Does that mean that Q4 will actually be a very strong quarter for... So actually, Q2 was on track on the optical broadband side. The weakness was on the wireless infrastructure, which, you know, you're seeing the blending of the two playing out.

Speaker Change: for DSP-RAMP or is there anything else going on in that category?

Speaker Change: So actually Q2 was on track on the optical broadband side.

Speaker Change: The weakness was on the wireless infrastructure, which, you know, so that, so you're seeing the blending of the two playing out. But actually, optical is doing very well, and we're on track, I think we have said categorically that we expect that we're on track, and we'll hit the high end or exceed that.

Kishore Seendripu: But actually, optical is doing very well, and we're on track. I think we have said categorically that we expect that we're on track and we'll hit the high end or exceed that. Obviously, there are one or two wild cards in terms of the qualification process.

Speaker Change: Obviously, there are one or two wild cards in terms of the qualification process, if that were to play out.

Kishore Seendripu: It's a wholly different ramp story as well, so we're being cautious even while we're confident that we'll hit the high end or exceed the high end of the range we set at the beginning of the year. So we're on track on optical, so I would not look at it as the overall story infrastructure shows a weakness. It's really to do with wireless infrastructure. And again, for Q3, is that the same comment?

Speaker Change: It's a wholly different ramp story as well. So we're being cautious even while we're being confident that we'll hit the high end or exceed the high end of the range we set at the beginning of the year. So we're on track on optical. So I wouldn't, I would not.

Speaker Change: Look at it as the story why the infrastructure shows a weakness, it's really to do with wireless infrastructure.

Speaker Change: And again, for Q3, is that the same comment then? Wireless being weak, but opticals actually growing?

Kishore Seendripu: Wireless being weak, but opticals actually grow. That's correct. Great. I'll go back in line.

Speaker Change: That's correct.

Speaker Change: Okay, great. I'll go back in line. Thank you.

Speaker Change: Thank you.

Speaker Change: Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna International Group. Please proceed with your question.

Chris: Hey guys, thanks for my question. I guess you're saying the inventory drain is going to stop in the back half. Is that across all segments? And then can we talk about end demand? How do you see it? Do we see a pickup into 2025? Or, you know, and is there something beyond that?

Christopher Adam Jackson Rolland: Hey guys, thanks for my question. So I'd just like to understand, I guess you're saying the inventory drain is going to stop in the back half.

Speaker Change: Is that across all segments? And then, can we talk about end demand? How you see it? Do we see a pickup into 25?

Chris: Have we seen some share shifts here, or anything structural, you know, as they move to a competitor or something like that? Just as we start modeling 2025, it's getting hard to think about the return on revenue, so any of these moving parts would be great. Sure, Chris. Maybe I'll start.

Speaker Change: And is there something beyond that? Have we seen some share shifts here or anything structural?

Speaker Change: You know, as they move to a competitor or something like that, just as we start modeling 2025, it's getting hard to think about the return of revenue. So, you know, any of these moving parts would be great. Thanks.

Steven G. Litchfield: Kishore may have something to add, but so I guess I would first say, I mean, we've been struggling to see the inventory dissipate completely, right? And so some of that is still out there. We do feel like we're going to, I mean, we've seen good signs of improvement throughout the year.

Speaker Change: Sure, Chris, maybe I'll start. Kishore may have something to add.

Speaker Change: So I guess I would first say, I mean, we've been struggling to see the inventory dissipate completely, right? And so some of that is still out there. We do feel like we're going to, I mean, we've seen good signs of improvement throughout the year. Bookings have continued to improve and we've seen.

Steven G. Litchfield: Bookings have continued to improve, and we've seen inventories, channel inventories, particularly move down. So we're seeing good progress, but definitely not as much as we had thought that we would see at this point in the year. But do I expect it to continue to improve? The answer is yes. Broadband connectivity and industrial, I would say, are definitely weighing more. There's more of that inventory. There's more pressure there.

Speaker Change: inventories, channel inventories particularly moved down.

Speaker Change: You know, definitely not as much as we had thought that we would see at this point in the year.

Speaker Change: But do I expect it to continue to improve? The answer is yes. Broadband, connectivity, industrial, I would say are definitely weighing more. There's more of that inventory, there's more pressure there. Industrial kind of has this dynamic of China.

Steven G. Litchfield: Industrial kind of has this dynamic of China that continues to put pressure on as well. And then infrastructure, I mean, we've got a lot of good things going. We definitely have telecom and CapEx spend that weighs a bit, as Kishore just spoke about Q2 and Q3 in the previous question. But I do see improvements in the coming quarters for sure. So I just would like to add that, you know, I would chalk it up to three elements, the what I call

Speaker Change: that continues to pressure as well. And then infrastructure, I mean, we got a lot of good things going. We definitely have telecom, CapEx spend that, you know, weighs a bit, as Kishore just spoke to about Q2 and Q3 in the previous question.

Speaker Change: But I do see improvements, you know, in the coming quarters, for sure. So, I just would like to add that, you know, I would chalk it up to three elements. The... what I call...

Kishore Seendripu: The inventory situation is persisting. What that means is that while our sell-through is higher than our sell-in, we are distributing at a lower speed than we had hoped for. Now, that itself is being impeded by, I would say, the cap on expenditure that the service providers are really conjecturing about. And they're also trying to make a decision because while this is playing out, there have been technology transitions and operator choice. For example, DOCSIS 3.1 to UltraDOCSIS and DOCSIS 4.0.

Speaker Change: The inventory situation is persisting. What that means is that while our sell-through is higher than our sell-in,

Speaker Change: But we are distributing at a lower speed than we had hoped for.

Speaker Change: Now, that itself is being impeded by...

Speaker Change: I would say that the CAPEX spend that the service providers are really conjecturing and they're also trying to make a decision because while this is playing out there have been technology transitions and operator choice for example DOCSIS 3.1 to UltraDOCSIS and DOCSIS 4.0

Kishore Seendripu: And then on the fiber side, the switchover from gigabit PONs to 2.5 gigabit and 10 GxGx PONs. So, and so that classic dalliance between choosing which way to go is also creating some freeze behavior. So, I think we're confronting all of that. Having said that, there are some green shoots in terms of us getting orders, and some positive commentary coming from our OEMs that the inventory is depleting. Unfortunately, not at the rate for us. So, how about the positive things that are happening?

Speaker Change: And then on the fiber side, the switchover from gigabit PONs to 2.5 gigabit and 10 GxGs PONs.

Speaker Change: So, and so that classic dalliance between choosing which way to go is also creating some freeze behavior, so I think we're confronting all of that.

Speaker Change: Having said that, there are some green shoots in terms of beginning orders.

Speaker Change: Some positive commentary coming from our OEMs that the inventory is depleting, unfortunately not at the rate for us.

Kishore Seendripu: So, does this sum up to a dissipated situation, inventory dissipating away by the end of the year, and fast-tab recovery starts? I think logic would indicate that. Now, you know, given what we just guided for and what we went through, I would definitely say 2025 recovery. On the pawn side, we are seeing strong momentum on the tier one player that we have already acquired. They seem to be growing and spending at the right level. So we just need to acquire more share on the pawn side, which we are actually gaining. Okay. Great.

Speaker Change: So, how about the positive things that are happening? So, does this sum up to a dissipated situation, inventory dissipating away by the end of the year and fast-track recovery starts? I think logic would indicate that.

Speaker Change: Now, you know, given what we just guided for and what we went through, I would say that

Speaker Change: Definitely 2025 recovery on the pawn side, we are seeing strong momentum on the Tier 1 player that we already acquired. They seem to be growing and spending at the right level, so we just need to acquire more share on the pawn side, which we are actually gaining share. Okay.

Chris: Maybe as a follow-up, just on those booking comments that you had, is this improving, you know, month over month, quarter over quarter? And what does it tell you about, you know, the second half and 25, like, for example, what is your backlog coverage, you know, into the back half or even? You know, on that, let's say on that Q3 number, you know, how strong is the backlog coverage for your various... So yeah, Chris, I'll take that.

Speaker Change: Great. Maybe as a follow-up, just on that booking commentary that you had, is this improving month over month, quarter over quarter?

Speaker Change: And what does it tell you about, you know, second half and 25? Like, for example, you know, what is your backlog coverage, you know, into the back half or even?

Speaker Change: Let's say on that Q3 number, how strong is the backlog coverage for your various businesses?

Steven G. Litchfield: I mean, in our prepared remarks, we talked about how we've seen four quarters of improvements in bookings. We are seeing quarter over quarter improvements at points during the quarter. We don't break out our turns as we normally do, but it's still not back to the levels that we would expect it to be at.

Speaker Change: So yeah, Chris, I'll take that. I mean, we...

Chris: In our prepared remarks we talked about, we've seen four quarters of improvements in bookings, we are seeing

Chris: kind of quarter-over-quarter improvements, you know, at points during the quarter.

Speaker Change: We don't break out our turns that we normally do, but it's still not back to the levels that we would expect it to be at.

Steven G. Litchfield: But are we seeing improvements? Yes, I'll echo what Kishore shared earlier. We've definitely seen inventories come down, but CapEx is definitely still weighing on the overall demand of the market. Okay, thanks.

Speaker Change: But are we seeing improvements? Yes. I'll echo what Kishore shared earlier. We've definitely seen inventories come down. But CapEx is definitely still weighing on the overall demand of the market.

Speaker Change: Okay, thanks.

Speaker Change: Thank you. Our next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with your question.

Quinn: Hey guys, thanks for taking my question. I guess I want to just kind of follow up on Chris's question. You know, this has sort of been six quarters in a row now where revenue has been coming down. I think many others have started to see what you're talking about, indications from OEMs that inventory is being digested. Bookings are starting to increase, yet you guys keep guiding revenue, http://TheBusinessProfessor.com. I can't help but think that there's got to be some... ShareLoss, especially in broadband and connectivity.

Nathaniel Quinn Bolton: Hey guys, thanks for taking my question. I guess I want to just kind of follow up on Chris's question.

Nathaniel Quinn Bolton: You know, this has sort of been six quarters in a row now where revenue has been coming down, I think, many other semiconductor companies.

Speaker Change: have started to see, you know, what you're talking about, indications from OEMs that inventory is being digested, bookings starting to increase, yet you guys keep guiding revenue in the future quarters down, and I think almost every one of your peers is starting to see a revenue recovery.

Speaker Change: I can't help but think that there's got to be some...

Quinn: And, you know, just wondering if you could help us reconcile, you know, the improvements in booking, you know, getting through the inventory digestion process and why revenue keeps going down, more legacy markets. There are two elements to this, right?

Speaker Change: Share loss, especially in broadband and connectivity, and, you know, just wondering if you could help us reconcile, you know, the improvements in bookings, the, you know, getting through the inventory digestion, and why revenue keeps going down in those, you know, more legacy markets. Thanks.

Kishore Seendripu: You know, there are the legacy markets, DOCSIS 3.1, and the subscribers. They have been facing subscriber losses. They have been shipping refurbishment under a lesser capex model. And there is what I call an implicit share situation due to long-term agreements that operators have signed with our competition. So technically, the amount of shipments in the share shift is potentially possible. However, from a design-in perspective and the future new product perspective, I don't think we can yet say that there have been share losses. Having said that, on the pawn side, we have gained new design wins, so that could technically..., signal that we are winning design wins.

Speaker Change: You know, there are the legacy markets, DOCSIS 3.1, and the subscriber...

Speaker Change: They have been facing subscriber losses. They have been shipping refurbishment under a lesser capex model and there is what I call an implicit share situation due to long-term agreements that operators have signed with our competition.

Speaker Change: So, technically, the amount of shipments is a share shift is potentially possible. However, from a design in perspective and the future new product perspective, I don't think we can yet say that there have been share losses.

Speaker Change: Having said that, on the pawn side, we have gained new design wins, so that could technically

Kishore Seendripu: I think here the problems you are citing are more a commentary on the state of the cable subscriber market and cable spend, which has been the dominant source of our broadband revenues. And so I think that is the dynamic we are talking about. Once again, I want to reiterate that as the transition happens, the new technologies, when they happen, the ASP content increases, the BOM, and overall revenue, which we can get back to, probably are not impacted as much, even if the share, 50 plus minus 10 percent has always been the theme.

Speaker Change: I think here the problems you are citing to are more a commentary over the state of the cable subscriber market and the cable spend which has been the dominant source of our broadband revenues.

Speaker Change: And so I think that is the dynamic we are talking about.

Speaker Change: Once again, I want to reiterate that, as the transition happens, the new technologies, when they happen, the ASP content increases, the BOM, and overall revenue to which we can get back to probably is not impacted as much, even if the share shifts.

Speaker Change: 50 plus minus 10 percent, that's always been the theme. On the pawn market side is where we have a large opportunity to grow, both in content and market wins, I think that's where the broadband growth will come from.

Kishore Seendripu: On the pawn market side, we have a large opportunity to grow, both in content and market wins. I think that's where the broadband growth will come from. I don't look at it as this is the market we are in, and we are constrained to the same market we are in. No, absolutely not.

Speaker Change: So, I don't look at it as, this is the market we are in, and then we are sort of constrained to the same market we are in. No, absolutely not. All the investments are about the future.

Kishore Seendripu: All investments are about the future. I guess I was just, obviously broadband's down, but connectivity is... $10 million last quarter, $13 million this quarter. You guys, I think in 21, did over $150 million in that. It's hard to think that there isn't share loss there, you know. You've talked about just the Ethernet portion of connectivity could get to 100 million run rate, which tells me that it doesn't feel like there's a lot of Wi-Fi business going on here.

Speaker Change: Yeah, I guess I was just, obviously broadband's down, but connectivity is, you know, there was $10 million last quarter, $13 million this quarter.

Speaker Change: You guys I think in 21 did over 150 million in that business. It's it's you know hard to think that that there isn't share loss there You know you've talked about just the Ethernet portion of connectivity could get to 100 million run rate which tells me

Speaker Change: It doesn't feel like there's a lot of Wi-Fi business going on here. Can you talk about the Wi-Fi business and what you see on that front?

Kishore Seendripu: Can you talk about the Wi-Fi business and what you see in that? So, firstly, I want to, you know, give a little bit of color on that, right? The dynamics of Wi-Fi are exactly the same as the dynamics of the cable business. They've been attached at the hip.

Speaker Change: So, firstly, I want to give a little bit of color on that, right? The dynamics of Wi-Fi are exactly the same on the dynamics on the cable business. They've been attached at the hip. So when we did $150 million, the broadband business, predominantly cable, was about $700 million or $650 million, somewhere there. Go.

Kishore Seendripu: So, when we did $150 million, the broadband business, predominantly cable, was about $700 million or $650 million. Yes, somewhere in there. So, you can run the math. At the percentage of the attached rate, probably the numbers don't change much. If you just take the percentage of Wi-Fi dollars versus revenue, Now, if you look at the Ethernet guidance, it was specifically about Ethernet or what it will get to. But, you know, we have not commented on anything about how much Wi-Fi can get.

Speaker Change: You can run the math at the percentage of the attached rate, probably the numbers don't change much. If you just take the percentage of Wi-Fi dollars versus the revenues.

Speaker Change: Now, if you look at the Ethernet guidance, it was specifically about Ethernet and what Ethernet will get to.

Speaker Change: But, you know, we have not commented anything about how much Wi-Fi I can get to.

Kishore Seendripu: Having said that, I will say that does Wi-Fi have the potential to get back to a $100 million run rate in broadband? Absolutely. But that requires a certain recovery in the cable business. That alone would be sufficient augmented by.

Speaker Change: Having said that, I will say that does Wi-Fi have a potential to get back to a hundred million dollar run rate in the broadband? Absolutely. But that recovers a certain recovery in the cable business that alone would be sufficient augmented by

Kishore Seendripu: There are already existing wins in fiber, so you're waiting for the market to recover. So this is not about share loss in terms of Wi-Fi. It's what we attach to on our broadband platform. Got it.

Speaker Change: There are already existing wins in fiber.

Speaker Change: So you're waiting for the market to recover. So this is not about share loss in terms of Wi-Fi, it's what we attach to on our broadband platforms.

Steven G. Litchfield: And then just a quick one for Steve, you mentioned taking options and actions to reduce OPEX heading into 2025. And you talked about, I think, an annual cost would then average somewhere in the 55 to 60 million level. Is that right? If that's the right sort of average, does it sort of start higher in Q1 and trend to that level or below in the second half of the year, just any sort of shape to that OPEX reduction? Yeah, no problem, Quinn.

Speaker Change: Got it. And then just a quick one for Steve. You mentioned, you know, taking options, actions to reduce OpEx.

Speaker Change: Heading into 2025, and you talked about, I think, an annual...

Speaker Change: Decrease in non-GAAP OPEX of 20-25%. If I'm doing my math right, it sounds like OPEX for the year would then average somewhere in the $55-60 million level. Is that right?

Speaker Change: If that's the right sort of average, does it sort of start higher in Q1 and trend to that level or below in the second half of the year, just any sort of shape to that OPEX reduction? Thank you very much.

Steven G. Litchfield: So I think your math is sound. I think that is exactly the way we're thinking about it. I'm not going to get into granularity on quarter by quarter next year. But I mean, you're absolutely right.

Speaker Change: Yeah, no problem, Quinn. So, your math is sound. I think that is exactly the way we're thinking about it. I'm not going to get into granularity on quarter by quarter next year, but, I mean, you're absolutely right. And it's not like it's, it shouldn't vary that much, let's put it that way.

Steven G. Litchfield: And it's not like it's, It shouldn't vary that much, let's put it that way. Got it. Thank you. Thanks. Thanks for the question. Just to follow up Quinn's question, Steve, just to make sure I have it right, I know you don't want to do operations on a linear basis.

Nathaniel Quinn Bolton: Got it. Thank you.

Gwen: Thanks, Gwen.

Speaker Change: Thank you. Our next question comes from the line of Ross Seymour with Deutsche Bank. Please proceed with your question.

Ross Seymour: Hi guys, thanks for asking the question. Just to follow up Quinn's question, Steve, just to make sure I have it right, I know you don't want to do OpEx on a linear basis, but is that 20-25%? That's the full year on the full year, that's not kind of an exit rate to exit rate, just to be clear? Correct.

Steven G. Litchfield: But is that 20 to 25%? That's the full year on the full year, to exit rate, just to be clear. Correct. Correct. OK. At one point, you guys talked about the ability to grow for the rest of the year sequentially. Obviously, the Huawei or whatever the geopolitical issues are is one aspect that hurts that. Do you think that you can now grow in the fourth quarter sequentially? And, you know, if you're not willing to comment on that, just what would be the puts and the takes as you look forward to the fourth quarter, you know, cyclical stuff? Yeah, sure, Ross.

Ross Seymour: Correct.

Speaker Change: At one point you guys talked about the ability to grow for the rest of the year sequentially. Obviously the Huawei or whatever the geopolitical issues are is one aspect that hurts that.

Speaker Change: Do you think that you can now grow in the fourth quarter sequentially? And, you know, if you're not willing to comment on that, just what would be the puts and the takes as you look forward to the fourth quarter? You know, cyclical stuff versus company specific, design wins, whatever you guys can go into would be helpful.

Ross: Yeah, I'm not going to guide Q4. But I mean, clearly, it's kind of been frustrating. I feel like it's been a bottoming process. But I think we're making really good progress. So I actually do think we'll see some improvements. I'm not going to give you the exact time and date.

Speaker Change: Yeah, sure, Ross. Yeah, I'm not going to guide Q4. But, I mean, clearly it's kind of been frustrating. I feel like it's been a bottoming process. I think we're making really good progress. So I actually do think we'll see some improvements. I'm not going to give you the exact time and date. We've not been super good at projecting that.

Steven G. Litchfield: We've not been super good at projecting that, so I'm not going to start now. But I mean, as far as the indicators go, we've talked about bookings, and talked about sell-through in general being very good. So those are, of course, good indicators. We talked about them in the past.

Speaker Change: I'm not going to start now, but I mean, as far as the indicators, I mean, we've talked about bookings, talked about sell-through in general has been very good, so those are, of course, good indicators.

Steven G. Litchfield: We continue to see this. We see customers come in kind of frantically ordering inside of our specified lead time. So that's something that is, of course, a good indicator. Expedites, things like that.

Speaker Change: talked in the past, we continue to see this, we see customers come in kind of

Speaker Change: frantically ordering inside of our, you know, specified lead time, so that's something that is, of course, a good indicator.

Steven G. Litchfield: I mean, you can definitely feel across the industry, as I think somebody else previously even commented on, that the inventory is definitely clearing. And demand, I mean, as CapEx budgets kind of ease a little bit, you're starting to see some of that spending flow. On the broadband side, you still have some of this federal subsidy money that some of these folks are waiting on. But we're starting to hear from customers that they're starting to invest in them.

Speaker Change: [inaudible]

Speaker Change: Kind of ease a little bit. You're starting to see some of that spending flow on the broadband side you know, you still have some of this federal subsidy money that some of these folks are waiting on but But we're starting to hear from the customers that you know, they're starting to invest that money

Steven G. Litchfield: I guess the last question on the gross margin side of things, you guys have kept it very stable for a very long time, impressively so given the revenue volatility, but it finally seems like it's cracking a bit at the midpoint of your guidance. Is that solely related to just fixed cost coverage, given the revenues, or is there... price cut action just because you guys really want to clear out the inventory? What's the reason for that gross margin? Sure, sure. The midpoint is 58.5.

Speaker Change: And I guess the last question, on the gross margin side of things, you guys have kept it very stable very long, impressively so given the revenue volatility, but it finally seems like it's cracking a bit at the midpoint of your guidance.

Speaker Change: Is that solely related to just fixed cost coverage given the revenues? Is there, you know, price cut action just because you guys really want to clear out the inventory? What's the reason that the gross margin is down?

Steven G. Litchfield: Yeah, so it is down a little bit, and you're absolutely right, it's mostly fixed costs. I mean, revenues are down quite a bit, and it's having an impact. I don't think, I mean, naturally, there are certain markets that are more prone to some of this stuff. You know, we talked about China earlier in the call. I mean, some of those markets can be more competitive, but I'd say, across the board, it hasn't changed that much. And I don't think our long-term outlook has changed at all.

Speaker Change: You know, basically a couple of points sequentially.

Speaker Change: sure sure uh the midpoint is 58.5 um yeah so it is down a little bit and you're absolutely right it's mostly fixed house i mean the revenues are down quite a bit and it's having an impact i don't think

Speaker Change: I mean, naturally, I mean, there's certain markets that are more prone to some of this stuff. You know, we talked about China earlier in the call. I mean, some of those markets can be more competitive, but I'd say across the board, it hasn't changed that much. And I don't think our long-term outlook has changed at all.

Speaker Change: So, and keep in mind, the mix, as infrastructure continues to grow, you're going to see, you know, that's a healthy, positive contribution to gross margins.

Steven G. Litchfield: So, and keep in mind the mix, as infrastructure continues to grow, you're going to see, you know, that's a healthy, positive contribution to gross markets. I would say the fixed cost is the biggest contributor to the center point, and the volatility has always been there in the mix. Plus, minus 2% is what we would always say, but we've always done a good job on that. The pricing pressure is no different than it used to be; we have combinations of great markets, and we have some that are a little bit price competitive. So you're right, fixed cost coverage for us is the biggest one, in my opinion. Hey, yeah, I did that.

Speaker Change: I would say the fixed cost is the biggest contributor to the center point.

Speaker Change: And the volatility has always been there in the mix, plus-minus 2% is what we would always say, but we've always done a good job on that.

Speaker Change: But the pricing pressure is no different than it used to be. We have combinations of great...

Speaker Change: And we have some that are a little bit price competitive. So you're right, it's fixed cost coverage, Ross, is the biggest one in my opinion.

Speaker Change: Got it. Thanks, guys.

Speaker Change: Thank you. Our next question comes from the line of Ananda Baruah with Loop Capital Markets. Please proceed with your question.

Steven G. Litchfield: Thanks for taking the question. I just, really, I guess this one for me... Yeah, I guess that's the problem. That's it for me.

Ananda Prosad Baruah: Hey, yeah, good afternoon, guys, and thanks for taking the question. I just, just, really, I guess this one for me...

Ananda Prosad Baruah: How do you see the linearity through the quarter? Yeah, I guess just across the various disciplines.

Kishore Seendripu: I think, you know, it's no different than what we got in the last quarter. I remember distinctly Steve talking about it being heavily back and loaded because we're getting into this terms business, the urgency increases as you head towards it, pushing customers, prodding them. You know, entering the quarter, we had no idea of what I would call two-thirds bookings. It's improved, but this terms business is really, really, that's what it's become right now. It's blocking and tackling.

Speaker Change: And that's it for me.

Speaker Change: I think, you know, it's no different than what we had in the last quarter. I remember distinctly Steve talking about...

Steven G. Litchfield: It's heavily back-and-loaded because we're getting into this terms business. The urgency increases as you head towards it, pushing customers, prodding them.

Speaker Change: You know, entering the quarter, we have no way of what I would call two-thirds bookings. It's improved, but this terms business is really, really—that's what it's become right now. It's blocking and tackling. So I wouldn't say it's linear. I would say—

Kishore Seendripu: So I wouldn't say it's linear; I would say it takes a step up in the second half of the quarter as the sales guys and the customers are grappling with the situation. I got it, Kishore. And this is a case where we're just needing clothes and straws and mud in the neighborhood.

Speaker Change: It takes a step up in the second half of the quarter as the sales guys and the customers are grappling with the situation.

Speaker Change: I got it, Kishore. And this is a case of it just being close and strong as it might have been able to.

Kishore Seendripu: Could you repeat that question, please? Yeah, so is it really what, what, what happened? The Bulletproof Executive 2013,.................. Yeah, I mean, as Kishore stated, it was kind of back and low to begin with. And so things pushed out into the following quarter. I mean, that's kind of and some disappeared, right? So, you know, if it had pushed in the next quarter, then we should be a little bit more energized about this quarter on the front. But that is not the case because some revenue disappeared, namely the Chinese revenue that we spoke about. That's PeopleHealth.

Kishore Seendripu: Could you repeat that question, please?

Speaker Change: Yeah, so is it really, what happened towards the end of the quarter, has it been closed at the pace that you guys thought it could?

Speaker Change: The software closed.

Speaker Change: Yeah, I mean, as Kishore stated, I mean, it was, it was kind of back and low to begin with and so things pushed out into the following quarter. I mean, that's kind of...

Speaker Change: And some disappeared, right? So you know, if it had pushed in the next quarter, then we should be a little bit more energized about this quarter on the front, but that is not the case because some revenue disappeared, namely the China revenue that we spoke about.

Speaker Change: Yes, got it. That's super helpful. Thanks a lot.

Speaker Change: Thank you. Our next question comes from the line of Karl Ackerman with BNP Paribas. Please proceed with your question.

Kishore Seendripu: Yes, thank you, Domeniv2. First off, could you help frame the size of the opportunity? from the second tier one U.S. CARE, from what sounds like your single chip integrated PON, fiber PON, and 10 gigabit processor gateway. And I guess if you address that question, what would dictate that ramp in 2025 versus 2020? So, very, very good question, you know, you can call it, if you look at 5 or 4 on the main players, only two players in North America on the, what you would call, tier 1 OEMs. They are similarly sized on their gateway rollouts. Right, so... What really matters is whether you are winning at these tier ones or not.

Karl Ackerman: First off, could you help frame the size of the opportunity

Karl Ackerman: from the second tier one U.S. carrier, from what sounds like your single chip integrated PON, fiber PON and 10 gig processor gateway. And I guess if you address that question, what would dictate that ramp in 2025 versus 2026?

Speaker Change: So, very very good question. You know, you can call, you know, even if you look at 5 or 4, the main players are only two players in North America on the, what you would call, Tier 1 OEMs.

Speaker Change: They are similarly sized on their gateway rollouts, right, so...

Speaker Change: So let's assume that, you know, they don't turn all their platforms into one kind. Half of their volume splits into another kind. That is the latest offering we have from ours. Let's assume, you know, we get 50% share of that. That's how these operators go.

Speaker Change: And it could be a $40 million per year opportunity on the gateway side, right? But mind you, we're already shipping them revenue, just ramping.

Speaker Change: on the ONT side, which is just basically a fiber termination, the curb or at the home. And that's a high single-digit sort of revenue opportunity. So I would say that is the size of the opportunity.

Speaker Change #100: and what would dictate the pace of that design into the gateways?

Speaker Change #101: It really depends on their rollout plans. So far, they've been hitting their milestones on the RFPs and things like that. They're not delayed. So, are there considerations on CapEx sometime at the end of next year? They're always there. So, I would say it's...

Speaker Change #101: 25, 26 time range and...

Speaker Change #102: What really matters is, are you winning at these Tier 1s or not?

Kishore Seendripu: You know, in the business we are in, predicting the exact timing of a ramp has been a hazard. And that's why you build up product cycles to be a scalable company, right? So that you protect each other.

Speaker Change #103: In the business we are on, predicting the exact timing of a ramp has been a hazard. And that's why you build up product cycles to be a scaled company, right? So that you cover each other. So we call it those gaps that are...

Kishore Seendripu: So we call them those gaps that are now exposed because of the big supply chain overhang that we have faced in the last three years. Yeah, very helpful. Thank you.

Speaker Change #103: Now exposed because of the big supply chain overhang that we have faced in the last three years.

Steven G. Litchfield: I guess for my follow-up, if I may, just to go back on CAPEX. You are taking a meaningful cut to CAPEX, but are these R&D programs being completed primarily on broadband modems, and, I guess more importantly, how quickly could you turn that spending back on in the event that a recovery is faster than you thought? Firstly, our spending plans are not, okay, you know, I'm a household man. Obviously, my spending plans are based on my income. There is some guardian of behavior on my end. And on the other side, you do have to invest in your children for the future, right?

Speaker Change #104: Yep, very helpful. Thank you. I guess for my follow-up, if I may.

Speaker Change #105: Just to go back on CapEx, you are taking a meaningful cut to CapEx, but are these R&D programs being completed primarily on broadband modems? And I guess more importantly, how quickly could you turn that spending back on in the event a recovery is faster than you anticipate? Thank you.

Speaker Change #106: Okay, firstly, our spending plans are not, okay, you know...

Speaker Change #107: You know, you know, I'm a household man, you know, obviously my spending plans are based on my income there is some

Speaker Change #107: There is some guardian of behavior on my end. And the other side is you do have to invest in your children for the future, right? And that's exactly how we think about the problem.

Kishore Seendripu: And that's exactly how we think about the problem. So all the roadmap items that we did a heavy spend to produce the next generation of products that were motivated by our customers are nearing completion. So there are a few other product lines, like an optical data center and certain infrastructure areas, or Wi-Fi 8, for example, that we have to continue to invest in because they come at a faster pace than, let's say, a broadband fiber situation or a cable DOCSIS situation. So I think we're entering a phase of reduced R&D spend, which we knew was going to happen, and so accordingly, the spending goes down.

Speaker Change #108: So, all the roadmap items that we did a heavy spend to produce the next generation of products that were motivated by our customers are nearing completion.

Speaker Change #108: So, there are a few other product lines like an optical data center and certain infrastructure areas or a Wi-Fi 8, for example, that we have to continue to invest.

Speaker Change #108: because they come at a faster pace than, let's say, a broadband fiber situation or a cable dock situation. So, I think we're entering a phase of reduced R&D spend.

Speaker Change #108: which we knew always was going to happen, and so accordingly the spending goes down.

Kishore Seendripu: Tempered by the fact that customers have delayed their launch plans... It also signals to us that we don't have to be exuberant in our own spending for catching their next generation rollout beyond the next generation that we already have completed right now. Remember, there's a long cycle market, the last five to seven years, and the cycles on the investments are complete, have not started yet. They're just threatening to start in the 25, 26 times. Very clear, thank you. Thank you.

Speaker Change #108: tempered by the fact that the customers have delayed their launch plans.

Speaker Change #108: It also signals to us that we don't have to be exuberant in our own spending for catching their next generation rollout beyond the next generation that we already have completed right now.

Speaker Change #108: Remember, there's a long cycle market, the last five to seven years, and the cycles on the investments are complete, have not started yet. They're just threatening to start in the 25, 26 time.

Speaker Change #110: Very clear, thank you.

David Neil Williams: Our next question comes from the line of David Williams with the Benchmark Company. Please proceed with your question. Hey, good afternoon, thanks for taking my question. I guess, Steve, the first thing is just thinking about the visibility of that inventory that's in the channel. I know you've been kind of struggling through understanding where that inventory is, but I guess my...

Speaker Change #110: Thank you. Our next question comes from the line of David Williams with The Benchmark Company. Please proceed with your question.

Kishore Seendripu: I would say that the, Steve, you can provide more color. I think the magnitude of the inventory is kind of known, right, because we ship the product and we track how much our OEMs are shipping. What we cannot quantify is the behavior of the operators in their actions, and that's really always been very opaque, even in the best of times.

Kishore Seendripu: So it's not about the size of the inventory, so it's how they are consuming from our OEMs. And then they have their own warehouses and their subscriber situation. And then add on to that, in the cable case, the refurbishment. Okay, so there are multiple dynamics, so... And at the end of it, we know the sell-through is slower than what we had anticipated.

David Neil Williams: Hey, good afternoon. Thanks for taking my question. I guess, Steve, the first thing is just thinking about the visibility of that inventory that's in the channel. I know you've been kind of struggling through understanding where that inventory is, but I guess my bigger question is do you think that this is just that the inventory is bleeding down more slowly?

Speaker Change #110: Or do you think that maybe you just didn't have a good handle on the magnitude of the inventory that was in the channel when we kind of started going through this inventory digestion?

Speaker Change #109: I would say that the... Steve, you can provide more color. I think the magnitude of the inventory is kind of known, right? Because we ship the product and we are tracking how much our OEMs are shipping.

Speaker Change #112: What we cannot quantify is the behavior of the operators in their actions. And that's really always been a very opaque, even in the best of times. So it's not about the size of the inventory. So it's the how they are consuming from our OEMs.

Speaker Change #113: And then they have their own bait houses and their subscriber situations and then add on to that in the cable case the refurbishments.

Speaker Change #113: Okay, so there are multiple dynamics, so...

Speaker Change #113: At the end of it, we know the sell-through is slower than what we had anticipated, but the sell-through is higher than what we are selling in, and that's running at a pace where that says that it's going to take longer.

Kishore Seendripu: But the sell-through is higher than what we are selling, and that's running at a pace where it says that it's going to take longer. Steve, do you want to add any more color? I think you've covered it, Kishore. I mean, we constantly...

Speaker Change #113: Steve, you want to add any more color? I think you've covered it, Kishore. I mean, we constantly...

Steven G. Litchfield: I think as we look out into next year, I mean, I think the excitement is not, I mean, the inventory is going to take care of itself. I've said this before. It's going to go away. Right now, it's just, you know, making sure that we're winning on these new platforms. I mean, we talked a little bit about, you know, the PON platform. You're talking about, you know, the transition to Wi-Fi 7. I mean, and circling back to the PAM-4 opportunity that we have, I mean, these new programs are the exciting ones that are going to drive revenue, and that's really where the focus is at this point. The inventory is kind of down to a, I'll be disappointing, but it's a reasonable level. Yeah, no, I mean, it's the right question.

Speaker Change #113: Bye.

Steven G. Litchfield: I think as we look out into next year, I mean...

Steven G. Litchfield: I think the excitement is not necessarily, I mean the inventory is going to take care of itself. I've said this before. It's going to go away. Right now, it's just, you know, making sure that we're winning these new platforms. I mean, we talked a little bit about

Steven G. Litchfield: I mean, the PON platform, you're talking about, you know, the transition to Wi-Fi 7. I mean, and circling back to the PAM-4 opportunity that we have, I mean, these new programs are the exciting ones that are going to drive revenue.

Steven G. Litchfield: And that's really where the focus is at this point.

Speaker Change #114: I'll be disappointing, but it's a reasonable level.

Speaker Change #115: Okay. Great. And then maybe just on the booking side, I know last quarter you had pointed to bookings improving and you've talked about that again this quarter, yet we're still seeing kind of a 16% decline from first quarter to the third quarter. I'm just trying to square how we're seeing better bookings and things seem to be improving a bit there, but we're still not getting the revenue kind of linearity here that we would expect to begin to see on this improving booking side. So I guess maybe you could help me understand how maybe the puts and takes there, how are things a little better in some areas, but revenue is still declining, and how does that maybe portend to the fourth quarter, do we continue to see this kind of slide downward or is there a place where you think that we can go no lower? Thanks.

Steven G. Litchfield: I mean, bookings, I mean, probably more than anything, it speaks to how bad bookings were four quarters ago, right? I mean, the whole industry was back when you had years worth of backlog, and then bookings really slowed down. And so you could live off of that for some period of time without many bookings, right? And that certainly was the case.

Speaker Change #116: yeah no I mean it's it's the right question I mean bookings

Speaker Change #116: Yeah.

Speaker Change #117: I mean, probably more than anything, it speaks to how bad bookings were four quarters ago, right? I mean, the whole industry was back when you had a year's worth of backlog, and then bookings really slowed down, and so you can live off of that for some period of time without many bookings, right? And that was certainly the case.

Steven G. Litchfield: But as the industry and MaxLinear kind of get back to normal, I mean, we would expect to see, you know, 30, 40% turns in our business. And so we're headed in that direction. But I mean, I've stated before, bookings are definitely much improved, but they're not at the level that we need them to be at yet. And I mean, that's the crux of the issue. Hi Kishore, hi Steve.

Speaker Change #117: But, you know, as the industry and MaxLinear kind of gets back to the normalcy, I mean, we would expect to see, you know, 30, 40 percent turns in our business.

Speaker Change #117: and so we're headed in that direction but I mean I've stated before bookings are definitely much improved but but they're not to the level that we need to need them to be at yet and I mean that's the crux of the issue.

Speaker Change #118: Thank you. Our next question comes from the line of Suji DeSilva with Roth Capital. Please proceed with your question.

Steven G. Litchfield: Steve, you talked about the cost reductions year over year, you talked about programs that you know are winding down. Are there any areas that you're starting to, for lack of a better term, disinvent? Kind of pare back the roadmap, and are there any areas that do that?

Suji DeSilva: Hi, Kishore. Hi, Steve. Steve, you talked about the cost reductions year over year. You talked about programs that, you know, are kind of winding down. Are there any areas that you're starting to, for lack of a better term, disinvest?

Suji DeSilva: Kinda care back roadmap from are there any areas? Many candidates for that if there's a prolonged downturn or I mean you guys are in many many product areas I'm wondering if they're all still kind of candidates for growth in the roadmap and investment or whether some areas can be emphasized if

Steven G. Litchfield: Candidates for that, if there's a prolonged downturn, or, I mean, you guys are in many, many product areas. I'm wondering if they're all still kind of candidates for growth on the roadmap, whether some areas can be de-emphasized. You know, the way product portfolio categories work, I mean, you have seen them in the end market, they all don't need investment simultaneously. You cycle through them, right?

Speaker Change #120: The Dow Jones Day is prolonged.

Speaker Change #121: You know, the way product portfolio categories work, we have seen them, in the end market, they all don't need investment simultaneously. You cycle through them, right?

Kishore Seendripu: And if they're long product life cycles, you don't get into, you know, finishing one product and then working on the other in the same market area. I think we're taking advantage of that. The single biggest investment we have been in following our connected home business acquisition from Intel was really getting the roadmap up to snuff on broadband. That has been the biggest substantial investment we've been making. And the other one is the optical data center. So now, we are off that treadmill on the investment side of broadband, but optically, we are entering the market. We need to show resolve and commitment to multiple generations of investment.

Speaker Change #122: Thank you very much.

Speaker Change #123: following our connected home business acquisition from Intel was really getting the roadmap up to snuff on the broadband. That has been the biggest substantial investments we've been making. And the other one is the optical data center.

Speaker Change #123: So now, we are off that treadmill on the investment side of the broadband, but optically, we are entering the market. We need to show resolve and commitment to multiple generation of investment. So that's where the focus of the investment is right now.

Kishore Seendripu: So that's where the focus of the investment is right now. Then, you know, on the wireless infrastructure side, our focus has been on 5G wireless access with the single-chip solution for the remote radio units. That's where we're investing. And so, the investment targets have narrowed down, and there are much fewer investment, and product pipeline points than there were when the broadband thing, you know, product line had to be really fully invested in and upgraded to where it is today. So it's just a narrowing; the winnowing process is going on through a self-selection process.

Speaker Change #123: The, you know, on the wireless infrastructure side, our focus has been on the 5G wireless access with the single chip solution for the remote radio units, that's where we're investing.

Speaker Change #123: And so the investment targets have narrowed down, and it's much fewer investment.

Speaker Change #123: product pipeline point than they were when the broadband, the, you know, product line had to be really fully invested and upgraded to where it is today. So it's just a narrowing, the winnowing process is going on by a self-selection process. So.

Kishore Seendripu: I don't think there's any great new revelation based on end markets, really; it's just the investment cadence in various markets based on the product life cycle. Thanks, Kishore, that clarity helps. And then on the optical side, just trying to kind of get a framework for what the calendar 25 run rate can look like.

Speaker Change #123: I don't think there's any great new revelation based on end markets really, it's just the investment cadence in various markets based on the product life cycles.

Speaker Change #124: Okay. Thanks, Kishore. That clarity helps. And then on the optical side, just trying to kind of get a framework for what calendar 25 run rate can look like. Should we expect multiple customers supporting your 25 revenue or still the lead customer? And maybe you can tie in why you're hitting the 1.6 transition versus a lot of focus on 800G now. Is that a technical reason? Is that a market intercept reason? Any color there would be helpful. Thanks.

Kishore Seendripu: Should we expect multiple customers supporting your 25 revenue, or is it still the lead customer? And maybe you can tie in why you're hitting the 1.6 transition versus a lot of focus on 800G now. Is that a technical reason? Is that a market intercept reason? Any color on that?

Kishore Seendripu: Suji, I think you are sort of, you know, a little bit, maybe miscommunication on our side here, but all the revenue is coming from 800 gigabits per wavelength, times 8 channels with a 1.6 terabyte generation. And that one won't hit revenues for a while to come on the data center side. But Keystone, our 800 gigabit product with 100 gigabits per lane, which is eight times 100, will be the mainstay of revenue and the rollout for many years to come.

Speaker Change #125: Suji, I think you are sort of, you know, a little bit, maybe miscommunication on our side here, but all the revenue is coming from 800 gig, design is 800 gig, but just like our competitors, we have to invest in the next generation, 200 gigabit per wavelength.

Speaker Change #125: times 8 channels with a 1.6 terabyte generation.

Speaker Change #125: And that one won't hit revenues for a while to come, on the data center side, but Keystone, our 800 gigabit product, with 100 gigabit per lane, which is 8 times 100, will be the mainstay of the revenue and the rollout for many years to come.

Kishore Seendripu: So, nevertheless, we still have to invest in the 1.6 terabit just to ensure that. We have continuity for the future. This is one of those investments where you have to make, even though the revenues may not be substantial in the near term, right? It's just the continuity of our program.

Speaker Change #125: So, nevertheless, we still have to invest in 1.6 terabit just to ensure that we have continuity for future. This is one of those investments where you have to make, even though the revenues may not be substantial in the near term, right? It's just a continuity of our programs.

Kishore Seendripu: And the first part of your question, Suji, I mean, there are multiple customers that will drive revenues in 2025, for sure. Even in 2024, the revenue we spoke about is not a single customer. Actually, there are at least three customers driving the revenue. Three meaningful customers, not some, you know, idly-pidly ones, right? I just want to be clear. Good. Great. That helps. Thank you, Kishore.

Suji DeSilva: And the first part of your question, Suji, I mean, there are multiple customers that will drive revenues in 2025, for sure. Even in 2024, the revenue we spoke about is not a single customer. Actually, there are at least three customers driving the revenue.

Suji DeSilva: Okay.

Suji DeSilva: Three meaningful customers, not some, you know, idly-pidly ones, right? I just want to be clear.

Suji DeSilva: Good, great, that helps. Thank you, Kishore.

Speaker Change #126: Thank you. Our next question comes from the line of Richard Shannon.

Craig Hallam: With Craig Hallam.

Speaker Change #128: Please proceed with your question.

Kishore Seendripu: Hi guys. Thanks for taking my questions. I think I'll ask a couple on the broadband topic here. The first one just kind of put pen to paper here.

Richard Cutts Shannon: Alright guys, thanks for taking my questions. I think I'll ask a couple on the broadband topic here. The first one, just kind of put pen to paper here.

Kishore Seendripu: Splitting that business up between cable and pawn, it seems pretty clear that the pawn market's bigger than that, if you can just verify that. And then just based on your comments earlier in the Q&A about expecting most of the growth coming from pawn shops in the future, which certainly makes sense. I mean, it would make sense that pawn will continue to be bigger than cable TV going forward. You'd expect a possible switchover at some point down the line.

Richard Cutts Shannon: splitting that business up between cable and pawn it seems pretty clear that the the pawn market's bigger than that if you can just verify that and then just based uh Kishore I think it was your comment earlier in the Q&A uh about expecting most of the growth coming from pawn in the future which certainly makes sense I mean it would make sense that

Speaker Change #130: Pawn will continue to be bigger than cable TV going forward. You'd expect a possible switchover at some point down the line here.

Kishore Seendripu: Okay, so firstly, we are not in the cable TV market, right? It's really in the cable data market. And there are two dynamics playing out here, right, on the cable side. One is that the cable guys are losing market share to the telcos for a couple of reasons. Let's leave the reasons aside on a couple of fronts.

Speaker Change #131: Okay, so firstly we are not in the cable TV market, right? It's really in the cable data market and there are two dynamics playing here right on the cable side. One is that the cable guys

Speaker Change #131: are, you know, are losing market share to the telcos, you know, for a couple of reasons.

Speaker Change #132: Now, let's leave the reasons aside, you know, on a couple of fronts. And even though you're having the subscriber losses, the BOM content is increasing, which will compensate the subscriber losses. They will be seen as a flat-time market in dollar terms for us.

Kishore Seendripu: And even though you're having subscriber losses, the BOM content is increasing, which will compensate for the subscriber losses. They will be seen as a flat-time market in dollar terms for us. And then, based on the recovery and the shared distribution, we expect that, you know, we'll be approximately 50% plus minus, right? That's the expectation. On the pound side...

Speaker Change #132: And then based on the recovery and the share distribution, we expect that, you know, we'll be approximately be maybe 50% plus minus, right? That's the expectation.

Kishore Seendripu: These wireless carriers have now gotten a taste of getting broadband subscribers through fixed wireless access, which tends to be on the lower end of the market. And they're augmenting the major fiber phone deployments for the higher end of the markets, which So you can see the cable subscribers sort of, you know, wanting now, the cable guys wanting to upgrade their offerings to compete effectively with the higher end because, at the end of the day, cable is about the higher end subscribers, right? Made for the higher end.

Speaker Change #132: On the pound side...

Speaker Change #133: These wireless carriers have now gotten the taste of getting broadband subscribers to fixed wireless access that tends to be on the lower end of the market.

Speaker Change #133: And they are augmenting the major fiber phone deployments for the higher end of the markets, which...

Speaker Change #133: So, you can see the cable subscribers sort of, you know, wanting to now, the cable guys wanting to upgrade their offerings to compete effectively with the higher end, because at the end of the day, cable is about the higher end subscribers, right, mid to higher end.

Kishore Seendripu: So on the pawn side, you've got varied distributions. And in North America, it will tend to be the high-end fiber pawn, really, really high-end gateways, and so on. Europe will tend to be mid-end to lower-end deployments. And that market is much bigger from a pure access to a subscriber glaze than cable markets. So the pawn has a large range.

Speaker Change #133: So, on the pond side, you've got varied distributions, and North America will tend to be the high-end fiber pond, really, really high-end gateways and so on. Europe will tend to be mid-end to lower-end deployments.

Speaker Change #133: And that market is much bigger from a pure access to a subscriber base than cable markets.

Kishore Seendripu: But the pricing dynamics are very different in both the markets. So since we have very little or no footprint in fiber pawn except for the tier one player OEM in North America, and the other one, we are just starting to win at the brink of winning the socket on the gateway side. We expect our pawn market share revenues to continue to grow while cable, we expect it to be a stable, at a stable place. And to be clear, Richard, the pawn market is much bigger than the cable market.

Speaker Change #133: But the pricing dynamics are very different in both the markets. So, since we have very little or no footprint in FiberPond except the Tier 1 player OEM in North America, and the other one we are just starting to win at the brink of winning the socket on the gateway side.

Speaker Change #133: We expect our pawn market share revenues to continue to grow, while cable, we expect it to be a stable, at a stable place. And to be clear, Richard, the pawn market is much bigger than the cable market. Yes.

Kishore Seendripu: You've mentioned that many times, and that message certainly was received there. My second question here is following up, and you mentioned this early in response to a question that just kind of alluded to it here again, Kishore, about some sort of contractual, you know, level of revenues or share by your competitor that unnaturally keeps their share higher than what you've seen in the past. Under what dynamics, contingencies, etc., market transitions, whatever, allow that to end so that you can get back to more of a normal share level and see that, you know, get back to where you've seen it? Richard, I think you've answered that question yourself. In the future, everything is a green field in terms of market share winnability. Even on the cable side?

Richard Cutts Shannon: Right, yeah, and you've mentioned that many times, so a message certainly received there. My second question here is following up, and you mentioned this early in response to a question, just kind of alluded to it here again, Kishore, about some sort of

Kishore Seendripu: you know, contractual...

Speaker Change #134: You know, level of revenues are shared by your competitor that naturally keeps their share higher.

Kishore Seendripu: Than what you've seen in the past. Under what dynamics, contingencies, etc., market transitions, whatever, allow that to end so that you can get back to more of a normal share level and see that, you know, get back to where you've seen it kind of.

Kishore Seendripu: Richard, I think you've answered that question yourself. On the future, everything is a green field in terms of market share winnability.

Kishore Seendripu: Even on the cable side?

Kishore Seendripu: Absolutely. Okay, fair enough, that's all from you guys. Yeah, thank you. I just had a couple of follow-ups. [inaudible] Yes, sure, Tori.

Kishore Seendripu: Absolutely.

Speaker Change #135: Okay, fair enough. That's all from you guys. Thank you.

Speaker Change #136: Thank you.

Speaker Change #137: Our last question comes from the line of Tore Svanberg with Stiefel. Please proceed with your question.

Tore Egil Svanberg: Thank you. I just had a couple of follow-ups. Back to this export restriction issue, Kishore,

Tore Egil Svanberg: Again, I guess I'm a little bit confused. I mean, you know, we've known about...

Tore Egil Svanberg: How new of a development is this? Is this something that's going to continue to impact you going forward?

Tore Egil Svanberg: When you dive to $80 million, does that mean China now is pretty much de minimis as a percentage of revenue? Just really try to understand the dynamics of it because it's certainly a pretty last minute development.

Tori: Look, I think this speaks to the ongoing environment we're in with export controls. But it did come late in the quarter, so it was a surprise to us. I mentioned earlier, on the order of $5 million to $8 million impact in Q2. Yes, it does impact the second half of the year, probably $10 million to $15 million. I would not say that it is going to limit our ability to sell in China.

Tore Egil Svanberg: Yes, sure, Tori. Look, I think this speaks to the ongoing, you know, environment we're in with export controls. It did come late in the quarter, so it was a surprise to us, I mentioned earlier.

Tori: On the order of five to eight million dollar impact in Q2. Yes, it does impact the second half of the year

Tori: Probably $10-15 million. I would not say that it is going to limit our ability to sell in China. No, as you're well aware, I mean, we'll be able to continue to sell in China, so I don't think

Steven G. Litchfield: As you're well aware, we'll be able to continue to sell in China, so I don't think this is somewhat of a one-off situation with a few products. But you can confirm that it's not just telecom, it's also in... You're correct. Yeah, that was a broad statement. It wasn't intended to say just telecom, correct. And it's not all customers in China, specific entities.

Tori: This is somewhat of a one-off situation with a few products.

Speaker Change #139: But you can confirm that it's not just telecom, it's also an industrial product. You're correct. Yeah, that was a broad statement. It wasn't intended to say just telecom. Correct. And it's not all customers in China. Specific entities.

Steven G. Litchfield: Last question, so with the new cost structures, is it fair to say that I don't think we're going to get into the model right here, sorry, but it's a good effort. Okay, I just had to try. Thank you. No problem. No problem. We understand. So thank you all for attending today's conference call. You know, as we navigate through what is, you know, what I call a bottoming out of the inventory situation or broadband demand, and we look forward optimistically to our success in infrastructure, particularly optical data centers.

Speaker Change #140: Okay, so it's entered the list, got it. Last question, so with the new cost structures, is it fair to say that your break-even point will be just under $100 million in quarterly revenue?

Speaker Change #141: I don't think we're going to get into the model right here, sorry, but it's a good effort.

Speaker Change #142: Okay. Just had to try. Thank you. No problem. No problem. We understand.

Speaker Change #142: Thank you. If there are no further questions at this time, I'd like to turn the floor back over to Kishore Seendripu.

Steven G. Litchfield: We hope to bring you progress on this at the various investor conferences we are attending in this particular quarter. For that matter, this quarter, we'll be presenting at a number of financial conferences and virtual events, and we'll be posting the details on our investor relations page. So once again, thank you all for joining us today, and we look forward to speaking with you again soon. Thank you very much.

Kishore Seendripu: Thank you for closing comments.

Kishore Seendripu: So, thank you all for attending today's conference call. You know, as we navigate through what is a very, you know,

Kishore Seendripu: What I call a bottoming out of the inventory situation on broadband demand. And we look forward optimistically to our success in infrastructure, particularly optical data center. We hope to bring you, you know, progress on this in the various investor conferences we are attending in this particular quarter.

Kishore Seendripu: For that matter, this quarter we'll be presenting at a number of financial conference and virtual events, and we'll be posting the details on our investor relations page. So once again, thank you all for joining us today, and we look forward to speaking with you again soon. Thank you very much.

Speaker Change #143: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.