MaxLinear, Inc

Greetings and welcome to the Max Linear Incorporated 4th Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Nicholas Aberle, Vice President, Finance and Investor Relations. Thank you, Nicholas. You may begin.

Thank you, Operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's fourth quarter 2021 financial results. Today's call is being hosted by Dr. Kishore Sindhripu, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for first quarter 2022 revenue, revenue growth expectations in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, effective tax rate and interest and other expense. In addition, we will make forward-looking statements relating to trends, opportunities, and uncertainties in various product and geographic markets, including without limitation, statements concerning opportunities arising from our broadband, wireless, infrastructure, and connectivity markets, and opportunities for improved revenues across our target markets. These forward-looking statements involve substantial risks and uncertainties, including risks arising from competition, supply constraints facing the semiconductor industry, global trade and export restrictions, the impact of the COVID-19 pandemic our dependence on the limited number of customers, average selling price trends, and risks that our markets and growth opportunities may not develop as we currently expect, and then our assumptions concerning these opportunities may prove incorrect. More information on these and other risks are outlined in the risk factors section of our recent SEC filings, including our Form 10-K for the year ended December 31st, 2021, which was filed today. 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 2021 earnings release is available in the investor relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenues, gross margins, operating expenses, income or loss from operations, interest and other expense, income taxes, net income or loss, and net income or loss per share on both a GAAP and non-GAAP basis. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in the press release available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges. including stock-based compensation and its associated tax effects. Non-GAAP financial measures discussed today do not replace the presentation of MaxLinear's GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. Lastly, this call is also being webcast, and a replay will be available on our website for two weeks. And now let me turn the call over to Kishore Sindhripu, CEO of MaxLinear.

Thank you, Nick, and good afternoon, everyone. Our Q4 revenue was $247.9 million, up 8% sequentially and 27% year-on-year, with strong contributions from our connectivity and infrastructure in markets. Most notably, Wi-Fi and Ethernet product categories had breakout performances and grew in excess of 40% quarter-on-quarter. We exited Q4 on $100 million annualized Wi-Fi revenue run rate and expect to build upon this momentum throughout 2022. In infrastructure, 5G network build-outs are driving relative strength in 5G wireless access RF transceiver ramps, along with strong demand for wireless backhaul modems and RF transceivers. Our growth in Q4 and 2021 was driven by strong secular growth and company-specific drivers, including silicon content increases, market share gains, and solid traction with our new products across all our end markets. This momentum gives us strong confidence in our ability to drive solid growth into 2022. In Q4 2021, non-GAAP gross margin was 61.7%, and our non-GAAP operating margin hit a five-year high of 31%. Our Q4 end market revenue consisted of broadband access at 52 percent, connectivity at 21 percent, infrastructure at 13 percent, and industrial multi-markets at 14 percent of overall revenues. Now turning to some of the Q4 business highlights. End market fundamentals within broadband and connectivity space show robust growth trends as carrier and cable operators increase their capital expenses to expand network infrastructure and home CPE equipment capabilities to support the proliferation of bandwidth-intensive consumer applications and services. Operators and carriers are in the early stages of a multiyear network upgrade cycle, which is validated by their recent earnings commentaries on capital expense increases. We also expect the U.S. federal government's initiatives, such as the Rural Digital Opportunity Fund, to stimulate additional demand for delivering fixed broadband services to millions of underserved homes. We are well positioned to grow solidly and to outperform broadband connectivity market growth rates through share gains, content increases, and new product ramps. Our industry-leading suite of platform-level solutions, including our URX family of gateway SOCs and network processors for supporting 10 gigabits per second WAN access via Ethernet, PON, or coaxial cable, and our Wi-Fi 6, 6E, and next-generation Wi-Fi 7 in-home wireless distribution products. Recently, our latest Wi-Fi Wave 600 Series 2 chipset was selected by the Wi-Fi Alliance as its access point testbed device for its Wi-Fi 6 Release 2 certification. In 2022, we expect early-stage fiber RAMs of new and existing design means to more than double our share in the large fiber-to-the-home market, where we are historically underpenetrated. Additionally, we have several Wi-Fi 6 design wins outside our core operator gateways, which will drive solid connectivity growth in the second half of 2022. Moving to infrastructure markets, in 2021, our revenues exceeded $120 million. In 5G wireless access, Q4 marks the fourth consecutive quarter of 20% plus revenue growth, which is primarily driven by 5G RF transceiver shipments to North America. Also, in wireless backhaul, 5G network buildouts are driving strong circular growth trailwinds for our microwave and millimeter wave backhaul transport RF transceivers and modem deployments. Our microwave RF transceivers are the industry's only integrated backhaul solutions to support multi-gigabit links using channel aggregation, and they are rapidly replacing legacy discrete RF solutions. Microwave RF transceiver revenues doubled in 2021 on a year-on-year basis, and we expect them to double again in 2022. In the optical high-speed data center interconnect market, we shipped modest volumes during Q4, with a more meaningful future ramp dependent on the availability of peripheral components to build full system solutions. Given the lack of visibility on supply in the near to be term, we expect subdued contributions from our 400 gig PAM4 DSP products in the first half of 2022. Despite the continuing delays to our optical ramp, we have high confidence in our long-term success as the 400 gigabits per second PAM4 market is still in its infancy. Meanwhile, we have new customers designing in our 60 nanometer 400 gig PAM4 solution in parallel with our next generation 5 nanometer CMOS solution. In the optical data center market, in 2021, we have expanded our portfolio to include TIAs, retimers, and support for active electrical cables. We are also bullish on our position in the 800-gig PAM-4 DSPCs with our industry-leading first 5-nanometer CMOS Keystone product family. In summary, our company's specific growth drivers, which include market share gains, new markets, and product cycles, and increased silicon content per platform are feuding growth in our target markets. These company-specific growth catalysts are prevalent across both new and existing customers and all our end markets. Our continued focus on developing new and disruptive technologies across our high-valued end markets should enable us to outperform semiconductor industry growth rates over the long term also. With that, let me turn the call over to Mr. Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.