MAXLINEAR, INC Q2 FY2024 earnings call

• Progress in infrastructure with optical data center and wireless products, on track to exceed high end of optical revenue target range. - Disappointed by weakness in broadband demand due to inventory burn-off and softness in telecom markets. - Launched several new products in high-value markets including optical data center interconnect, enterprise ethernet, etc. - Channel inventory expected to bottom in second half of the year, sell-through revenues above sell-in. - Infrastructure business, especially high-speed optical interconnect, has exciting prospects with Rushmore family for data centers, growth in 5G wireless backhaul, and incremental growth from Panther III storage accelerators. - Ethernet connectivity expanding TAM with new product announcements, expecting Tier 1 North American OEM to ramp in mid-2025. - Focused on PON for broadband growth with promising engagements, including a second Tier 1 North American carrier.

Total revenue for the second quarter was $92 million. Broadband revenue was $22 million, connectivity revenue was $13 million, infrastructure revenue was $32 million, and industrial multi-market revenue was $25 million. Non-GAAP gross margin for the second quarter was 60.2% of revenue.

• Q3 2024 revenue expected between $70 million and $90 million. - Q3 GAAP gross margin expected to be approximately 52.5% to 55.5%, non-GAAP gross margin in range of 57% to 60% of revenue. - Q3 GAAP operating expenses expected in range of $102 million to $108 million, non-GAAP operating expenses in range of $70 million to $76 million. - Expecting 20% to 25% reduction in operating expenses for fiscal 2025 over fiscal 2024 while accelerating top-line growth.

• Export restrictions impacting shipments in telecom and industrial products, affecting Q2 and Q3 results. - Uncertainties in market recovery and pace of inventory digestion.

Q: How do you see the linearity through the quarter across various businesses?

A: It's not linear, takes a step up in second half of the quarter as sales guys and customers grapple with the situation. Some revenue disappeared due to China geopolitical issues.

Q: Frame the size of opportunity from second Tier 1 U.S. carrier with fiber PON and 10 gig processor gateway?

A: Could be a $40 million per year opportunity on gateway side, with '25, '26 time range for ramp depending on Tier 1 rollout plans.

Q: On CapEx cuts, are R&D programs completed primarily on broadband modems and how quickly could spending be turned back?

A: Spending plans based on income, roadmap items nearing completion, with reduced R&D spend as customers delay launch plans, but some areas like optical data center still need investment.

Q: Visibility of inventory in channel and if it's bleeding down more slowly?

A: Sell-through is slower than anticipated but higher than sell-in, running at a pace that will take longer, with focus on new platforms like PON and Wi-Fi 7.

Q: Booking improvement but still seeing revenue decline, how does it portend to fourth quarter?

A: Bookings improved but not to normal levels, industry was backlogged before, and bookings speak to how bad they were 4 quarters ago, with focus on new programs driving revenue.

Q: On optical side, framework for calendar '25 run rate and why focus on 1.6 transition?

A: Revenue from 800 gig, investing in 1.6 terabit generation for future continuity, multiple customers to drive '25 revenue.

Q: PON market bigger than cable, will PON continue to be bigger and switch over?

A: PON market is bigger, with cable losing market share to telcos, PON has large distinct, and expect PON market share revenues to grow while cable remains stable.

Q: Export restriction issue, how new and impact going forward?

A: Late quarter development, impacted Q2 and second half, not limiting ability to sell in China, not a one-off situation with a few products.

Q: With new cost structures, is break-even point just under $100 million in quarterly revenue?

A: Not getting into model details, but good effort.