MaxLinear, Inc

Greetings and welcome to the MaxLinear fourth quarter 2024 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. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Leslie Green, Investor Relations. Thank you, Leslie. You may begin.

Thank you, Alicia, and good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's fourth quarter 2024 financial results. Today's call is being hosted by Dr. Kishore Sindriput, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take your questions. 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, gap and non-gap growth margin, gap and non-gap operating expenses, gap and non-gap interest and other expense, and gap and non-gap diluted share count. 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, including, without limitation, statements concerning future financial and operating results, opportunities for revenue and market share across target markets, new products, including the timing of production and launches of such products, demand for the adoption of certain technologies, and our total addressable market. 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. 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. 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. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations and the press release available on our website. 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. Non-GAAP financial measures discussed today are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. We are providing this information because management believes it is useful to investors as it reflects how management measures our business. 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 Sindhripu, CEO of MaxLinear. Kishore?

Thank you, Leslie, and good afternoon, everyone. Our Q4 results exceeded the midpoint of our guidance at $92.2 million in revenue, non-GAAP gross margin of 59.1%, along with a significant reduction in operating expenses. 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, PON, Wi-Fi, and Ethernet provide us confidence that we can achieve continued growth and improvement in our financial results throughout this year. Looking at our key markets, in infrastructure, the expansion of cloud computing is driving significant growth and design activity in our high-speed optical data center connectivity. We made strong progress in 24 with design interaction and product calls for a 5-nanometer Keystone PAM4 product. We exceeded our revenue targets in 24 and our position for exciting growth in 25. As of this month, we have shipped approximately 1 million plus units total of Keystone products across multiple customers into high-volume opportunities. Our initial design wins in transceivers, 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. 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. 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. 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 means that year one customers beginning to ramp particularly in the second half of 2025. Also, within our infrastructure revenues, our Panther 3 series hardware storage accelerators are providing exciting incremental growth opportunities. 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. This joint solution enables rapid access to massive datasets while enhancing both performance and scalability. As we look ahead, our Path-to-Product is strongly positioned within the data center. enterprise storage applications and at the edge of the network with multiple design means with major customers and value-added resellers across key geographies. In Ethernet connectivity, MaxLink is one of the broadest and most competitive portfolios of 200-gigabit Ethernet, switch, and PHY products for the enterprise and small and medium business switch markets. Swan Creek, our single-chip integrated 8-port PHY and switch, is gaining traction across multiple enterprise customers looking to upgrade the networks to 200 gigabit ethernet rates 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 in addition we are seeing widespread interest from next generation broadband gateways and routers shifting to broadband and wi-fi connectivity are considerable focus and on pawn to expand a broadband target addressable market in addition to a strong cable data offering of DOCSIS 3.1, UltraDOCSIS and DOCSIS 4.0 solutions is bearing fruit. We have exciting design interaction for our single-chip integrated fiber PON and 10-gigabit processor Gateway SoC plus tri-band Wi-Fi 7 single-chip platform solution. 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. In conclusion, a strong product roadmap execution has begun to deliver meaningful traction and target addressable market expansion across several high-value categories, including high-speed interconnect for data center, enterprise Ethernet and storage accelerators, wireless infrastructure, multi-gigabit broadband access, and Wi-Fi connectivity solutions. As we begin 2025, we're 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.

Thank you, Kishore. Total revenue for the fourth quarter was $92.2 million, up 14% from $81.1 million in the previous quarter. 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. GAAP and non-GAAP gross margins for the fourth quarter were approximately 55.6% and 59.1% of revenue. 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. Fourth quarter GAAP operating expenses were 92.4 million, and non-GAAP operating expenses were 61.3 million. 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, acquisition-related costs of 7.3 million, and restructuring costs of 3.1 million. GAAP and non-GAAP loss from operations for Q4 2024 was 45% and 7% of net revenue. GAAP and non-GAAP interest and other income during the quarter was $351,000 and $677,000, respectively. 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. Our day sales outstanding was up in the fourth quarter to approximately 85 days. Our gross inventory was down versus previous quarter as we continued to make improvements with inventory turns slightly less than one. This concludes the discussion of our Q4 financial results. 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, connectivity is expected to be approximately flat, and industrial multi-market is expected to be down. 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. 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. We expect our Q1 GAAP and non-GAAP interest and other expense each to be in the range of approximately 1 to 2 million. We expect 2.7 million tax expense on a GAAP basis and non-GAAP tax of zero. We expect our Q1 GAAP and non-GAAP diluted share count to be approximately 85.5 million each. In closing, 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. We're excited that our innovation and investment in strategic applications such as optical high-speed interconnects, wireless infrastructure, storage, Ethernet, Wi-Fi, and fiber broadband access gateways are beginning to deliver tangible opportunities for near-term and long-term growth. 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.

Thank you. We will now be conducting a question and answer session. 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. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. 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 poll for questions. Thank you. Our first question comes from the line of Tor Savinberg with People. Please proceed with your question.

Yes, thank you. So my first question is, obviously, you know, you're still you know, relatively an entrant into the optical interconnect market. 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?

Well, Tori, 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. We have designed wins and shipments in various quantities and stages with all the top module makers in the world, with our end customers spanning, you know, across both China and the U.S. So that's the exciting part. With regard to what happened this week, I'm afraid that that's a question that really only democratizes and really expands the real possibility for new entrants like us to really expand our share as the market grows. At the end of the day, we are a high-speed interconnect, you know, transport company. So no matter what happens in the compute, the links are going to be more and they're going to be faster and speedier. And we have the right technology for low power and high efficiency performance targets that these markets will require. So from my point of view, processing content is one thing, but the links are a given and they're going to be really needed. 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's where to take hold.

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? Right. Help us understand what's going on there, and how should we think about DSOs here in 2025?

Yeah, 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 argue that in this 80 to 85 range is probably where you'd likely see it the rest of the year.

Got it. But that explains why, you know, I think your cash balance came down, what, was it $30 million?

Yeah, 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.

Thank you. Our next question comes from the line of Ross Seymour with Deutsche Bank. Please proceed.

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.

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 is much higher, so we're feeling much more confident. You know, just visibility has certainly improved. Customers are starting to kind of understand lead times and recognize that, you know, they can't get product when they 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, in the broadband market, certainly been a lot worse over the last two years, 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. 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.

Great. Thanks for that. And I guess 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.

Yeah, I mean, so the restructuring is certainly underway, and the biggest portion of that was 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. 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. It's not a huge change there, but it'll come down a little bit throughout the year.

Thank you.

Thank you. Our next question comes from the line of Tim Savage with Northland Capital Markets. Please proceed with your question.

Hi, good afternoon. Question on the optical front, I guess. I think you've been talking throughout the year and you've increased this range to more than $30 million in revenue for the year. I wonder if you could tell us where that ended up coming in. And given your volume comments, 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.

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, we're not breaking out the, you know, the exact number. But, you know, we started the year between 10 and 30. 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 wins and, you know, future production revenues are really driven by 800 gigs. conversion, and those are just now happening this year. So it's an exciting time and, you know, looking forward to talking more about that in the coming quarters.

Or perhaps on the next question, I 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 about what you think that optical business might be able to generate as you sit here in early 25?

Yeah, sure, Tim. Look, I don't think much has changed on this front. I think, I mean, we've talked about kind of the $60 to $70 million number. I think that's a very reasonable number that you can target right here. Hopefully, these new 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, I guess in this case, our customers' customers roll out these programs.

Okay, last one for me. Just 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 Jabil, who I think is a module partner of yours dating back to OFC where Amazon took a bunch of warrants, and Jabil doesn't exactly indicate an 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.

Well, look, 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. But we definitely, I mean, we demonstrated this at OFC last year, and they've been a good partner. Thanks very much. Good. Thanks, Tim. Thank you.

Our next question comes from the line of Quinn Bolton with Edelman Company. Please proceed.

Hey, guys. Steve, I just wanted to follow, sorry, ask a question to you, sort of a follow-up on Tori's question. Cash down to about $120 million. Guidance probably has yet a small, you know, few million, maybe mid-single-digit million net income, 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? Any sense where you think cash might, what cash might do through the quarter?

Yeah, 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, 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, of course. We've talked about cash flow break-even somewhere kind of mid-year, and it's probably Q2, Q3, likely Q3 is where I'd probably put it today. But we feel very comfortable with that, yeah.

Okay. Thanks for that, Steve. And then I guess maybe for Kishore, 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'd be great. And then sort of similarly, I think you mentioned now a promising engagement with an additional North American Tier 1 on the pond 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 question, your question of the ramp and the wireless infrastructure, the second half, you know, there are two parts to it. They're both in our wireless backhaul transport business and also on the access side. And so it's for both the product lines, the one for Sierra O-RAN product and as well as our backhaul products. And primarily this growth is coming through content expansion of these customers in the backhaul side. And obviously a Sierra product is unique and is a leader and it's the beginning of what could be a whole industry trend for, you know, merchant silicon to support, you know, both macro 5G and massive MIMO revenues in the future. So that design with a little bit of timing uncertainty, 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. Regarding on the broadband side, a tier one 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 20 for sure? 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 one operator. We talked about there are multiple product lines within these tier one operators, but this would be a whole gateway design, meaning add a tier one operator.

Is that PON and Wi-Fi or just the PON chip?

Yeah, it's both, right? When I refer to gateway, these days it's de facto. It has Wi-Fi. It's a full 10G XGS PON gateway with a processor that supports 10 gigabit speeds plus the world's first tri-band single-chip Wi-Fi access point solution, along with our own Ethernet quad-port, two and a half gigabit Ethernet files.

Perfect. Thank you, Kishore.

Thank you. Thank you. As a reminder, press star 1 to ask a question at this time. Our next question comes from the line of Suzy Del Silvia with Ross Capital Partners. Please proceed.

Hi, Kishore. Hi, Steve. 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 is 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 ramping strong? Just trying to understand some colors, the puts and takes there.

Yeah, look, I think excited infrastructure is probably the biggest grow for the year, and that's certainly the one. 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. 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 Tori asked about the news this week, but maybe topically also CPOs being discussed, whether it's NVIDIA's in-house solution or 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 at risk. Any color there would help as people are looking for that in 800 and 1.6T.

Well, you know, CPOs have now done their third incarnation in the discussion in the data center optical interconnect space, right? But there is always other vendors with optics, and CPO is a part of the discussion engagement we always constantly have. But our goal is a pure DSP, PAM4, TIA-type vendor story, whether it's linear optical transceivers, if you will, or the next generation 400 gigabit per lambda silicon for that that supports it. I look at our presence and focus on data center is beyond optics. 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 high-throughput interconnects within a compute or storage environment is target addressable market for us. So CPUs is one element of it. For that, you have to have your own optics or you partner with optics players to enable that. I just don't think that you know these many many years before cpos if ever become viable because of their various issues of quality yield power and the footprint and then you know uh how they lock in a lot of asp on the quality front that it goes to waste if it is not really properly actualized so i i think this topic come and go 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?

Yep. Great. Thanks, Kishore.

Yep. Thank you. Our next question comes from the line of Carl Ackerman with BNP Paribas. Please proceed.

Hi. This is Sam Feldman on for Carl Ackerman. 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 800 gig may not ramp till 2026? Does this mean the DSP ramp will have more importance with 800 gig?

Look, there's a large, large opportunity that is 400 gig. And 800 gig will, again, last for many, many years. And that also answers Suji's question about CPOs, honestly. 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. So, and the third players, we have a large revenues in the optically ticket that we can go and access. Regarding, you know, there are two markets here. We have always maintained that The line side is really delayed relative to what I call the compute side, which is the AI network, 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 800 gig comes much later, and I think they're on track on the front. And Amazon is not the only one, right? There's Meta, there's Microsoft, and everybody else. And our roadmap, frankly, followed the cadence of the line-side markets. And we have said that we are not a player in the NVIDIA market in terms of what happened in the past. And so that is the reality of it. So I think that you are sort of conflating both the markets, the 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 will be a long while before 1.6 terabit or 200 gig per lambda becomes a meaningful portion of the shipment of the revenues, you know, until after 400 gig and 800 gig have really, really run their course. Okay.

Understood. Thank you.

Thank you. Our next question comes from the line of David Williams, Benchmark Company. Please proceed.

Hey, 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 could give us a little indication on the 2.5G Ethernet and byproduct Swan Creek there. And I know you've talked about design wins there and major tier one enterprise OEM customers with multiple design wins, but how is that ramping and maybe just any of the color around the feedback or demand trends that you're seeing for the Swan Creek product line? Thank you.

So I think Swan Creek, as a product goes, probably one of the most successful products that we have ever designed and the kind of demand for the product. It's premier, it's highly differentiated, it is, you know, as outflanked anybody's offering on the 2.5 gigabit multi-port switch category. And we, frankly, ourselves were quite surprised with the amount of traction it has. And it's pretty much designed with all the major players on routers and gateways. and even on the industrial side as well. It's a very unique product. It can do multiple ports all the way from 4 to 8, and two of those switch ports can be compounded to do a 32-port solution as well. 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. That has not happened, but it's gotten delayed, but the ramp continues in the sense that the plants remain intact. It's their major platform, and I believe that as we head towards the rest of the year, it will start ramping, and in 26, 27, 28, 29, it will be in a pretty strong run rate position. And the overall product, really, we believe, can be $100 million per year revenue product line for Ethernet over the next two to three years. And And the mix would be single PHYs and, you know, multi-port PHYs and switches in equal proportion or more tilted towards the multi-port PHY and switch.

Okay? Very good. Thanks for the color there. Anything regionally that you're seeing 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.

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 are support activities, sales activities and such. So I would say that, well, the end markets are quite varied, but primarily the end markets are U.S. and China-centric. which you should expect given they're the largest markets in the world, right? So we're quite happy about it. Thank you.

Thank you. Our next question comes from the line of Alex Bolero with Moose Capital Markets. Please proceed.

Hey, guys. Thank you for taking my question. This is Alex on Fernando. I have two quick questions. So my first question is, As we go from 800G to 3.2T, do you guys see yourself becoming, do you guys see yourself as being more attractive to customers? If so, what do those dynamics look like?

Look, you know, really, really speaking, there are, you know, you have the entrance incumbents as one would do to 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 new entrant on the optical transceiver space by far. There's nobody even close to what we offer. And what we offer is extremely low power in the 800 gigabit solution and 400 gigabit solution for 100 gig per lane design, which is the newest generation of products that are ramping or will be ramping soon, like one of the analysts brought about the Amazon delay, for example. 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 built our core competencies as a company. 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 this is a genuine demand for a third supplier. It is where everybody wants a third supplier and we hope to first build our position as a third supplier and then build from there. And that's been our game plan from day one. And the fact that we went to zero 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, this has entailed a lot of investment on our side. I know analysts 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. Okay. I think that's where our strategic trust is right now in the infrastructure space.

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?

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 competent and really, really excellent at that. And the market capacity will require that those optics players are part of the supply ecosystem. And, therefore, they need a pure-play silicon vendor, and MaxUnion absolutely is a pure-play silicon player in this. No cables, no, you know, optics and that sort of a thing. So I think it's a net positive for us from a sort of, you know, creating a pool for what we provide, and we would be the alternative that would attach the best optics along with RDSP.

Got it. Thank you for that. Appreciate it, guys. Thanks, Alex.

Thank you. Our next question comes from Christopher Rowland, the Susquehanna International Group.

Hey, guys. Thanks for the question. I guess around optical, you know, Maybe if you had a range of optical units that we might expect in 2025, would there be a bull case to do 2 million units or maybe even more, or put another way, maybe market share? And maybe tying into this, Kishore, you talked about low power. How should we think about low power as you move to four nanometers, but competitors move to three? Will you still have that advantage?

So, you know, I'll let Steve talk to you about some of the colors on this, 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, you know, design and architectural capabilities. That's number one. And the other part, this whole thing is like, you know, last I checked, the latest report, 20 million units of transceiver modules have shipped. And we have told you that 1 million units we have shipped. So 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. 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, you know, $60 to $70 million. Yeah, you should expect that. Can we do better? I desperately want us to do much better than that. So that much I promise you. Okay.

Great. And Kishore, maybe just revisiting Tori's question and all this concern about DeepSeek this week. 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 and But it seems like democratizing AI on open source hardware is not very networking intensive. And so I just kind of wanted to revisit this, you know, how these more efficient architectures might affect either inference, in your opinion, or training, in your opinion, and mega clusters, for example, that seem to be very optically intensive. You know, just in terms of, you know, DSPs, units, transceiver volumes for you guys, 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?

Well, this week is too short, number one. Number two is that, look, these dynamics are beyond my understanding, and all I know is that we make extremely good products, very low power, high performance, and the demand is huge enough. Even otherwise, before the AI world happened, that's when we started on this roadmap, right? There was ChatGPD before, right? Nobody knew there was ChatGPD, 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. So from my point of view, it's a fantastic market. There is no reaction from me in any direction. Stay the course. The market will be exciting for us for maximum years. 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 we have a huge appetite as human beings, right? We just eat whatever comes, how much of a cheap it is, right? So we'll just gobble more of it, but the time dollars I don't expect to reduce, okay?

Great answer. Thanks, Kishore.

Thank you. Our next question comes to the line of Tor Savinberg with Stiefel. Please proceed.

Yeah, I just had a follow-up, Kishore, because there's a lot of talk about your optical DSP business, but you've also now getting into AEC, ACC. There's obviously a discrete TIA market out there. So could you just talk a little bit about that? When we think about that $60 million, $70 million, is that predominantly optical DSP, or are you also starting to see some contribution from AEC, ACC, and discrete TIAs? And one of your largest competitors just announced LPO here before the end of the year. So I assume, you know, given your capabilities, you are now probably working on LPO as well, right?

Absolutely. I mean, LPO 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 LPO. Anybody can do this who has got a DSP PAM-4. That just means there are only three people, but that's still. Number one, on our revenues, predominantly they are 800 gig and some 400 gig and there will be some AEC. Having said that, the AEC market is still pretty small, and we are, and the market being small, and, you know, one data center until now trying to deploy AECs. It's still, the verdict remains unclear whether it's going to be a sort of across-the-board promulgation because there are dynamics with the copper side that are quite different. So without getting into the details, our own revenues are dominated going to be 800 gigs, 400 gigs, and some AECs. We do have AECs that have already qualified, and therefore we expect revenues to start. How big? I don't think it's still a big enough market where that would overwhelm any of the optical revenues that we will be generating. So regarding the LTOs, I think I've answered that question. ATC is even more tiny, and I think that verdict remains very questionable. AECs are questionable in terms of market size, ATCs, propagation. But we have our eyes set on all of these targets, right? And we're not pulling back. 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. The answer to your question is affirmative. On the TIAs, clearly, we are one of the three DSP vendors on the optical side. 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. 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 making sure you understand that TIAs as a revenue stream is really attached to our DSPs, and I'm not aware of anything outside of that environment in terms of our go-to-market plan.

Yep, that's exactly the call I was looking for. Thank you, Kishore. Yep.

Thank you. There are no further questions at this time. I'd like to pass the floor back over to Kishore for closing remarks.

So, thank you, operator, and I want to once again thank everyone of you. Hey, happy new year. You all sounded muted. Just wake up. It's all exciting times moving forward, and I wish you a happy new year once again. And this quarter, we'll be presenting a number of financial conference and virtual events. We'll post the details on our investor relations page. Thank you very much and happy new year once again.