Q4 2024 MaxLinear Inc Earnings Call
Speaker Change: Greetings and welcome to the Max Linear 4th Quarter 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. A 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. As a reminder, this conference is being recorded.
It is now my pleasure to introduce your
Leslie Green: Host, Leslie Green, Investor Relations. Thank you, Leslie. You may begin.
Speaker Change: Thank you, Alicia, and good afternoon, everyone, and thank you for joining us on today's conference call to discuss Max Linear's fourth quarter 2024 financial results.
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.
Speaker Change: Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for the first quarter of 2025, including revenue, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses.
Speaker Change: Gap and Non-Gap Interest and Other Expense and Gap and Non-Gap 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.
Thank you very much.
Speaker Change: New products including the timing of production and launches of such products
Speaker Change: Demand for the adoption of certain technologies and our total addressable market.
Speaker Change: These forward-looking statements involve risks and uncertainties, including risks outlined in our risk factors section of our recent SEC filings, including our Form 10-K for the year ended December 31, 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. The fourth quarter 2024 earnings release is available in the Investor Relations section of our website at MaxLinear.com.
Speaker Change: In addition, we report certain historical financial metrics, including but not limited to gross margin, operating margin, operating expenses, and interest and other expense of both GAAP and non-GAAP basis.
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 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.
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.
Speaker Change: We are providing this information because management believes it is useful to investors as it reflects how management measures our business.
Speaker Change: Lastly, this call is being webcast and the 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? Thank you, Leslie, and good afternoon, everyone. Our Q4 results exceeded the midpoint of our guidance.
Speaker Change: at $92.2 million in revenue, non-GAAP gross margin of 59.1%, along with a significant reduction in operating expenses.
Speaker Change: We continue to see meaningful improvement in our customer order rates and backlogs. The solid signs of recovery combined with new product traction in strategic growth areas such as high-speed interconnect.
Speaker Change: PON, Wi-Fi and Ethernet provide us confidence that we can achieve continued growth and improvement in our financial results throughout this year.
Speaker Change: Looking at our key markets, in infrastructure, the expansion of cloud computing is driving significant growth and design activity, and our high-speed optical data center connectivity. We made strong progress in 24 with design interaction and product calls for our 5-nanometer Keystone PAM-4 product.
Speaker Change: We exceeded our revenue targets in 2024 and are positioned for exciting growth in 2025.
total of Keystone product across multiple customers into high-volume opportunities
Speaker Change: Active optical cables and active electrical cables are ramping as expected. We anticipate additional qualification and rollout for 800 gigabit and 1.6 terabit data center applications throughout 2025 and into 2026.
Speaker Change: The superior power and performance advantages of Keystone continue to be the mainstay and focus for our differentiation even in our next generation Rushmore family of 200 gigabit per lane PAM-4 TIAs and DSPs for 1.6 terabit interconnections.
Speaker Change: In wireless infrastructure, our wireless 5G access O-RAN single-chip radio unit and our backhaul transceivers and modems are essential for supporting increasing mobile usage and data rates as well as new functionalities such as Edge AI.
Speaker Change: We believe we are positioned strongly for content growth and share gains this year as service provider capex spend improves and as our continued design wins at year-one customers beginning to ramp, particularly in the second half of 2025.
Speaker Change: Also, within our infrastructure revenues, our Panther 3 series hardware storage accelerators are providing exciting incremental growth opportunities.
Speaker Change: At the 2024 Supercomputing Conference in November, we announced a new software-defined storage solution in partnership with Quanta to address the needs of AI, high-speed computing, and other data-intensive applications.
Speaker Change: This joint solution enables rapid access to massive datasets while enhancing both performance and scalability.
Speaker Change: As we look ahead, our Panther product is strongly positioned within the data center, enterprise storage applications, and at the edge of the network with multiple design wins with major customers and value-added resellers across key geographies.
Speaker Change: In Ethernet connectivity, MaxLin has one of the broadest and most competitive portfolios of 200 gigabit Ethernet switch N5 products for the enterprise and small and medium business switch markets.
Speaker Change: Swan Creek, our single-chip integrated 8-port 5-inch switch is gaining traction across multiple enterprise customers looking to upgrade their networks to 200-gigabit Ethernet rates.
Speaker Change: Our Tier 1 North American Enterprise OEM customer is expected to ramp to production in 2025 and contribute to significant Ethernet revenue growth over the coming years.
Speaker Change: In addition, we are seeing widespread interest from next generation broadband gateways and routers.
Thank you.
Speaker Change: Shifting to broadband and Wi-Fi connectivity, our considerable focus is on POND to expand our broadband.
Speaker Change: target addressable market in addition to a strong cable data offering of DOCSIS 3.1
Altra Doxis and Doxis, 4.2.
Thank you very much.
Speaker Change: We have a promising engagement at another Tier 1 North America carrier, which we believe can become a major opportunity for us in 2025 and 2026.
Speaker Change: In conclusion, a strong product roadmap execution has begun to deliver meaningful traction and target a decimal market expansion across several high-value categories.
Thank you.
Speaker Change: As we begin 2025, we are not only energized with the solid growth prospects in 2025, but we also feel confident of achieving sustained revenue growth in the coming years. With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.
Steve Litchfield: Thank you, Kishore. Total revenue for the fourth quarter was $92.2 million, up 14% from $81.1 million in the previous quarter.
Steve Litchfield: Infrastructure revenue was $27 million. Broadband revenue for the fourth quarter was $29 million. Connectivity revenue was $20 million and our industrial multi-market revenue was $16 million.
Steve Litchfield: Gap and non-gap gross margins for the fourth quarter were approximately 55.6% and 59.1% of revenue.
Steve Litchfield: The delta between GAAP and non-GAAP gross margin in the fourth quarter was primarily driven by $3 million of acquisition-related intangible asset amortization.
Steve Litchfield: Fourth quarter GAAP operating expenses were $92.4 million and non-GAAP operating expenses were $61.3 million.
Steve Litchfield: The delta between GAAP and non-GAAP operating expenses was primarily due to stock-based compensation and performance-based equity accruals of $20.4 million combined.
Steve Litchfield: Acquisition related costs of $7.3 million and restructuring costs of $3.1 million.
Steve Litchfield: Gap and non-gap loss from operations for Q4 2024 was 45% and 7% of net revenue.
Steve Litchfield: Gap and non-gap interest and other income during the quarter was $351,000 and $677,000 respectively.
Steve Litchfield: In Q4, cash flow used in operating activities was approximately $28 million. We exited Q4 of 2024 with approximately $120 million in cash, cash equivalents, and restricted cash.
Steve Litchfield: Our day sales outstanding was up in the fourth quarter to approximately 85 days. Our gross inventory was down versus previous quarter as we continue to make improvements with inventory turns slightly less than one. This concludes the discussion of our Q4 financial results.
Steve Litchfield: With that, let's turn to our guidance for Q1 of 2025. We currently expect revenue in the first quarter of 2025 to be between $85 million and $105 million. Looking at Q1 by end market, we expect broadband and infrastructure to be up.
Steve Litchfield: Connectivity is expected to be approximately flat and industrial multi-market is expected to be down.
Steve Litchfield: We expect first-quarter GAAP gross margin to be approximately 54.5% to 57.5%, and non-GAAP gross margin to be in the range of 57.5% and 60.5% of revenue.
Steve Litchfield: We expect Q1 2025 GAAP operating expenses to be in the range of $93 million to $99 million. We expect Q1 2025 non-GAAP operating expenses to be in the range of $56 million to $62 million.
Steve Litchfield: We expect our Q1 GAAP and non-GAAP interest and other expenses to be in the range of approximately $1 to $2 million.
Steve Litchfield: We expect $2.7 million tax expense on a GAAP basis and non-GAAP tax of zero.
Steve Litchfield: We expect our Q1 GAAP and non-GAAP diluted share count to be approximately $85.5 million each.
In closing...
Steve Litchfield: Another quarter of improvement in customer orders and continued new product traction give us confidence that we are entering our next stage of growth in 2025.
Steve Litchfield: We're excited that our innovation and investment in strategic applications, such as optical high-speed interconnects, wireless infrastructure, storage, and more, are being used in a variety
Steve Litchfield: Ethernet, Wi-Fi, and fiber broadband access gateways are beginning to deliver tangible opportunities for near-term and long-term growth.
Steve Litchfield: In addition, our strong focus on operational efficiency in 2024 is positioning us for positive leverage in our business model and a return to profitability this year. With that, we'd like to open up the call for questions.
and the other one.
Steve Litchfield: Thank you. We will now be conducting a question and answer session.
Speaker Change: As a reminder, 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.
Speaker Change: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Speaker Change: So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may re-queue, and time permitting, those questions will be addressed.
One moment, please, while we hold for questions.
Thank you.
Speaker Change: Thank you. Our first question comes from the line of Tor Savenberg with EFL. Please proceed with your question.
Speaker Change: Yes, thank you. So my first question is, obviously, you know, you're still...
Thank you.
Speaker Change: But, you know, you are the first one to report among your peer groups. So, I was just hoping, you know, both Kishore or Steve, could you just talk a little bit about, you know, the events of this week, especially from Monday, you know, how do you view this whole topic as far as potentially impacting the optical interconnect market?
Speaker Change: Well, Torrey, you know, we're pretty excited that we now have recorded, you know, a strong, you know, 2024, we exceeded our own internal targets and revenues.
Speaker Change: We have designed wins and shipments in various quantities and stages with all the top module makers in the world with their end customers spanning across both China and the US.
We are a high-speed interconnect, you know, transport company.
Speaker Change: So, no matter what happens in the compute, the links are going to be more and they're going to be faster and speedier.
Speaker Change: We have the right technology for low-power and high-efficiency performance targets that these markets will require.
Speaker Change: So, from my point of view, you know, processing content is one thing, but the links are given.
Speaker Change: And I think it really democratizes for people like us to really, really participate in a majorly, what I call, expanded and singularized market if that were to take hold.
Speaker Change: Yeah, that's great perspective. And as my follow-up, Steve, the DSOs have been all over the place this year. You know, they came down very nicely in Q3, but now they came back up again in Q4, obviously still not as bad as Q1, right? But help us understand what's going on there, and how should we think about DSOs here in Q25?
Speaker Change: yeah I think I think they were probably understated a little bit in Q3 it was really product mix and just some of the sales that we had there so they did come up a little bit but I would I would argue that in this 80 to 85 range is probably where you'd likely see it the rest of the year
Thank you.
Speaker Change: Got it. But that explains why, you know, I think your cash balance came down.
What was it, $30 million?
Speaker Change: Cash balance did come down, but that was already reflected. We talked about that last quarter. A lot of that was, I mean, there was some restructuring costs, but there was definitely kind of movement around the balance sheet, but certainly that was as expected in Q4.
Got it. Thank you.
Speaker Change: The first time I've seen this video, I've seen it in the video.
Speaker Change: Thank you. Our next question comes from the line of Ross Seymour with Deutsche Bank. Please proceed.
Ross Seymour: Hi guys. I wanted to talk about the bookings and the backlog. It's, I think, the third quarter in a row you've seen those improve, so it's nice to see that corner being turned. Can you give a little bit of color on where you see that happening, either by end market or geography? And perhaps even, is it company specific or is it just kind of the cycle is finally turning? Any sort of color like that on those metrics would be great.
Speaker Change: Sure, Ross. Yeah, thanks for the question. I mean, yeah, we're definitely continuing to see really nice improvement on the booking side, starting backlog, I mean, going into this quarter versus the previous two or three quarters.
Speaker Change: Is much higher, so we're feeling much more confident. Just visibility, is certainly improved. Customers are starting to understand lead times and recognize that they can't get product when they...
Speaker Change: asked for tomorrow, so we're seeing some nice improvements as far as visibility and forecasting. I mean, your question is it max linear versus everyone? It's... I mean, look, we've kind of...
Speaker Change: In the broadband market, it's certainly been a lot worse over the last two years.
Speaker Change: And so I would say that that is starting to normalize a bit. I also, Kishore, in a lot of his statements, talked about the new products. And I think as we look at 2025, I mean, certainly we've got a recovery. I think that'll be a nice tailwind.
Speaker Change: But I think what we're most excited about is these new products that are coming and these new programs that we've won So there's certainly market share gains that we're seeing and new products that are starting to ramp
All right, thanks for that, and I guess.
Speaker Change: Steve, probably this one's for you as well, just on the restructuring efforts, not the fourth quarter impact per se, but just wanted to make sure that there's no big change. And I think you guys talked about what 220 million plus or minus for the full year on the OPEC side. Just wanted to see that that's still the right trajectory and if there's any sort of lumpiness to the path on that between 1Q and 4Q.
Speaker Change: Yeah, I mean so the restructuring certainly underway and you know the biggest portion of that was in in Q3 And we had talked about kind of some residual That continues after that, but we're definitely seeing nice improvements in OPEX spending I don't think the expectations have changed. I think it is I do expect it to be somewhere between 220 and 225
Speaker Change: for the year and I would expect as kind of some of these final effects take place that you'll kind of see it move down throughout the year, modestly, not a huge change there but it'll come down a little bit throughout the year.
Thank you.
Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Tim Savagew with Northland Capital Markets.
Please proceed with your question.
[inaudible]
Hi, good afternoon.
Question on the...
Speaker Change: And the optical front, I guess. I think you've been talking throughout the year and you've increased this range.
Speaker Change: to more than $30 million in revenue for the year. I wonder if you could tell us...
kind of where that ended up coming in.
And, you know, given your volume comments...
Speaker Change: Seems like you must have had a pretty good January, I guess. Can we infer kind of a big step up there? I know you've got an infrastructure higher just looking at the million unit volume versus whatever your revenue may have been.
in 24, and I'll follow up from there.
Speaker Change: Sure. Hey, Tim. Yeah, I mean, I think I'd probably echo what was said in the previous statements. I mean, I think we're really pleased we came in higher than what we had expected. We didn't...
Speaker Change: We're not breaking out the exact number, but we started the year between 10 and 30.
Speaker Change: And I think, you know, we probably landed shy of the 40 number that we were stretching to, but certainly, you know, well above the high end of the range that we set originally. So we're pleased with the progress. I think, as we've talked about, I mean, a lot of our.
Speaker Change: wins and you know future production revenues are really driven by 800 gig conversion and those are just now happening this year so so it's an exciting time and you know looking forward to talking more about that in the coming quarters
Speaker Change: Or perhaps on the next question, wanted to see if you could, if you would like to set a range for this year similar to what you, not a similar range of numbers, of course, but conceptually similar.
Speaker Change: about what you think that optical business might be able to generate as you sit here in in early 25s.
Speaker Change: Yes, sure, Tim. Look, I don't think much has changed on this front. I think, I mean, we've
Speaker Change: talked about kind of the 60 to 70 million dollar number. I think that's a very reasonable number that you can target right here. Hopefully these new
Speaker Change: Data centers roll out as expected. Some of that's out of our control, but certainly, you know, we're doing our part getting the wins and getting the qualifications completed. And so as soon as, you know, then we see our customer, or I guess in this case, our customer's customers roll out these programs.
Okay, last one for me.
Thank you.
Speaker Change: I guess a little while ago, we saw an agreement. Well, actually, Amazon's been making a couple of agreements and announcements of late, but one with Jable.
Speaker Change: who I think is a module partner of yours dating back to OFC where Amazon took a bunch of warrants in Jable.
Speaker Change: 800 gig transceiver module relationship, but it seems like it could. I wonder if you have any comment on the potential impact of that agreement on MaxLinear.
Speaker Change: Well, I'm not going to comment on those agreements. I will confirm, as I think many of you have seen, we did demonstrate and we've been working with those guys for some time.
Speaker Change: but we definitely I mean we demonstrated this at at OFC last year and and they've been a good partner.
Thanks very much.
Good. Thanks, Jim.
Thank you.
Our next question comes from the line of...
and Colleen Bolton with Edam and Company.
Thank you for listening. Please proceed.
Speaker Change: Steve, I just wanted to ask a follow-up on Tory's question. Cash down to about $120 million. Guidance probably has you at a small few million, maybe mid-single-digit million net income.
Speaker Change: Non-GAAP net income loss in the March quarter. Are there any major changes in working capital or any residual Restructuring cash charges to hit you in the March quarter. I just any sense where you think cash might you know What what cash might do through the quarter?
Yeah.
Speaker Change: So, good question, Quinn. I think, as we've talked about cash, nothing's really changed on that front. We do expect inventory to continue to come down, so that's good. Working capital, I'm sure.
Speaker Change: As revenues start to recover here, and we burn down those inventories, we'll certainly have to replenish that. Out-quarter revenues are certainly going to be above where they are today, so we'll have to start building on that, and we're doing our best to manage it.
Speaker Change: Of course, you know, we've talked about cash flow break even somewhere kind of mid-year and, you know, it's probably Q2, Q3, likely Q3 is where I'd probably put it today, but we feel very comfortable with that, yeah.
Okay.
Speaker Change: Thanks for that, Steve. And then, I guess maybe for Kishore...
Ross Seymour: Two questions, you talked about some design wins, a tier 1 design win I think in the wireless infrastructure market beginning to ramp in the second half of 2025. I wasn't sure if that was for the Sierra product or if that was for the backhaul product, if you could provide any more detail there, that would be great. And then sort of similarly, I think you mentioned now a promising engagement with an additional North American...
Speaker Change: Tier 1 on the PON side. I think in the past you've already talked about working with two of the largest in North America, so wondering if that is a third Tier 1 in North America or maybe I misheard something. Thank you.
Well, you know, first, to answer your...
Thank you very much.
on National Geographic.
I know Mr. Seedripu is unique and he's a leader.
Speaker Change: and it's the beginning of what would be an old industry trend.
Thank you very much.
Thank you very much.
Speaker Change: and Antony T. Hopefully you're at Mobile World Congress and you'll be able to catch a lot more glimpse of these products that I'm super excited about, for sure.
Speaker Change: regarding on the broadband side, a Tier 1 operator we refer to where we're in engagement, we expect that to be a major driver in 2026, but could you have a little bit of revenue in 2025? Sure.
Speaker Change: Now, we talked about two major North America operators, but you must understand that we never talked about a gateway design per se in a Tier 1 operator. We talked about there are multiple product lines within these Tier 1 operators, but this would be...
Speaker Change: This will be a whole gateway design and a Tier 1 operator.
Thank you.
Is that PON and Wi-Fi or just the PON chip?
Speaker Change: Yeah, it's both, right? When I refer to Gateway these days, it's de facto. It has Wi-Fi. It's a full 10GX, GS PON gateway with a processor that supports
Speaker Change: 10 gigabit speeds, plus the world's first tri-band, single-chip Wi-Fi access point solution, along with their own Ethernet quad-core, 2.5 gigabit Ethernet files.
Perfect. Thank you, Kishore.
Thank you.
Thank you.
Speaker Change: Thank you. As a reminder, press star 1 to ask a question at this time.
Speaker Change: Our next question comes from a line of Sugi Delsuvia with Ross Capital Partners.
Please proceed.
Sugi Delsuvia: Hi, Kishore. Hi, Steve. I just wanted to, Steve, maybe double click down on the 1Q guidance. Appreciate the segment color, but I'm just trying to understand if infrastructure...
Speaker Change: is likely growing and continuing to ramp up here. You know, where the offsets to that are, and what would, you know, have you be at the low end if you have a segment like infrastructure that's.
Speaker Change: I'm just trying to understand some colors, the puts and takes there.
Speaker Change: Yeah, look, I think we're excited. Amstructure is probably the biggest grower of the year, and that's certainly the one.
Speaker Change: that we've got a lot happening around. But I mean, we'll definitely see broadband grow as we stated in Q1 and likely be in the year at a much higher level. I mean, the one that's been weak has been industrial.
Speaker Change: And I think we're still, like many of our peers, kind of working through that. Demand is soft. There's a little bit of inventory out there, but I think it's really more about demand. And certainly connectivity is starting to recover as well as we talked about along with broadband.
Okay, that's helpful, Steve. Thanks.
And then maybe for Kishore, I know...
Speaker Change: Merchant vendors like Marvell. I'm just curious, you know, if you could update us on your thoughts on whether CPOs impact your opportunities orthogonal or whether it creates opportunity or whether it's something a risk. Any color there would help as people are looking for that in 800 1.6 T.
Thank you.
Speaker Change: Well, you know, CPOs have now done the third incarnation in the discussion in the data center optical interconnect space, right?
Speaker Change: So, but there is always other vendors with optics and CPU is a part of the discussion engagements we always constantly have.
Speaker Change: But our goal is a pure, you know, DSP, PAM-4, TIA-type vendor story, where there's linear, you know...
Speaker Change: You know, linear optical transceivers, if you will, or, you know, the next generation 400 gigabit per lambda silicon for that, that supports it, you know, I look at our presence and focus on data center is beyond optics.
Speaker Change: And that's why we call that high-speed interconnects, right, because we're a silicon provider. It spans not just the interconnect connection, but any kind of, you know, high-throughput interconnects.
Thank you very much.
You know, there's many, many years before CPOs
Thank you.
Speaker Change: I think this topic has come and gone in our industry, and every time people provide different solutions or, you know, venture into different ideas, we have to pursue all these directions. Okay?
Great.
Thank you for watching.
Speaker Change: Thank you. Our next question comes from the line of Carl Ackerman with BNP Paribas. Please proceed.
Thank you.
Hi, this is Sam Feldman, on for Carl Ackerman.
Speaker Change: So, you indicated that your DSP business will ramp in 2025, given your engagements at hyperscalers. What gives you confidence it can double, given Amazon indicated that 800GB may not ramp till 2026? Does this mean the DSP ramp will have more importance with 800GB?
Thank you.
Speaker Change: See, look, there's a large, large opportunity that is 400 gig.
Speaker Change: And 800 gig will again last for many, many years. I think that also answers Suji's question about CPUs, honestly.
Speaker Change: So, our revenues are a mix of both 400 gig and 800 gig, and as Tori pointed out, we are new entrants in this market space, and the third player, so we have a large revenue in the Optical Indicator that we can go and access.
Speaker Change: regarding you know there are two markets here we have always maintained that
Speaker Change: The line side is really delayed relative to what I call the compute side, which is the AI network.
Speaker Change: and the very, very different markets. So, the line side markets are indeed delayed, not delayed, I would say they've always been sort of the 1800 gig comes much later. And I think they're on track on the front, you know. And Amazon is not the only one, right? There's Meta, there's Microsoft and everybody else.
Speaker Change: And our movement, frankly, followed the cadence of the lineside markets, and we have said that we are not a player in the Nvidia market in terms of, you know, as being, you know, what happened in the past.
Speaker Change: So that is the reality of it. So I think that you are sort of, you know, conflating both the markets and very different markets in terms of the timeline, how they're evolving. And same will be true for 1.6 terabit, by the way. I would say that it'll be a long while before 1.6 terabit.
Thank you very much.
Understood. Thank you.
Thank you. Bye-bye.
Thank you.
Unknown Moderator: Our next question comes from the line of David Williams of Ben Farm Company.
David Williams: Good afternoon, gentlemen. Thanks for taking my questions. I guess maybe first, and Kishore, I think you mentioned this in your script earlier and I may have missed it, but just wanted to see if you give us a little indication on the 2.5G Ethernet and byproducts at Swan Creek there. I know you've talked about Donovans there and major tier one enterprise OEM customers.
and the Swan Creek Product Line.
Thank you.
David Williams: and it's pretty much designed with all the major players on routers and gateways and even on the industrial side as well.
David Williams: It's a very unique product. It can do multiple ports, all the way from four to eight. And two of those switch ports can be compounded to do a 32-port solution as well.
David Williams: So, it's got extremely good traction and with this Tier 1 OEM, we were supposed to have actually ramped stronger towards the end of last year.
David Williams: That has not happened, but it's gotten delayed, but the ramp continues in the sense that the plans remain intact. They're major platforms, and I believe...
David Williams: that as we head towards the rest of the year, it will start ramping, and in 2026, 2027, 2028, 2029, it will be in a pretty strong runway position.
and the overall product.
Thank you very much.
in equal proportion are more tilted towards the multiprofile switch.
Speaker Change: Very good. Thanks for the color there. Anything regionally that you're seeing that to speak of in terms of demand trends around maybe China or even North America, how are you seeing, I guess geographically, how are the demand trends? Ben, anything you would point to there? Thank you.
Ben: Absolutely. You know, most of the, you know, almost all of these designs and these markets happen in Taiwan or China and that's where most of our activities, our support activities, sales activities are. So I would say that, well, the end markets are, you know, the end markets are, you know,
The End
Ben: which you should expect given the enlarged markets in the world, right? So we're quite happy about it.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Alex Valero with Moove Capital Markets.
Thank you for your time. You may now disconnect.
Alec: Hey guys, thank you for taking my question. This is Alec on Fernando.
Speaker Change: I have two quick questions. So my first question is, as we go from 800G to 3.2T, do you guys see yourself as being more attractive to customers? If so, what do those dynamics look like?
Look, uh...
Speaker Change: Really, really speaking, you have the entrenched incumbents as one would duly give them credit for, which is both Marvell and Broadcom. They come at it very, very differently in terms of the competitive force, if you will. However, there's only one credible...
Speaker Change: You know, new entrant on the optical transceiver space by far. There's nobody even close to what we offer.
Thank you very much.
Speaker Change: One of the analysts brought about the Amazon delay, for example.
Speaker Change: So, the differentiation really comes from extremely low power, and we all now know, whether it's an AI network or any data center, power, power, power is the key, and that's where we build our core competencies as a company.
Speaker Change: So, I believe that, you know, and we've also seen shortages on DSPs and optical module solutions in the last few years as all data centers try to upgrade to new technologies. So there's a genuine demand for a third supplier.
Thank you very much.
Speaker Change: And the fact that we went to $0 to $40 million last year is proof of that. It's a million units. That's pretty substantial. And hopefully, we can do much, much better this year and leading up to next year. And I think we are very pleased with the progress. Now...
Speaker Change: It will entail a lot of investment on our side, I know, and all the analysts.
Speaker Change: You always have OpEx questions, but I just want to be very, very clear that this is a strategic area of interest, investment, a high-growth market area, and we intend to continue to invest very, very strongly in this space to expand our portfolio beyond the optical space.
Speaker Change: Okay, I think that's where our strategic trust is right now in the infrastructure space.
Speaker Change: Got it. Thank you. Just for a quick follow-up, so with your guys' tech in the world of co-packaged optics, do you guys believe that advantages you guys, disadvantages you guys, or is it net neutral to you?
Thank you.
Speaker Change: I would say it may be a net positive because, you know, if our competitors are invested in optics and they try to do a fully integrated CPU, there are more optics producers in the world, you know, who are more, who are competent and really, really excellent at that.
Speaker Change: And the market capacity will require that those optics players are part of the supply ecosystem.
Thank you very much.
Thank you very much.
Alex: Got it. Thank you for that. Appreciate it, guys. Thanks, Alex.
Thank you.
Our next question comes from Christopher Rowland, Susquehanna International Group.
Thank you.
Speaker Change: Maybe if you had a range of optical units that we might expect in 2025, like, would there be a bull case to do, you know, 2 million units or maybe even more, or, you know, put another way, maybe market share. And maybe tying into this, Kishore, you talked about low power.
Speaker Change: How should we think about low power as you move to four nanometers but competitors move to three, will you still have that advantage?
Speaker Change: So, I'll let Steve talk to you about some of the colors on the display, but I just want to add these things that, obviously, competitive advantages and power and performance are incredibly important. We take that seriously, and we are absolutely confident we'll come out this thing, right? And that's the secret sauce of our design and architectural capabilities. That's number one.
Speaker Change: And the other part, this whole thing is like, you know, last I checked, the latest report, that 20 million units of transceiver modules have shipped.
Speaker Change: And we have told you that 1 million units we have shipped, so...
Speaker Change: I know it's not about 10% right now, I'm pretty proud of the 5% market share, right? That's the way I would give it.
Speaker Change: But beyond that, we don't provide color on these because there are various uncertainties on timing and that sort of a thing, but I would stand by the guidance that Steve earlier talked about.
Thank you.
Speaker Change: Great. And Kishore, maybe just revisiting, you know, Tori's question and all this concern about DeepSeek this week.
Speaker Change: I mean, it had your stock off quite a bit itself, maybe not as much as others, but was still off. And I understand your comments about democratizing AI.
Speaker Change: But it seems like democratizing AI on open source hardware is not very networking intensive.
Speaker Change: And so I just kind of wanted to revisit this, you know, how these more efficient architectures might affect
Speaker Change: Just in terms of DSPs, units, transceiver volumes for you guys...
Speaker Change: And if there was some sort of a reset in order rates, you know, when would we know? It doesn't sound like you've seen anything over the past week in terms of a reset. But any thoughts on how this would play out or when we would know?
Speaker Change: Well, this week is too short, number one. Number two is that...
Speaker Change: These dynamics are beyond my understanding and all I know is that we make extremely good products, very low power, high performance.
Speaker Change: And the demand is huge enough, even otherwise, before the AI world happened, that's when we started on this roadmap.
Speaker Change: Right, they will chat GPD before, right? Nobody knew they will chat GPD and that would drive the markets and Likewise, I don't know what DeepSeek is going to do But all I know is that even if there were no AI networks present, the market was very very huge
Speaker Change: So, from my point of view, this is a fantastic market. There is no reaction from me in any direction. Stay the course. The market will be exciting for us, for Max Lunier. And I really don't have thoughts about this. But I don't think we should be surprised of disruptive innovations. And that will make us more competitive and
Speaker Change: We have a huge appetite as human beings, right? We just eat whatever comes, how much or what cheap it is, right? So we'll just gobble more of it, but the damn dollars I don't expect to reduce, okay?
Great answer. Thanks, Kishore.
Thank you.
Unknown Moderator: Thank you. Our next question comes from the line of Tor Savenberg with Stiefel. Please proceed.
Speaker Change: Yeah, I just had a follow-up, Kishore, because, you know, there's a lot of talk about your optical DSP business, but you've also announced
Speaker Change: getting into AEC, ACC. There's obviously a discreet, you know, TIA market out there.
Speaker Change: So could you just talk a little bit about that? When we think about that 60, 70 million, is that all, I mean, is that predominantly optical DSP?
Speaker Change: or are you also starting to see some contribution from AAC, ACC?
Speaker Change: and one of your largest competitors just announced LPO here before the end of the year, so I assume, given your capabilities, you are now probably working on LPO as well, right?
Speaker Change: Absolutely. I mean, LPL is just a derivative of what we do as a larger DSP. So I don't know why people need such a big deal about LPL.
Speaker Change: Anybody can do this who has got a DSP PAM-4, that just means there are only three people, but that's still.
Speaker Change: and there will be some AEC, having said that, the AEC market is still pretty small.
Speaker Change: And we are, as the market being small and, you know, one data center up until now trying to deploy ADCs, it's still, the verdict remains unclear whether it's going to be a...
Speaker Change: So across the board promulgation because there are dynamics with the a copper side that are quite different So without getting into the details our own revenues are dominated going to be 800 gig 400 gig and some AECs We do have AECs that have already qualified
And therefore, we expect revenues to start.
Speaker Change: How big? I don't think it's still a big enough market there that would overwhelm any of the optical revenues that we will be generating.
So, regarding the LTOs, I think I've answered that question.
Thank you very much.
Speaker Change: We are doing everything, design-ins and so on and so forth, but I'm just being an honest assessment of our own revenues where they are.
Speaker Change: So the answer to your question is affirmative. On the TIAs, right, clearly we are one of the three DSP vendors on the optical side.
Speaker Change: And we work with partners on the TIAs, but it is foolhardy for us to think that we will be able to sell TIAs to our other two competitors on their platforms, right?
Speaker Change: So the expectation for our TIAs is so much more predominantly controlling our own platform and destiny and being cost competitive and power competitive, not as much as trying to build a TIA business. So I'm just...
Thank you very much.
Thank you.
Speaker Change: Yep, that's exactly the color I was looking for. Thank you, Kishore.
Thank you.
Unknown Moderator: Thank you. There are no further questions at this time. I'd like to pass the floor back over to Kishore for closing remarks.
Kishore Seendripu: So, thank you, operator, and I want to once again thank every one of you.
Speaker Change: Hey, happy new year. You all sounded muted. Just wake up. It's all exciting times moving forward.
Kishore Seendripu: and I would wish you a happy new year once again, and this quarter we will be presenting a number of financial conference and virtual events, we will post the details on our investor relations page. Thank you very much and happy new year once again to all of you.
Kishore Seendripu: This concludes today's teleconference. You may disconnect your line at this time. Thank you for your participation.
Two years later.
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