MaxLinear, Inc

Ladies and gentlemen, please hold the call. The conference will start in a few seconds. Thank you. Thank you. © transcript Emily Beynon Greetings and welcome to MAC's linear Q3 earnings 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, Leslie Grin, Investor Relations. Ms. Grin, you may begin.

Thank you, Vittoria. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's third quarter 2022 financial results. Today's call is being hosted by Dr. Kishore Sindriput, CEO of 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 the fourth quarter of 2022 revenue, revenue growth expectations in our principal target market, and gap and non-gap growth margin, operating expenses, effective tax rate, and interest in other expenses. 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, infrastructure, connectivity, and industrial markets, and opportunities for improved revenue across our target markets. Additionally, we may make forward-looking statements relating to the completion of the pending Silicon Motion transaction and its anticipated timing. These forward-looking statements involve substantial risks and uncertainties, including risks arising from the current geopolitical concerns, competition, supply constraints facing the semiconductor industry, global trade and export restrictions, the impact of COVID-19 pandemic, are dependent on a limited number of customers, average selling price trends, and the risk that our markets and growth opportunities may not develop as we currently expect, and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks is outlined in the risk factor section of our recent SEC filings, including our Form 10-Q for the quarter ended September 30, 2022, which we filed today. Any forward-looking statements are made as of today, and Max Littner has no obligation or... to update or revise any forward-looking statements. The third quarter 2022 earnings release is available on the investor relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenue, gross margin, operating expenses, income from operations, interest and other expense, income taxes, net income, and net income 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 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 Dr. Kishore Sindripu, CEO of MaxLinear. Kishore?

Thank you, Leslie, and good afternoon, everyone. Our Q3 revenue was $285.7 million, up 2% sequentially and 24% year-on-year basis. Non-GAAP gross margin was 62%, and non-GAAP operating margin was 33.9%, with cash flows from operating activities of $61.8 million. We continue to see exciting near and long-term growth drivers across fiber access gateway, Wi-Fi connectivity, wireless and optical infrastructure, and industrial applications, which will allow us to outperform our end markets via share gains and increased silicon content in customer platforms. Turning to the business highlights, our Wi-Fi connectivity business grew robustly in Q3 with revenues more than tripling year over year. Based on our revenue run rate, we believe we are well on our way to doubling our Wi-Fi revenues in 2022 versus 2021 and on target to deliver $200 million plus in sales in financial year 2023. Our strong Wi-Fi 6 and 6E offerings are expanding our customer platform attach rates and also driving a strong pipeline of new customer design wins. Also, as we continue to strongly ramp product into third-party standalone routers, we are expanding and diversifying our Wi-Fi revenues beyond service provider gateway applications. Last week, we announced our Wave 700 product family, which is the industry's first Wi-Fi 7 standard tri-band single-chip system-on-chip solution targeting access points and broadband gateways. It delivers 12 spatial streams simultaneously over 2.5 GHz, 5 GHz, and 6 GHz Wi-Fi spectrum bands. The Wave 700 family is currently sampling, and we expect to see Wave 700-enabled customer products starting in 2023. Wi-Fi 6E, 6, and 7 standard-based products represent an unprecedented multi-year growth driver for Wi-Fi by enabling in-home connectivity speeds close to 20 Gbps. With each new generation of Wi-Fi, we're increasing our differentiation, gaining market share, and driving higher platform attach rates and average selling prices. Moving to broadband fiber, multiple customers in North America are currently wrapping up products, including a large tier one operator we mentioned before. In 2022, our fiber access revenues are expected to increase more than four times versus 2021, with continuing momentum into 2023. Our latest generation of AnyVAN broadband SOCs, which we recently announced, support multiple access technologies in a single solution, including fiber, copper, coaxial cable, fixed wireless access, and Ethernet. It will enable operators and OEMs to cost-effectively upgrade their networks and to rapidly roll out new high-performance multi-gigabit solutions to customers. Fiber broadband represents a very large multi-year revenue growth opportunity for us. So we are excited by, first, the market traction for our industry-leading integrated pawn and 10-gigabit fiber processor gateway solution. Second, our significant growing fiber platform below material content. And third, our proliferating design wins beyond North America. Additionally, ongoing CapEx commitments from carriers and governmental incentives for fiber upgrades provide a strong growth catalyst for our broadband revenues. Moving to infrastructure, in 5G wireless infrastructure, revenues grew despite tight backend packet substrate supply constraints. In Q1 2023, with increases in substrate capacity anticipated, we'll be better able to address a strong backlog of continuing customer demand for wireless access and backhaul solutions. We are especially benefiting from the expanding rollout of multiband millimeter wave and microwave backhaul platform solutions as a part of new 5G network rollout across several large geographies, such as in India. These multi-band platforms more than double our content per platform and grow our addressable units. As 5G networks proliferate, we expect our revenues will grow in the near to median term, owing to our industry-leading full-system silicon solutions for wireless backhaul and our 5G access RS transceivers. Moving to the rapidly growing high-speed optical data center interconnect market, we have a leading strategic position with our keystone family of products, which is the industry's only 5-nanometer CMOS, 400-gigabit and 800-gigabit PAM4 production-ready silicon. Based on the anticipated trajectory of growth in hyperscale cloud data and processing requirements and our ongoing success with product qualifications and multiple OEMs, We feel confident in our ability to strongly grow our data center revenues in the next upgrade cycle. During Q3, we also announced the availability of Panther 3, the latest in our Panther series of storage accelerators. We showcased this product at the Flash Memory Summit in Santa Clara, California, where it won Best Offshore for the Flash Memory Enterprise Business Application category. Panther 3 opens up new opportunities for us within the enterprise storage market, including all flash array and non-volatile memory express systems. With that, let me turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.