MaxLinear, Inc

Greetings and welcome to the MaxLinear fourth quarter 2022 earnings conference call. 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. Please note that this conference call is being recorded. I will now turn the conference over to our host, Leslie Green of Investor Relations. Thank you. You may begin.

Thank you, Diego, and good afternoon, everyone, and thank you for joining us on today's conference call to discuss Max Lanier's fourth quarter 2022 financial results. Today's call is being hosted by Dr. Kishore Sundripu, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take questions. Our comments today, including forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for first quarter 2023, including revenue, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, GAAP and non-GAAP effective tax rate, GAAP and non-GAAP interest and other expenses, and GAAP and non-GAAP diluted share count. In addition, we will be making 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, connectivity, and industrial markets, timing for the launch of our products, and opportunities for improved revenue and market share across our target markets. Additionally, we will 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 our proposed merger with Silicon Motion, including the anticipated timing of the People's Republic of China State Administration for Market Regulation, or SAMR, review. Risks related to increased indebtedness, competition, the impacts of global economic downturn and high inflation, our ability to obtain government authorization to export certain of our products or technology, and a failure to manage our relationships with or negative impact from third parties. More information on these and other risks is outlined in the risk factor section of our recent SEC filings, including our Form 10-K for the year ended December 31st, 2022, which we 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 2022 earnings release is available in the investor relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including gross margin, operating margin, operating expenses, and interest and other expense 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 are not meant to be considered in isolation or as a substitute for the comparable GAAP financial measures. We are providing this information because management believes it to be useful to investors as it reflects how management measures our business. Lastly, this call is also being webcast, and a replay will be available on our website for two weeks. And now, let me turn the call over to Dr. Kishore Snigripu, CEO of MaxLinear. Kishore.

Thank you, Leslie, and good afternoon, everyone. Our Q4 revenue was $290.6 million, up 2% sequentially and 17% year-on-year, capping a major milestone in fiscal year 2022 with record revenues breaking the $1 billion mark and operating cash flow of $389 million. Our Q4 non-GAAP gross margin was 59.6% and non-GAAP operating margin was 32.5% with cash flows from operating activities of $69.4 million. As we look forward, we are energized by the near and long-term drivers of our growth trajectory spanning fiber broadband access gateways, Wi-Fi connectivity, wireless and optical data center, and enterprise infrastructure. Entering 2023, we're confident in our ability to outperform our end markets via share gains and expanding silicon content in customer platforms. Our connectivity business achieved record results with both quarter four quarterly revenue and fiscal 22 revenue growing nearly 100% year on year. Our connectivity growth continues to be fueled by the strong market adoption of our Wi-Fi 6 and 6E access point solutions, increased attach rates in existing customer platforms, and a healthy pipeline of new customer design wins. Beyond service provider gateway opportunities, our ramping design wins in several third-party standalone routers will further expand and diversify our Wi-Fi revenues. They comprise a new and continuing high-volume growth opportunity in 2023. As we look beyond Wi-Fi 6 and 6E, our Wi-Fi 7 standard compliant Wave 700 product family is currently sampling and is the industry's first single-chip tri-band 12-channel Wi-Fi access point solution in the world. It will drive increased performance and differentiation, higher attach rates, ASP improvements and a favorable cost structure versus previous generations and competition. We expect to see Wave 700-enabled customer products starting late this year. Turning to broadband, coming off several strong quarters of growth, in Q4, our revenue declined as expected. Even as demand moderates to more normalized levels through an adverse period of digesting excess channel inventory, We believe the market is early in a multi-year upgrade cycle of infrastructure modernization by both operators and carriers to enhance customer experience and enable a variety of new revenue-generating services. Market growth in PON is a particular area of strength globally, with additional government incentives for fiber upgrades just beginning to roll out later this year. In this context, we are excited about the solid market traction we have with our industry-leading integrated PON and 10 gigabit fiber processor gateway solution. In 2022, our fiber access revenue increased more than four times from 2021, and we are entering 2023 with strong design wind momentum. Importantly, in the fiber PON market, we have relatively small market share today and expect to continue share gains in the coming years with our unique product and technology differentiation. We currently have multiple customers in North America ramping our products, including a large tier one operator. We're winning designs globally beyond North America, along with significant silicon content expansion from our Wi-Fi, Ethernet, power management, and more. Moving to infrastructure, our wireless infrastructure business grew by over 20% this past year, despite acute shortages of substrates and packet capacity. which resulted in minimal shipments in second half 2022 versus demand. However, as we enter Q1, we are excited to see sustained strong demand for our wireless backhaul and access products, along with improvements to our supply chain headwinds. Throughout 2023, we see great market traction and are excited about wireless infrastructure growth as we continue to benefit from the expanding rollout of multi-band millimeter wave and microwave back wall 5G platform solutions across several large geographies. These multi-band platforms not only double our content, but also grow our total addressable units. In high-speed optical data center interconnect, we have a leading strategic position with our second generation and industry's only 5 nanometer CMOS 400 gigabit and 800 gigabit PAM4 production-ready silicon. We're making good progress in ongoing qualifications and feel confident that our data center revenues will grow meaningfully over the next two years. We are working closely with hyperscale data center, enterprise, and OEM module customers to support the increasing performance requirements of the industry's transition to 400 gigabit, 800 gigabit, and beyond. A strong Q4 performance on our 2022 revenues of $1 billion plus and operating cash flows of $389 million are capstone achievements which we are very proud of. In 2022, we also significantly advanced our technology platform and expanded our product portfolio offerings. We have conviction in a strong long-term growth even as we navigate the ongoing macro weakness with extreme discipline, thanks to our developing technology leadership, accelerating design momentum, and expanding target markets consisting of Wi-Fi, fiber access, wireless, and optical infrastructure. Over the last two years, we have delivered transformative growth and strong financials, balancing disciplined expense management and investments in product innovation. Entering 2023, as a result of our core offering, we are once again uniquely poised to grow MaxLien at significant profitability levels and increase scale. We are also looking forward to our pending acquisition of Silicon Motion and are excited for the future growth opportunities of our comprehensive combined product portfolio. With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.