Q3 2024 MaxLinear Inc Earnings Call
Yeah.
Speaker Change: Greetings and welcome to the Max linear third quarter's 2024 earnings conference call. At this time, all participants are in a listen only mode.
Speaker Change: A question and answer session will follow the formal presentation if.
Speaker Change: If anyone should require operator assistance. Please press star zero all your telephone keypad as a reminder, this conference is being recorded.
Speaker Change: It's now my pleasure to introduce Leslie Green.
Speaker Change: Thank you you may begin.
Leslie Green: Thank you Julian and good afternoon, everyone and thank you for joining us on today's conference call to discuss Max linear third quarter 2024 financial results. Today's call is being hosted by Dr. Kishore, <unk>, CEO and Steve Litchfield, Chief Financial Officer, and Chief Corporate strategy Officer. After our prepared comments, we will take.
Speaker Change: Questions.
Our comments today include forward looking statements within the meaning of the applicable securities laws, including statements relating to our guidance for the fourth quarter of 2024, including revenue GAAP and non-GAAP gross margin GAAP and non-GAAP operating expenses, GAAP and non-GAAP interest and other expense and GAAP and non-GAAP diluted share count.
Speaker Change: In addition, we will make forward looking statements relating to trends opportunities execution of our business plan and potential growth and uncertainties in various products and geographic markets, including without limitation statements concerning future financial and operating results opportunities for revenue and market share across our target market.
Speaker Change: New products, including the timing of production and launches of such products demand for and adoption of certain technologies and our total addressable market.
Speaker Change: These forward looking statements involve substantial risks and uncertainties, including risks outlined in our risk factors section of our recent SEC filings, including our Form 10-Q for the quarter ended September 32020 for which we filed today any forward looking statements are made as up to date and Max linear has no.
Speaker Change: Obligation to update or revise any forward looking statements. The third quarter 2024 earnings release is available in the Investor Relations section of our website at Max linear Dot Com. In addition, we report certain historical financial metrics, including but not limited to gross margin operating margin operating.
Fences and interest and other expense on both GAAP and non-GAAP basis, we encourage investors to review detailed reconciliation of our GAAP and non-GAAP presentation and the press release available on our website, we do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with the <unk>.
Speaker Change: <unk> to project certain future changes, including stock based compensation and its related tax effects as well as potential impairment non-GAAP financial measures are 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 my.
Leslie Green: I just meant believes it is useful to investors as it reflects how management measures. Our business. Lastly, this call is also being webcast and replay will be available on our website for two weeks and now let me turn the call over to Dr. Kishore <unk> CEO of much funnier Vishal. Thank you Leslie and good afternoon, everyone.
Dr. Kishore: Our Q3 results were slightly above the midpoint of our guidance at $81.1 million.
Dr. Kishore: Revenue and non-GAAP gross margin was 58.7% we.
Dr. Kishore: We have seen meaningful improvements in our customer order rates for several quarters, how long with Expedites and oldest pleased with your lead times.
Dr. Kishore: The early signs of recovery and combined with new product traction, we're feeling confident that we can achieve sequential improvement in our revenues in the coming quarters.
Dr. Kishore: Q3 was also a very active quarter for us as we demonstrate the new technology and products at several industry events.
Dr. Kishore: July.
Dr. Kishore: The flash memory summit, we showcased our partnership with E. M. D for patented three our hardware accelerated storage compression and keeps you brought up are getting enterprise storage and compute server applications.
Dr. Kishore: Equal along with one N. We demonstrated the industry's by far lowest power agent that gigabit D. R. Eight optical transceiver solution.
Dr. Kishore: Less than 12 awards for data center applications and recently at Network X B announced Max E. E. I use case, there need to machine language take bold your framework.
Dr. Kishore: Integrated into our any band broadband access and connectivity platform solution for service providers.
Dr. Kishore: Additionally, in the quarter, we were delighted to receive.
Dr. Kishore: That's emerging supplier of the year award from Cisco.
Dr. Kishore: Looking at our key markets in infrastructure, the exponential growth in AI workloads continues to drive massive design activity.
I don't know high speed optical data center connectivity.
Dr. Kishore: We're excited that that product shipment volume run rate is now greater than 1 million units per year across several direct customers, including our Q3 land at our U S data Center player.
Dr. Kishore: We are seeing continued progress on initial qualification testing for an agent to gigabit transceivers and active electrical cables at several large data center customers would broadly across the industry eight gigabit Pam four Ethernet adoption is starting to ramp even as voting to gigabit demand continues to accelerate.
Dr. Kishore: Yeah.
Dr. Kishore: The superior power and performance of our Keystone high speed optical Panful products' strongly position us for current opportunities.
Dr. Kishore: And we are highly competitive with our differentiated Rushmore family up 200 gigabit per lead.
Dr. Kishore: D S piece for early market adopters moving to 1.6, Jeremy interconnections.
Dr. Kishore: Moving to fight your body's infrastructure, we are making significant customer inroads with our millimeter and microwave backhaul modem and RF transceiver products.
Dr. Kishore: The only bullshit merchant multi band radio solution in the world.
Dr. Kishore: With increasing mobile usage and new functionality such as E.
Dr. Kishore: Our hybrid microwave and millimeter wave backhaul technologies are required to support increasing transport data reads.
Dr. Kishore: We believe we are positioned strongly for content growth and revenue expansion and service provider Capex spend is expected to improve in 2025.
Dr. Kishore: <unk> access network upgrades pick up pace globally.
Dr. Kishore: Also we do not infrastructure revenues, our patented three Cds hardware accelerators are providing exciting incremental growth opportunities.
Dr. Kishore: The need for E I N the edge as well as growing security considerations are resulting in a shift towards enterprise storage with all flash array and hybrid storage enterprise application systems.
Dr. Kishore: And then he is also gaining traction in compute subsystems for usage across surveys as well as data center storage customers.
Dr. Kishore: Our Panther product is strongly positioned for this macro trend and we have multiple design wins in enterprise OEM customers.
Dr. Kishore: And buyers across major geographies.
Dr. Kishore: In Ethernet connectivity magazine as one of the broadest and most competitive portfolios have gone up gigabit Ethernet switch and phy products for the enterprise and small and medium business switch markets, where we offer a strong value proposition for the upgrade went from one gigabit per second legacy data rates.
Dr. Kishore: Gigabit speeds again, using existing gunfire cabling, our gear, but north American enterprise OEM customer is expected to ramp to production in 2025 and contribute the significant Ethernet revenue growth over the coming years.
Dr. Kishore: In Asia, we are seeing widespread interest from next generation broadband gateways and routers.
Dr. Kishore: In total we believe we could reach $100 million run rate over the next 24 months.
Dr. Kishore: Moving to broadband in flight connectivity, we are focused on <expletive> for new broadband time get older and you shouldn't do on existing cable M. S O data offering including the latest DOCSIS four point is illusion.
Dr. Kishore: We're excited by the design win traction for our bond platform based on a single chip integrated fiber pawn and 10 gigabit processor Gateway S O C and Tri band Wifi seven single Chip solution. We have seen continued momentum in design wins and promising ongoing engagements, including traction into second tier one north American.
Dr. Kishore: <unk>, which we believe can become a major opportunity for 2025 and 2026.
Dr. Kishore: As mentioned before at Netbook X, we were pleased to announce Max E.
Dr. Kishore: I used the word need do machine learning technology, we would integrate it into our any events illusions.
Dr. Kishore: <unk> is designed to enhance network performance security.
Dr. Kishore: Issue triage and diagnostics as well as improving the use of connectivity experience in month I use it applications like E. R V. Our video conferencing and multiplayer gaming.
Dr. Kishore: We believe Max <unk> further strengthens our competitive position in this market.
Dr. Kishore: In conclusion multiple factors give us confidence that it would be a well positioned to resume growth in Q4, and we need to refine.
Dr. Kishore: Following three years of innovative product development, we are gaining traction with new products in high value markets, including optical data center interconnect enterprise Ethernet and storage accelerators five G wireless infrastructure multi gigabit bond broadband access and Wifi connectivity.
Dr. Kishore: It's not only opened significant new target addressable market, but are poised to drive.
Speaker Change: Steve I Love wherever you go over the next several years, creating enhanced value for our customers and shareholders with that let me turn the call over to Steve Litchfield, Our Chief Financial Officer, and Chief Corporate strategy Officer, Steve.
Steve Litchfield: Thanks sure.
Steve Litchfield: Total revenue for the third quarter was $81 1 million down 12% from 92 million in the previous quarter.
Steve Litchfield: Broadband revenue for the third quarter was 32 billion connectivity revenue was $13 million.
Steve Litchfield: Infrastructure revenue was $23 million and industrial multi market revenue was $13 million.
Steve Litchfield: GAAP and non-GAAP gross margin for the third quarter were approximately 54, 4% and 57% of revenue.
Steve Litchfield: Delta between GAAP and non-GAAP gross margin in the third quarter was primarily driven by $3 5 million of acquisition related intangible asset amortization.
Steve Litchfield: Third quarter GAAP operating expenses were $110 8 million and non-GAAP operating expenses were $72 8 million.
Steve Litchfield: Delta between the GAAP and non-GAAP operating expenses was primarily due to restructuring cost of $26 8 million.
Steve Litchfield: Related to the workforce reduction initiated in Q2 and stock based compensation and performance based equity accruals of $11 5 million combined.
Steve Litchfield: GAAP and non-GAAP loss from operations for Q3, 2024 was 82% and 31% of net revenue.
GAAP and non-GAAP interest and other expense during the quarter was $15 8 million and 4 million respectfully.
Steve Litchfield: Which did include some currency fluctuation in the quarter the delta between the GAAP and non-GAAP interest and other expense was primarily impaired impairment of an investment in a privately held company of $11 8 million.
Steve Litchfield: And the Q3 cash flow used in operating activities was approximately $31 million. We exited Q3 of 2024 with approximately $149 million in cash cash equivalents and restricted cash.
Steve Litchfield: Our days sales outstanding was down meaningfully in the third quarter to approximately 54 days.
Our gross inventory was also down versus previous quarter as we continue to make improvements with inventory turns slightly less than one.
Steve Litchfield: This concludes the discussion of our Q3 financial results.
Steve Litchfield: With that let's turn to our guidance for Q4 of 'twenty three 'twenty four we currently.
We expect in the fourth quarter of 'twenty 'twenty four to be between 80 million and $100 million in revenue looking at Q4 by end market, we expect broadband to be slightly down and infrastructure connectivity and industrial multi market to be up.
We expect fourth quarter GAAP gross margin to be approximately 54% to 57% and non-GAAP gross margin to be in the range of 57, 5% and 65% of revenue.
Steve Litchfield: We expect Q4 2024, GAAP operating expenses to be in the range of 88 million to $94 million.
Steve Litchfield: We expect Q4 2024, non-GAAP operating expenses to be in the range of 58 million to $64 million.
Steve Litchfield: We expect our Q4, GAAP and non-GAAP interest and other expense each to be in the range of approximately one to $2 $5 million.
Steve Litchfield: We expect our Q4, GAAP and non-GAAP diluted share count to be approximately $84 5 million each.
Speaker Change: In closing following a prolonged market correction, we are now seeing a positive turning point in our business. We're excited that our innovation and investment in strategic applications, such as optical high speed Interconnects wireless infrastructure storage Ethernet Wi Fi and fiber broadband access gateways are creating transforming.
Speaker Change: The opportunities for long term growth and.
Speaker Change: In addition, our strong focus on operating efficiency and physical discipline are opening up near term leverage in our business model as we enter our next stage of growth and expansion.
Speaker Change: With that I'd like to open up the call for questions Julien.
Speaker Change: Okay.
Julien: Thank you we will now be conducting a question and answer session I would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two to remove yourself.
Speaker Change: Yourself from the queue for participation using speaker equipment, it may be necessary to pick up the handset before pressing the star keys, one moment, while we poll for questions.
Speaker Change: And our first question comes from tore Svanberg Stifel. Please proceed with your question.
Speaker Change: Yes. Thank you.
Speaker Change: Cancellations on the turnaround here.
Speaker Change: Sure I was hoping you could elaborate a little bit more on your 1 million.
Speaker Change: Optical transceiver comment.
Speaker Change: You know.
Speaker Change: Could you give us a sense for the mix between 408 hundred gig and I assume that's what you have shipped so far.
Speaker Change: Hum.
Speaker Change: And basically what I'm trying to get there of course is you know is this sort of a run rate now that we should think about into calendar 'twenty five meaning that you could potentially do more than 1 billion for the whole year next year.
Speaker Change: Thank you Dori, yes, our you know our prepared remarks did point to.
Speaker Change: 1 million unit per year run rate as we exit the year, but coincident to leave you accumulate all the units that view that we are now forecasting to ship through the end of 2024 will be okay.
Speaker Change: It pretty much in a million units are more slightly so yes. So we are excited about the progress we have made.
Speaker Change: And there's a million units a run rate is actually being up.
Speaker Change: Primarily are driven by optical transceiver revenues related to.
Speaker Change: Both agents gigabit 40, gigabit, but 800 gigabit being the larger fraction religion, two 400 gigabit transceivers.
Speaker Change: We do expect many more designs to come through finish we have a.
Speaker Change: Huge number of design wins that are in place with Oems, but it all gauging by sort of you know delays are prolonged.
Speaker Change: Data center calls that are happening. So we are very optimistic that we will exceed this run rate through 2025.
Speaker Change: I just wanted to point out that as we entered the year, we are hoping for zero to a range of zero to $30 million of revenue.
Speaker Change: Well in excess of that based on the volume I just indicated.
Speaker Change: Yeah, No that's very helpful and as a follow up I was hoping you could give us an update on the broadband business. It's great to see the other three segments growing sequentially in Q4, obviously broadband is still going to be down.
Speaker Change: Just help US understand you know where we sit on inventory levels I know theres been some delays with DOCSIS.
Speaker Change: DOCSIS four Plano is that starting to clear out so yeah, any visibility and especially as sort of a comment on how you expect the brother in business to do in 2025.
Speaker Change: Okay.
Speaker Change: So Oh are you obviously are from where we are we expect the broadband business to grow in 2025, Oh, whereas we as he sort of straddling the bottom here are the order rates have picked up and as you know it's a full platform solution they tend to come in chunky manner.
Speaker Change: And as a you know.
Speaker Change: As the market is gearing up and I think of the character and the Flintstones you know revolving legs. You know so maybe we will start picking up the orders, but so I wouldn't read much into Q4 dip. It just the cadence of the B O's and you are seeing still a lagging effect of customer deliveries I do want to point out.
Speaker Change: The pickup in the bookings are really.
Speaker Change: Primarily related to broadband, but it's a very good sign and so outside up our infrastructure in the optical business.
Speaker Change: These have been the two drivers over engine for all of US right now so I'm very happy about that so getting back to the cable side of the business you know cable cable the cable business right now it's still a DOCSIS three point or 3.1 business full point due is really really pilot quantities and even.
Speaker Change: So I I believe and I know that when the cable that Cody acts that happens it will still be dominated by $3, one and ultra DOCSIS 3.1, and four point Joel will remain a small fraction of the revenues in 'twenty five and probably grow steadily from there in 26. So we didn't end the way things are.
Speaker Change: Our design incumbency prevails in three point or 3.1 is the market and we accept we start we should start seeing some recovery steady and it could be as we head into the next end of next year.
Speaker Change: Okay.
Speaker Change: Good I'll go back in line and I Love the stone analogy. Thanks.
Speaker Change: Thank you [laughter].
Speaker Change: Okay.
Speaker Change: Our next deal with Sony.
Speaker Change: Sorry.
Speaker Change: Our next question comes from Ross Seymore Deutsche Bank.
Speaker Change: Hi, guys can you hear me.
Speaker Change: Yes.
Speaker Change: Great also congratulations love to find something to.
Ross Seymore: Just a near term question and then a little bit of a longer term question, Steve when you talked about the guidance for the fourth quarter, a little bit down in broadband everything else up it seems like everything else has to go up by about 20% sequentially.
Ross Seymore: Can you just give us an idea of where.
Where that's coming from is it just shipping closer to demand is it the secular growth in the infrastructure side and kind of the optical transceivers just any color on that is my first question. Please.
Speaker Change: Yeah, I mean look I think we're seeing improved demand.
In general I mean really across the board right I mean, the bookings have been across the board Kishore mentioned the strength in broadband in particular, yes, that's definitely picked up but that's also been the one that lagged the most I think.
I think we're doing well on the optical front.
Speaker Change: As you're aware Ross we were you know this this year was going to be pretty back end loaded as 800 gig kind of adoption started.
Speaker Change: And so that'll be a big contributor.
Speaker Change: As far as the other end markets I mean, we do see some modest recovery happened in connectivity industrial multi market was down quite a bit in Q3. You know there were China continues to be depressed industrial continues to be depressed, but we'll start to see that improve in Q4, and then and I think we'll see some modest.
Speaker Change: Improvements throughout 2025.
Speaker Change: Got it thanks for that color, Stephen and I guess, you guys talked about the Opex cutting last quarter, how should we think about the linearity of that I think you said year over year down 20% to 25% if I recall right for next year are we still on path for that and kind of how do you get from the 61 million you talked about before.
Speaker Change: Two it looks like you'd be slightly less than that at some point next year.
Speaker Change: No.
Speaker Change: Glad you noticed that that's been a lot of work throughout Q3 is kind of getting this cross cost structure down yes, we are on track to realize the 20% to 25% a.
Speaker Change: Reduction next year of some of them.
Speaker Change: Some of the you know the majority of those costs have been realized but there'll still be some residual kind of you know over the next quarter or two but we do feel like we're on track.
Speaker Change: To hit that number.
Great. Thank you.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Quinn Bolton Needham <unk> company.
Speaker Change: Okay.
Speaker Change: Okay.
Speaker Change: Glen.
Speaker Change: Maybe.
Speaker Change: Sorry, guys.
Speaker Change: Thanks for taking the question I wanted to start with bookings you guys have talked about bookings improving now I think for several quarters.
Speaker Change: Now at a point or a book to Bill is back above one I mean, it looks like it likely is given that you've guided higher for the December quarter, but just wanted to see.
Speaker Change: If you could comment whether book book to Bill was back above one.
Speaker Change: Yeah. So I think you know.
Speaker Change: I think you know we don't break out the bookings number we feel very good I mean, we saw a really significant uptick in bookings in this past quarter. So that was very encouraging and we're seeing follow through now even and so backlogs building nicely for Q4, and Q1 already and so were running at higher levels.
Speaker Change: And we were in previous quarters. So another encouraging sign and then I think the last one that I would mention is probably sell through sell through has been very good. So so it feels like you know that in demand continues.
Speaker Change: So all of those are encouraging signs.
Speaker Change: So we are kind of a feeling opt.
Speaker Change: We're optimistic that the gap between the saleen into sell through so to speak you know closes within the next couple of quarters and both will be at a global.
Global dynamic so to speak on a rate basis.
Speaker Change: Got it.
Speaker Change: Any any comment on how much higher sell out is right. Now then selling that's not my second question I like.
Speaker Change: That's good.
Speaker Change: Right.
Speaker Change: Yes.
Speaker Change: We are still in the Flintstones here so.
Speaker Change: Victoria.
Speaker Change: Oh.
Speaker Change: Second question.
Speaker Change: Yes.
Speaker Change: Optical business, obviously, it sounds like it's on.
Speaker Change: Very very good pace, you've talked about exceeding.
Speaker Change: 30 million. If you guys are going to do with close to $1 million.
Speaker Change: Optical DSP this year.
Speaker Change: I guess is the DSP spaces definitely over 30 box and so I wouldn't be surprised and I won't ask you to comment, but if optical DSP might be closer to 40 or 50, and if that's the case total infrastructure revenue looks like it's going to be on pace to be about 115 to maybe $120 million and so if I back out optical everything.
Speaker Change: Els is probably only 70 or $80 million, where it was probably $177 million last year or two.
Speaker Change: I understand the optical is good.
Speaker Change: You've talked about Panther, you've talked about.
Speaker Change: Yeah.
Speaker Change: No.
Speaker Change: Yes.
Speaker Change: The microwave backhaul and everything you say sounds very encouraging but like the revenue was still very very depressed and so can you give us outside of optic or when do you think the rest of the business really starts to get back because it feels like it's pretty depressed I assume a lot of its inventory depletion rather than end market demand.
Speaker Change: Construction, but wondering if you could comment on that.
Speaker Change: Infrastructure acts Opticals.
Speaker Change: Yeah, No problem, yeah, absolutely I mean, we we had mentioned as you talk talked through it last quarter as well so as expected our wireless infrastructure is definitely a drag telecom spending is down.
Speaker Change: You know what was it 12 plus months ago now.
Speaker Change: Wireless infrastructure was really humming and that's really dialed back our consistent with all of the telecom Capex.
Speaker Change: [noise] formation, that's out there so I think you know.
Speaker Change: Those revenues really follow up so that there is some.
Speaker Change: Analog product as Youre aware that sells into the infrastructure market that saw some of that is enterprise related as far as the <unk>.
Speaker Change: Real growth drivers I mean, kishore kind of talk through the optical side, but Panther also is another encouraging one as far as you know we are seeing good traction. We do you know real estate have positive developments on the customer front with that and we think we're really well positioned so outlook is very good as we get through.
Tori with some of the telecom spend.
Speaker Change: We will start to see that recover I mean next year I think we will see you know 30 plus percent increases in our infrastructure business. So I think that's really exciting.
Speaker Change: Excellent. Thank you.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Christopher Rolland Susquehanna International Group.
Christopher Rolland: Hey, guys. Thanks for the question.
Christopher Rolland: And congrats on what looks like the bottom here.
Christopher Rolland: And as.
Christopher Rolland: Can we have.
Christopher Rolland: More confidence in this bottom do you guys have a better view on kind of what more normalized revenue would look like either quarterly or annually.
Speaker Change: For broadband I guess number one and then connectivity number two just isn't completely normalized environment, where do you think those revenues go to now.
Speaker Change: Yeah, I think we are getting through the inventory challenges that we've been through over the last two years frankly.
Speaker Change: So that's encouraging you kind of saw that last quarter, you know you'll see some follow through over the next couple of quarters, which is good.
Speaker Change: I think of it a little bit more color. So I don't know that were.
Speaker Change: Completely out of the woods, yet, but I do feel like we're kind of getting back to that other level.
Speaker Change: So I mean, I do expect to see kind of broadband connectivity growing double digits next year. So I think we're on the right track. There is there more to be made up yes, but I think all the signs are there. The bookings are there the new wins I mean, I think this is really important right. The PON business that we're winning is really encouraging and for <unk>.
Speaker Change: Amount or even the cable.
Speaker Change: Improvements that we're seeing is also good you continue to see upgrades I think as we look into next year, you're going to start to see some of the bead money rollout.
Theres a handful of.
Speaker Change: Drivers that we'll see a recovery in the market beyond just inventory situations theres new products Theres new win their share gains. There's PON transition you know, there's Wi Fi seven transition as well, which is something else theres been a bit of a lull in the market.
As a pet adoption takes place.
Speaker Change: Thank you for that Steve.
Speaker Change: And then my second question is on optical.
Speaker Change: Kishore you talked about the huge number of design wins.
I was wondering if you could kind of bucket. These.
Speaker Change: The customers for us, particularly those that you expect to ship in big volumes.
Speaker Change: So.
Like what percent do you think are going to be like general transceiver providers.
Speaker Change: This is let's say hyper scaler.
Ah versus systems vendors and can you speak to qualifications, particularly at the systems guys and then at Hyperscale.
Speaker Change: So I would say that Ah I would step back and say that you know we have many designs going on with all the top.
Speaker Change: Module makers in the World now I can safely claim that I would probably claim that later, but right now safely claim that and these guys are targeting all of the major data centers you know all the all that pair in shipments.
Speaker Change: <unk> has really been infiniband driven in media products and the last one off years.
Speaker Change: And I just wanted to point out as far as the data center guys go on the Ethernet side of the thing actually the adoption has been very slow and that is just beginning to move and if in fact, if any of the 400 gigabit de accelerating.
Speaker Change: So some of these module vendors are fully qualified and system vendors.
Speaker Change: <unk> systems level solutions.
Speaker Change: And some of these module vendors are directly in the draw a process, many datacenters and I, just and I wanted to point out is that.
Speaker Change: That China is going to hit a massive E boom in the next deployment boom in the next you know starting in the next in 25. So there are many many data centers. If you combine both the U S and China, where and that he did this range when the big guys like you know too.
Speaker Change: Our what we call tier two but they're gigantic as well so I think that's it in tier two data centers, where we are through the calls.
Speaker Change: At tier ones, we're in the process of the calls, but it was build out going on in preparation for that there's a lot of optimism in the industry of what Maxim newest products.
Speaker Change: Maybe it's a part of a rite of passage that they want to put like hazing attorney Dino. So so you know you can see all manage valleys liquidity interesting right now, but I feel good you know I feel really good that we can deliver we are delivering and feel pretty excited about it. So I will leave it there and let the results.
Speaker Change: For themselves as we move forward because you know.
Speaker Change: That's what it's been for us and that's so we want to be measured as well.
Speaker Change: Thank you Kishore.
Christopher Rolland: Thanks, Chris.
Speaker Change: Thank you.
Question comes from David Williams Benchmark company.
Speaker Change: Okay.
David Williams: Hey, good afternoon, gentlemen, thanks for taking the question and let me also give my my congrats on the turn here.
Speaker Change: Thanks, David.
Speaker Change: I guess, maybe the first question yes.
Speaker Change: Just around can you talk a little bit about this earlier Quichua Swan Creek, and just that transition of two and a half G sounds like you've got some really nice traction. There can you talk maybe about what your expectation is over maybe 25 and what that contribution could look like and how has that I guess is the adoption coming in at expectation or do you think it's slower maybe even faster than you would have.
Speaker Change: Anticipating.
Speaker Change: David This is one case I would say that option has been adoptions with excellent it's moving faster than we can support.
David Williams: And so having said that you know it off just two parts to it one is the rate at which they are getting they can sell at the end market. So there are two parts. One is enterprise type businesses. Although one is kind of consumer ish type of businesses. So on the we've been very surprised at the amount of traction.
David Williams: Getting on to sort of the consumer and retail type markets, whereas these small business medium business and major enterprises business are going to pace as expected.
David Williams: With no hiccup. So we're very very pleased street in fact, if anything it's emboldened in our view about our future roadmap on Ethernet switch product lines, you know and debate is configurations of gigabit and the number of ports associated with this and you know I did talk about Max AI from Max linear.
David Williams: And Max AI is not just a frame a you know a machine learning AI framework for various use case scenarios and performance optimization, just where the broadband platforms. It's a general concept and capability that we're building on that will proliferate, all our product lines, including E learning got five suites Broadax are.
David Williams: Accelerated parts and so on so we are really trying to drive the company now to be.
David Williams: Very very AI being a necessary tool in terms of you know showing a competitive superiority of the product so.
Looking forward to the next year is 2025.
David Williams: Cant give you about 20 to 25, but I can only tell you about how big the switch one gig product can be I look at the switch Swan Creek product to be anywhere between $50 million to $100 million potential on an annualized run rate basis over a three year window.
Speaker Change: Uh huh.
Speaker Change: Okay.
Speaker Change: Perfect. Thanks, so much and maybe talking about that the Max AI can you maybe how do you think about that in terms of value and driving is that something you can monetize or is it more of a value add how do you think maybe just let's say go to market look like with the Max AI.
Speaker Change: So there are two parts to it one is right.
Speaker Change: So they there are parts of it that we imagine will be offering as depot, because it's table stakes and competitive differentiation. The other parts I would say that wouldn't be very customized to develop part of the various customers and these days right as a company and be shipped two very large customers customer bases are dramatically consolidated so there'll be some customization.
Speaker Change: So I think.
Speaker Change: They are what do you call a pay to play model and there is you know you know if you don't if you don't play we won't win so to speak right. So those are the two buckets. So I think it'll be a hybrid model, but the latter model of a pay to play will take some time because the industry is in a very infant phase in terms of utilizing E vapor.
Speaker Change: Real performance.
Speaker Change: Uh huh.
Speaker Change: For improving efficiency on the networking communications site and use case scenarios.
Speaker Change: I think that will play out as time that lips.
Speaker Change: Great. Thanks, so much for the time and the questions gentlemen.
Speaker Change: Thank you David.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Sushi, the silver Roth capital.
Speaker Change: Hi, Kishore I, Steve Congrats on the progress here Kishore I hadn't heard other optical guys mentioning the China hyperscale or opportunity maybe it's just they sent us a larger bucket, but are you guys differentiated in your position in China relative to others, who may be competitors, maybe more focused on the U S opportunity or is it similar across the landscape.
You can see the differentiation is universal it's not easy to Chinese North American right low power low power low power.
Speaker Change: You really go back to our history, we are all well.
Dr. Kishore: We were made to deliver low power all the products and communications that'd be ever offered and I think that's why it is beginning to come through and we'll continue to do so that we're not just a keystone vertical of course, everybody knows who the lowest borrow there, but you can look forward to our rushmore product in there and the offering of ballroom at one <unk>.
Dr. Kishore: I, even by far be the lowest bar anybody would be able to bring out in the next 12 months for sure.
Speaker Change: Okay. That's helpful and maybe perhaps for Steve on the Wi Fi the connectivity revenue versus the broadband revenue, Steve should I think of those as more couple than not or are there specific drivers for each one as you go through the next few quarters.
Steve Litchfield: I think the.
Steve Litchfield: There's definitely some overlap right, so Wifi and Ethernet, there's there's a lot of attach that has happened historically as you're well aware.
Steve Litchfield: But we keep them separate because we continue to see more traction kind of winning Wi Fi outside of a standard gateway business as well as kind of winning.
Steve Litchfield: Our Ethernet business and that was really.
Steve Litchfield: You've heard us talk a lot about some of the traction we're getting with our Ethernet product in the industrial markets and the enterprise markets.
Steve Litchfield: That's one of the places that we really leverage that two five gig solution and penetrating.
Steve Litchfield: With our sales force kind of getting more opportunities out there and so going forward youre going to continue to see more growth out of that connectivity.
Steve Litchfield: Enabled by these new markets.
Speaker Change: Okay. Thanks, Dave.
Dave: Sure. Thanks Judy.
Speaker Change: Thank you. Our next question comes from Ananda Baruah loop capital markets LLC.
Ananda Baruah: Hey, guys yeah. Thanks for taking the question.
Ananda Baruah: Yes, a couple if I could.
Ananda Baruah: Really the first Q.
Speaker Change: Probably clarification Kishore.
Speaker Change: Prepared remarks, actually I think it may be beginning a Q&A.
Speaker Change: You talked about run rate. This is DSP run rate exiting optical DSP run rate.
Dr. Kishore: Exit this year at 24 and <unk>.
Dr. Kishore: Yes.
Speaker Change: I hear you accurately that you would say right now the run rate exiting.
Exiting 'twenty or you may.
Dr. Kishore: Yes, $1 million, which would put you.
Dr. Kishore: 4 million run rate heading into 25, just looking for a clarification there and then add a couple of months.
Speaker Change: So ananda just for clarity the exiting run rate is 1 million unit per year. So it's not a quarterly run rate right. So so the question that Ah I believe Tory asked ease.
Speaker Change: Is that a and Dmitry I responded that we obviously expect to do much better than that and it would be in excess of the 1 million unit per year run rate now for getting fantastic, but let's stick to being greater than 1 million unit per year for now.
Speaker Change: Thank you. Thank you for that and then another clarification.
Speaker Change: Around <unk> question.
Speaker Change: Are you also working with and actually just a clarification on your amongst ourselves also.
Speaker Change: When you say youre working with all the leading module makers does that include the Chinese module makers.
Everyone.
Speaker Change: Okay.
Got it.
Speaker Change: Okay cool.
Speaker Change: That's it for me I appreciate it thanks.
Speaker Change: Thanks Shannon.
Speaker Change: Thanks.
Speaker Change: Okay.
Speaker Change: Thank you. Our next question comes from Karl Ackerman.
Speaker Change: Carrabba's.
Speaker Change: Okay. Thank you.
Speaker Change: One clarification question and.
Speaker Change: A follow up just on the clarification question.
Hi, Steve I think you were mentioning China restrictions being a headwind to your September quarter, and December quarter guide, where those restrictions more or less than your prior view or.
Speaker Change: Hopefully you could clarify the commentary before December.
Steve Litchfield: Yeah well.
Steve Litchfield: We said that it would probably $5 million to $10 million in the back half of the year would be the impact and we're definitely feeling that you've been talking about.
Steve Litchfield: See that in our industrial multi market numbers.
Steve Litchfield: And so yeah, I mean, I think the good thing here is that you know now that that's.
Steve Litchfield: That's behind Us.
Steve Litchfield: We don't see problems going ahead, and so excited about looking forward into next year.
Got it okay. Thanks for that and then.
Within broadband you entertain PON remains a strong longer term opportunity sure Tri band on chip solution at a second tier one U S.
Carrier.
Steve Litchfield: Youre talking about how broadband.
Speaker Change: It's still down for December, but I guess as you look into 2025 are you seeing orders for.
Upon being Poland earlier than you previously envisioned at the second carrier and or is that recovery upon more of a.
Speaker Change: Our back half 'twenty five and into 2026, a few thank you.
Speaker Change: So yes, Steve I'll just take it for a second is a general trading you know there's a lot of activity on the telco players to start rolling out fiber. So they have taken their sort of you know industrial up their plans and whether they're doing fixed viral axis are now they realize that they really.
Speaker Change: Need upon fiber network and anything there considering right now is how do we lay I'll, let you know what it go start laying more fiber right you've seen that in the AT&T commitment and that's like the big thing and you'll see that of Verizon.
Speaker Change: You're saying that their communication related related to acquisition discussions right that have been in the newspapers. So there's a general trend for everybody to start visiting their fiber rollout plans very seriously now.
Speaker Change: The real backbone to the bounty they had been getting on the fixed wireless access.
So we are seeing momentum there, they're discussing rfps or appeals and stuff. So while some are ahead. Some are later, but in terms of the revenue momentum on solutions, where gateways and so on and so forth I really look at it happened in the latter half of 2025 slowly coming more and more revenues coming into the into the run rate basis and.
Speaker Change: And the follow on continuing through 'twenty.
Speaker Change: In 2027, so theres not really any jumpstarts like suddenly turn on the switch because you got to keep in mind that our revenue and fiber to start with is a very small share.
Speaker Change: Last year, it was about a $50 million to $100 million range and now we you and me and you know the telecom spend has been down but that is not showing up in the fiber numbers, because it's been a growth a growth where new for us.
Speaker Change: But the momentum should start moving forward a brand new fiber designs picking up some velocity.
Speaker Change: Alright, thank you.
Speaker Change: Thanks Carl.
Speaker Change: Okay.
Speaker Change: Our next question comes from Richard Shannon Craig Hallum.
Richard Shannon: Okay guys. Thanks for taking my question maybe.
Richard Shannon: Maybe to hit on.
Richard Shannon: Product something that hasn't been asked about here in wireless infrastructure I think he gave kishore some pretty positive comments about.
Richard Shannon: The go forward from here, maybe you can just give us a sense of visibility here in terms of bookings and when we might start to see some sort of pick up and get back to prior highs.
Speaker Change: Yes, it's a very very good question, Richard and you know look everybody's like wireless infrastructure Blah Blah blah is all looking boring and stuff, but I just look at it the law last man standing game at the right technology and you know a couple of years. It will turn around and then there's going to be beautiful revenues.
Speaker Change: Really long term revenue and we have the right our investment in technology.
Speaker Change: Now are we going to start seeing some recovery in telecom spend and the first being in South East Asia Latin America, India. All the expansion in terms of starting to upgrade their networks to <unk> and their wireless transporting the single biggest mechanism and the really really hungry for expanded band.
Speaker Change: With data read for transport because fiber is not an option.
Speaker Change: So we are really very well positioned there.
Speaker Change: And then you you'll come back to the fact that holds the recovery looking like Oh, My Gosh, I mean last quarter.
Speaker Change: I think Dwayne pointed out like you said like alternative optical things must be pretty done yes, they're very down in fact, there are horribly down on the wireless side last quarter and and now we have all the indications that there's going to be a steady improvement in bookings and we are booking things that actually.
Speaker Change: So he is going to recover or the entirety of air next year.
Speaker Change: And beyond 45, it's going to really pick up even more strongly so.
Speaker Change: Things are beginning to look positively up on wireless infrastructure and seem to be pretty.
Speaker Change: Italy recovery, which engine okay.
Speaker Change: Okay, Great I appreciate that Oh that summary, there maybe touching on another topic that I had been hit on much today here in storage I think he made one brief comments about some some progress there at flash memory summit.
Speaker Change: I think you've been quoted publicly at our Investor Conference talking about a revenue bogie of that category of $50 million to $75 million I think that was applied to the calendar year 'twenty six I'm wondering if you're if you're progressing well towards that generic goal.
Speaker Change: Or above or below that just kind of general thoughts there. Thank you.
Speaker Change: So are you guys still hold the bogey Oh, the next and the three year window, but things are things that are a little bit slow in terms of that timeline right now because as expected as I told you much of the design traction with enterprise storage obligations and those guys are have delayed the rollout plans.
Speaker Change: You're right a lot of inventory on their side as well and so that's the only big bogey number it may shift out of bed, but theres no reason to change our view on all big independent storage business can be.
Speaker Change: So yeah.
Speaker Change: Yeah, that's absolutely right, what you said, but what we are trying to do right now is proliferate our Panther beyond just a story of gap, Inc, and Steve.
Speaker Change: Steve talked debate there are like compute server to subsequent terms and expand the scope beyond that and so it's getting a lot of traction right now in what we call <unk>.
Speaker Change: The customer evaluation and Bruce proofs of concept with giving the customer itself.
Speaker Change: So to help that process, we also rolled out our software defined.
The storage.
Speaker Change: That mimics Panther, what that customers can prepare their solutions using the hardware to be ready okay.
Speaker Change: Okay, great. Thanks for the comments Kishore I, that's all for me.
Richard Shannon: Thanks Richard.
Richard Shannon: Okay.
Speaker Change: And our final question comes from Toray Svanberg Stifel.
Toray Svanberg: Yeah. Thanks, I just had a follow up.
Toray Svanberg: Sure I know you've been sampling the Rushmore 200 gig claim.
Toray Svanberg: OFC this year.
Toray Svanberg: Just wondering as far as timing of revenue there.
Toray Svanberg: And where would that revenue to come initially between regular optical modules versus.
MRO or AUC.
Speaker Change: Oh, so that's a very good question Tory I think now we can all are I think the ski equal out. The flavor was just give me the same old DSP is much much much much lower power right and L. Autos are being considered via being the champions of Eldorado's, but but these chicago's about just give me those darn DSP.
Speaker Change: With like a fraction of the power and that's because the Mojo that tells you how complex and difficult. These are these Pam four modulation system is as you start increasing the bandwidth and the problem gets even more challenging in the corporate side.
Speaker Change: The active electrical cable you you will so this is really a big boy game in terms of technology and as it heads towards is we feel very good so with regarding the 200 gig really the only one who's really looking at 200 gig is really the AI type systems, and it's really driven by Nvidia right now all the other data center folks are.
Speaker Change: Sort of the Ethernet types or that there's been some a lot more time for this to happen having said that you are not real in this market unless you have everything in the world wants and so we're getting to getting up to that and we hope to showcase our rushmore product in a full blown way with multiple vendors in the OFC, there's just going to come about.
Speaker Change: A couple of months, but okay three months away, but yes, that's the goal here and a really theres no real customer for.
Speaker Change: Two under Geely anyway, other than Nvidia or trying to get ahead and and we have told us before Nvidia is developing its own DSP solutions that'll be their first boyfriends number one and then hopefully they expand the scope to other multiple vendors to secure their supplies in the future.
Speaker Change: Very helpful. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you everyone.
Speaker Change #100: And the last question I want to thank you. All are this quarter will be president and the number of financial conferences in person and virtual events.
And we will post the details of the calendar on the Investor Relations page so.
Speaker Change #100: And we look forward to speaking with you again soon thank you very much.
Speaker Change #100: Yeah.
Speaker Change #101: Thank you. This does conclude today's teleconference. We thank you for your participation you may disconnect your lines at this time.
Okay.
Speaker Change #101: [music].
Speaker Change #101: Okay.
Speaker Change #101: Okay.
Speaker Change #101: Yeah.
Speaker Change #101: Okay.
Speaker Change #101: Yeah.
Speaker Change #101: Yeah.