MaxLinear, Inc

Greetings and welcome to Max Linear's first quarter 2023 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 a 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 Green, Investor Relations. Thank you. You may begin.

Thank you, Doug, and good afternoon, everyone. And thank you for joining us on today's conference call to discuss Max Lanier's first quarter 2023 financial results. Today's call is being hosted by Dr. Kishore Sindripu, 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 the second 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 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, 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 risk 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, risk related to increased indebtedness, competition, the impacts of global economic downturn, and high inflation, the cyclical nature of the semiconductor industry, our ability to obtain or retain government authorization to export certain of our products or technology, ability to support current level of revenue, including the impacts of excess inventory on our customers' expected demand for certain of our products, and a failure to manage our relationships with or negative impacts from third parties. More information on these and other risks is outlined in our risk factors, the risk factors section of our recent SEC filings. including our Form 10-Q for the quarter ended March 31, 2023, 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 first quarter 2023 earnings release is available in the Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including but not limited to gross margin, operating margin, operating expenses, and interest in 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 did 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 is useful for 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 Sindhripu, CEO of MaxLinear. Kishore?

Thank you, Leslie, and good afternoon, everyone. Our Q1 revenue of $248.4 million was down 15% sequentially and 6% year-on-year basis. In Q1, non-GAAP gross margin was 60.3%, and non-GAAP operating margin was 27.8%, with cash flow from operating activities of $42.2 million. Wireless infrastructure had a highlight quarter, recording 45% sequential and 41% year-on-year growth, along with strong forward growth momentum. However, our broadband access and connectivity businesses were challenged due to excess inventory in the channel, along with seasonality in Q1. Our industrial multi-market revenues remain stable in what is proving to be a cyclical semiconductor downturn. In 2023, MaxLinux is continuing to lay the critical groundwork for future growth with design-win activity, technology innovation, and customer relationship building spanning fiber broadband, Wi-Fi connectivity, wireless infrastructure, and high-speed data opticals, data center interconnect, and enterprise markets. We believe that these initiatives will drive future market share gains and further expand silicon content in our proven customer platforms. We continue to be encouraged by the strong market adoption of our Wi-Fi 6 and 6C access point solutions and the growing pipeline of new and existing customer design wins in both service provider gateways and third-party standalone routers. More importantly, our Wi-Fi 7 products represent the next phase of growth for our connectivity products. Our Wave 700 product family is the industry's first and only single chip tri-band Wi-Fi 7 solution targeting access points. Due to their highly differentiated performance, power, and cost benefits, we expect our Wave 700 products to both improve average selling price and drive higher attach rates in our broadband and connectivity businesses. Our first Wave 700-enabled customer solutions will launch later this year, and we expect to ramp multiple solutions throughout 2024. Regarding our broadband access market, though demand continues to be soft due to excess channel inventory, we are confident in and excited by the longer-term outlook as the multi-year upgrade cycle of infrastructure modernization by both MSOs and telco carriers firmly takes hold. We have solid market traction with our industry-leading single-chip integrated fiber PON and 10-gigabit processor gateway solution. Our PON access revenue increased fourfold in 2022 and we are well positioned for continued share gains in 2023 due to the breadth of our integrated access and connectivity technologies. As the industry migrates from legacy DSL and older PON technologies to 10 gigabit PON, we expect to grow our revenues by expanding market share and customer platform silicon content. Moving to wireless infrastructure, we see strong growth momentum throughout 2023 as 5G wireless backhaul deployments of multi-band and hybrid millimeter wave and microwave radios double the silicon content per platform of our modem and RF transceiver products. We are very well positioned to benefit from the expanding rollout of E-band millimeter wave technologies across several large geographies, including India, in conjunction with the proliferation of 5G networks. We are currently partnered with Tier 1 equipment suppliers to support ongoing 5G network rollouts that will drive our growth through 2023 and beyond. In high-speed optical data center interconnect, we are in a leading strategic position and have a strong design wind pipeline for a second generation and industry's only 5-nanometer CMOS, 400-gig and 800-gig PAM-4 production-ready silicon pipelines. We are making good progress with the ongoing qualifications for data center deployments that will ramp production shipments late this year and continue to do so over the next two years. In addition, we are working very closely with hyperscale data center, enterprise, and OEM module customers to address the increasing optical interconnect performance requirements driving the industry's transition to 400 gigabit, 800 gigabit, 1.6 terabit, and beyond data speeds. We entered 2023 with a strong product portfolio, significant market traction, and robust designing activity across all our strategic markets. Even as we navigate the ongoing macro demand weakness with extreme fiscal discipline, we are excited by our design with momentum and our strengthening strategic customer and partner relationships, particularly in Wi-Fi, fiber access, and wireless and optical data center infrastructure. We believe that our platform approach, driven by strong technology innovation, is enabling us to not only secure new business opportunities, but also further expand our silicon content in areas where we have proven success. We are also looking forward to our pending acquisition of Silicon Motion, which will further expand the growth opportunities for a combined comprehensive product portfolio. With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer. Steve?