MAXLINEAR, INC Q4 FY2024 earnings call

• Q4 results exceeded guidance with $92.2 million in revenue and non-GAAP gross margin of 59.1%.
• Saw improvement in customer order rates and backlog.
• Progress in infrastructure markets: growth in cloud computing driving high speed optical data center connectivity, design wins and product quals for Keystone PAM4 product, and expansion in wireless infrastructure with 5G access and backhaul solutions.
• Panther III Series hardware storage accelerators and joint software defined storage solution with Quanta announced.
• Swan Creek 8-port PHY and switch gaining traction in enterprise Ethernet.
• Strong focus on PON, Wi-Fi 7, and broadband access solutions with design wins and promising engagements.

Total revenue for the fourth quarter was $92.2 million. Infrastructure revenue was $27 million, broadband revenue was $29 million, connectivity revenue was $20 million, and industrial multi-market revenue was $16 million. GAAP gross margin was approximately 55.6% and non-GAAP gross margin was 59.1% of revenue.

• Expect revenue in Q1 2025 to be between $85 million and $105 million.
• Q1 GAAP gross margin expected to be approximately 54.5% to 57.5% and non-GAAP gross margin in the range of 57.5% to 60.5%.
• Q1 GAAP operating expenses expected to be in the range of $93 million to $99 million and non-GAAP operating expenses in the range of $56 million to $62 million.
• Q1 GAAP and non-GAAP interest and other expense each expected to be in the range of approximately $1 million to $2 million.
• Expected $2.7 million tax expense on a GAAP basis and non-GAAP tax of 0.
• Q1 GAAP and non-GAAP diluted share count expected to be approximately 85.5 million each.

• Uncertainties associated with projecting future changes like stock-based compensation and potential impairments.
• Market dynamics and uncertainties in product adoption and order rates affecting financial results.

Q: Obviously, you're still relatively an entrant into the optical interconnect market, but you are the first one to report among your peer groups. So I was just hoping both Kishore or Steve could just talk a little bit about the events of this week, especially from Monday. How do you view this whole topic as far as potentially impacting the optical interconnect market?

A: Tore, we're pretty excited that we now have recorded a strong 2024. We exceeded our own internal targets and revenues. We have design wins and shipments in various quantities and stages with all the top module makers in the world with their end customer spanning across both China and the US. So that's the exciting part. With regard to what happened this week, I'm afraid 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. And the end of the day, we are a high speed interconnect PHY transport company. So no matter what happens to 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. 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 majorly what I call expanded and cellularized market if that were to take hold.

Q: The DSOs have been all over the place this year. They came down very nicely in Q3, but now they came back up again in Q4. Obviously, still not as bad as Q1. But help us understand what's going on there and how should we think about DSOs here in 2025?

A: 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. I would argue that in this 80 to 85 range is probably where you'd likely see it the rest of the year.

Q: A follow up on Tori's question. Cash down to about $120 million. Guidance probably has you at a small few million, maybe mid-single digit million 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 what cash might do through the quarter?

A: 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. They certainly are 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.