Edited Transcript of MXL earnings conference call or presentation 1-May-19 8:30pm GMT

Non-GAAP economical measures discussed today conduct no replace the presentation of MaxLinear GAAP economical results. We're providing this data ought enable investors ought conduct more meaningful comparisons of our operating results at a stand similar ought management's analysis of our business.

Lastly, this growl is either being webcast, and a replay will exist available above our website although 2 weeks. And now permit me fetch the growl above ought Kishore Seendripu, CEO of MaxLinear.

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Kishore Seendripu, MaxLinear, Inc. - Co-Founder, Chairman, CEO & headmaster [3]

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Thank you, Brian, and good afternoon, everyone. Thank you vulgar although joining us today. Our Q1 2019 revenue was $84.6 million, compatible with our guidance and expectations of modest improvement at our Connected family business, a seasonal slowdown at infrastructure and a macro-driven overall industry weakness at industrial and multi-market. aim impartial revenue breakout was infrastructure at 26%, industrial and multi-market at 23% and Connected family at 51% of overall revenues.

We had sturdy operating money flows of almost $16 million, driven greatly by total border improvements at our high-performance analog brood and lowering of overall operating expenses. More importantly, we last ought kill solidly above our heart 5G wireless optical data heart interconnect and might management initiatives comprising our high-growth infrastructure revenues.

Weakness at our Connected family impartial is owed ought technique transition challenges at our aim OEM customers, the impact of U.S. government import tariffs above our guest manufacturing furnish chains and mutual impartial softness because of telegram data operator spend.

As such, we are excited almost the latent leverage at our brood xerox enabled by the mixture of improvements at our operating price structure and continuing sturdy execution above our 5G wireless and optical data heart network infrastructure growth initiatives.

Moving onto some of the more exciting manufacture and technique highlights at the big and attractive networking infrastructure markets. at the 5G wireless market, we dine sturdy network equipment guest create at traction following the launch of our 14-nanometer CMOS wireless gigantic MIMO RF transceiver system above chip solution at Mobile world conference at February. Additionally, at Q1, we started high-volume shipments of our 10-ampere might modules ought a Tier 1 5G wireless OEM's far radio unit platform. Our industry-leading 5G radio frequency transceiver manufacture delivers the highest operation and widest bandwidth, along with superior system-level integration and flexibility at 50% lower might consumption than opponent solutions.

We are gaining sturdy guest traction by enabling base station designers ought quicken the development of 5G gigantic MIMO radios. We're increasingly confident of being a chief actor at the 5G wireless access infrastructure roll-outs slated although 2020. at 4G and 5G wireless backhaul, an preference of our wireless backhaul RF transceiver is accelerating along our guide millimeter and microwave modem customers. It will motivate new revenue streams at the second half of 2019.

Our RF solution uniquely supports channel aggregation with double data genius at existing wireless cause spectrum. during a result, we dine sturdy operator and OEM engagements although contemporary 4G and future 5G deployments. With the anticipated seasonal recovery at wireless backhaul modem shipments at Q2, our wireless backhaul brood remainder above explore although sturdy double-digit growth at 2019.

Moving ought the fiber data heart interconnect market. We dine secured multiple guest create wins although our internal the data heart 400-gigabit PAM4 system-on-a-chip system solution. little of these engagements were above show at the optical fiber conference at March. We either achieved an significant milestone at Q1 with the commencement of astronaut manufacture shipments of our PAM4 SoC.

Our sturdy manufacture portfolio, coupled with the ongoing healthy optical module vendor partnerships, enables us ought exist a chief supplier at the 400-gigabit hyperscale data heart upgrade cycle starting at the latter half of this year.

In might management, we recently released a dual 13-ampere might module ought production, which is our highest might solution hence far. It is currently being designed into multiple Tier 1 telecom optical fiber module solutions. We growl on sturdy traction although our high might modules and our high might way map along the vulgar enterprise server, 5G wireless far radio units and industrial markets.

Overall, we are indeed excited that our concentrate and execution is bringing us closer ought realizing high-growth manufacture revenues at the big and transforming 5G wireless access and the high-speed optical data heart interconnect infrastructure markets.

In the Connected family market, however we wait although answer ought might at telegram data, we dine little big create partnerships at advanced stages of deploying our next-generation MoCA and G.hn multi-gigabit wired connectivity technologies into telco operator and industrial IoT applications. This ought guide ought improvement at our connectivity at brood throughout the year. above the G.hn powerline connectivity front, our enhanced Wave-2 software rollout is accelerating the displacement of legacy powerline family plug-based solutions and either enabling new industrial IoT applications.

We desire ought furnish farther details above these engagements at the next mix of quarters. With that, permit me fetch the growl above ought Mr. Steve Litchfield, our head economical officer and head Corporate tactic Officer, although a newspaper of the Q1 brood results and our dispatch guidance.

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Steven G. Litchfield, MaxLinear, Inc. - CFO & head Corporate tactic officer [4]

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Thank you, Kishore. I will first newspaper our Q1 2019 results, and then farther debate our expectation although Q2 2019.

On revenue of $84.6 million, we saw Connected family increase 1%, driven by double-digit improvement at both our telegram revenues and an uptick at both satellite and G.hn demand, offset by the expected declines at our tuner and MoCA categories.

Our infrastructure brood was down 3% sequentially because of a comfort at one of our big backhaul customers, cottage our optical interconnect and HPA categories were up solidly quarter-over-quarter. above the industrial and multi-market side, sales were down 12% sequentially because of macro stress along our distributor channel, with some affect from continued commerce tension, compatible with the commentary from little of our analog peers at the space.

GAAP and non-GAAP total margins although the fourth area were almost 53.3% and 63.5% of revenue, respectively. This compares ought GAAP total border guidance of 52.5% ought 53.5% and non-GAAP total border guidance of 63% ought 64%. The delta among GAAP and non-GAAP total margins at the first area reflects the amortization of $8.4 million of purchased intangible goods from foregoing acquisitions and $0.2 million of stock-based compensation and stock-based bonus accruals. First area GAAP operating expenses were almost $52.9 million, which is below our GAAP guidance of $56.0 million ought $56.5 million, because of lower than expected restructuring costs related ought our price reduction initiatives. GAAP operating expenses included amortization of purchased intangible goods of $5.8 million; stock-based compensation and accruals related ought stock-based bonus scheme of $7.6 million and $1.9 million, respectively; and $1.9 million at restructuring.

Non-GAAP operating expenses were $35.7 million, which was down $1 million sequentially and below our non-GAAP guidance of $36 million ought $36.5 million because of disciplined fare management. We've continued ought diligently work above moderating the cost during this transitional mature with good success. We achieved a quarter-over-quarter refuse despite a seasonal step-up at payroll taxes. And we expectation our quarterly cost ought last ought grow down along this year during we tighten the cost and larger development efforts slow at the second half of the year.

Moving ought the remainder sheet and money run statement. Our money run generated from operating activities at the first area of 2019 was almost $16 million versus $24.2 million generated at the fourth area of 2019. We made $15 million at debt prepayments during the area toward our vocabulary lend during we last ought concentrate above debt paydown with our money generation. at addition, we recently made another $15 million debt prepayment during Q2. This brings the full debt prepayments ought $193 million and our lend remainder down ought $232 million.

Our days sales eminent although the first area was almost 64 days, which was slightly above the foregoing area days sales eminent of 62 days. Our inventory turns decreased slightly ought 3.7 compared ought 4.0 at the fourth quarter.

That leads me ought our guidance. We currently expectation revenue at the second area of 2019 ought exist almost $83 million ought $88 million, up 1% sequentially at the midpoint of the guidance range. We expectation Connected family revenues ought exist down mid-single digits sequentially with improvements at connectivity revenues, offset by declines at telegram data shipments, due ought continued aim impartial weakness and choppiness at the DOCSIS 3.0 ought 3.1 transition.

Within industrial and multi-market, we dine seen improvements at our distributor sell-through patterns and expectation sequential improvements from a mix of key accounts, yielding expected double-digit revenue growth. We expectation low single-digit infrastructure growth greatly driven by a resumption at wireless backhaul appeal and incremental part gain.

We expectation second area GAAP total utilize border ought exist almost 53% ought 54% of revenue and non-GAAP total utilize border ought exist almost 63.5% ought 64.5% of revenue, up sequentially because of improved mix.

As a reminder, our total utilize border percent predict could vary plus or minus 2%, depending above manufacture mix and other factors. flat during we are focused above reducing our run estimate cost levels, we last ought fund strategic development programs targeted at delivering sturdy climax queue growth at 2019 and beyond, with especial concentrate above infrastructure initiatives and our stated aim of increasing the operating leverage at the business. during such, we expectation Q2 2019 GAAP operating expenses ought lessen almost $3.7 million quarter-on-quarter ought a mountain of $49 million ought $49.5 million, driven by reductions at restructuring, disguise and payroll-related expenses.

We expectation Q2 2019 non-GAAP operating expenses ought exist down almost $2.5 million ought a mountain of $33 million ought $33.5 million. We expectation GAAP tax fare ought exist almost $0.5 million and a non-GAAP tax estimate of 7%. We expectation utilize and other expenses at the area ought exist $3 million ought $3.1 million.

In closing, we are pleased ought interpret proceed at our infrastructure initiatives, highlighted by our expanding create engagements at 400-gig data heart market, engineering milestones at our 5G gigantic MIMO transceiver platform and expansion of our infrastructure might management portfolio.

As we navigate along a transitional mature of appeal weakness at Connected family environment, we will last ought affirm sturdy profitability and money run generation however maintaining our velocity of strategic investments. These infrastructure investments and sturdy execution, combined with an upcoming upgraded cycle at the data heart and wireless markets, stand us sturdy ought dispatch sturdy leverage at our business, during many of the new manufacture initiatives commence ought generate revenue at the second half of 2019 and into 2020.

With that, I'd similar ought blank up the growl although questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first riddle comes from the queue of Quinn Bolton with Needham & Company.

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Quinn Bolton, Needham & Company, LLC, investigation piece - Senior Analyst [2]

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A little questions. First, congrats above the joyful OpEx reductions. Looking dispatch ought friendly of year-end, are you cottage targeting something at the kind of $32 million ought $33 million range, Steve? Or conduct you deem it can amuse flat lower than that?

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Steven G. Litchfield, MaxLinear, Inc. - CFO & head Corporate tactic officer [3]

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I guess, I don't -- possibly I don't desire ought further into that flat of specificity. I deem similar we've had some good progress. You can growl on from our guidance that we're looking dispatch ought a joyful refuse at Q2. Q3, we've got some one-off things. We've got some legal expenses that can autumn into that one, consequently we don't growl on an accurate linear decline. cottage I deem although the year, we're above explore ought growl on a joyful improvement.

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Quinn Bolton, Needham & Company, LLC, investigation piece - Senior Analyst [4]

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Okay, great. And then kind of above the manufacture front. Did I hear you guys at the note lesson almost a PA manufacture although wireless infrastructure?

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Kishore Seendripu, MaxLinear, Inc. - Co-Founder, Chairman, CEO & headmaster [5]

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Quinn, this is Kishore. That's no a PA product. It's a high-power module. consequently there's a Tier 1 OEM guest although wireless -- of 5G wireless deployment that are being rolled out precise now. And we dine a create amuse towards which we are shipping -- high-volume shipments started although these 10-ampere might module. They employ multiple 10-ampere might modules at each far radio unit. And consequently this kind of validates our paper that coupling our radio transceivers with the might management devices above the expectation vocabulary is a gigantic winning proposition although us. cottage at this point, our shipments at 5G is greatly a might module. Our desire and expectation is that above the organize of the way map development at our 5G manufacture portfolio, we will amplify our bond footprint ought include during much of the analog/mixed sign content during possible.

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Quinn Bolton, Needham & Company, LLC, investigation piece - Senior Analyst [6]

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Got it, okay. consequently the might module from the kind of Exar acquisition. Moving ought the cellular transceiver outlook. can you confer us kind of an update above impartial your transceiver and the create efforts? It looks similar at least a mix of your -- the big base station OEMs can exist undergoing changes at their kind of ASIC create groups or ASIC partnerships. Obviously, your cellular transceiver, I used to think, used to marry up show gather with some of those ASICs. And consequently ought the extent those ASICs are changing, how does that impact the expectation although your business? conduct you deem you can cottage ramp that manufacture along the second half of 2020?

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Kishore Seendripu, MaxLinear, Inc. - Co-Founder, Chairman, CEO & headmaster [7]

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So Quinn, a very, same good question. The actual scene above 5G, the initial deployments nation you hear at allowance calls and consequently above although the companies is greatly a PGA-based design, very, same price effective. consequently many of these cellular operators now are doing their hold habit digital ASIC manufacture and some semi-custom manufacture platform although the actual 5G rollout that is expected ought happen at 2020 -- latter divide of 2020. consequently -- and indeed are inexpensive during we create ought confront with these new generation of chips that are coming from the chief vendors. consequently we feel we're at a very, same good position. The timing is excellent. And indeed having the best manufacture at the market, the smallest technique node at 40-nanometer CMOS compared ought anybody out there, the levels of integration, we are truly passion very, same ganzo almost our positioning above the 5G wireless space precise now. consequently I think, if anything, it's indeed the moment then comes at our bid with the method our chip has been designed. And it was ideally made with the OEMs' hold DFE ASICs, if you will.

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Operator [8]

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Our next riddle comes from the queue of Christopher Rolland with Susquehanna International.

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Christopher Adam Jackson Rolland, Susquehanna economical Group, LLLP, investigation piece - Senior Analyst [9]

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So between, growl it, PAM-4, the telegram fiber node, some of these 5G products including might management, the transceiver, the backhaul, what are you most excited almost here? And what conduct you deem is going ought dine the most revenue, growl it, 4 years from now?

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Kishore Seendripu, MaxLinear, Inc. - Co-Founder, Chairman, CEO & headmaster [10]

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Chris, this is Kishore. Obviously, I dine ought exist excited by what's generating revenues today, right? And that's growing very, same strongly with wireless backhaul, modems, both millimeter ripple and microwave, paired with our RF transceiver. And that's a total system solution. We are the virgin vendor at the world that has everything above the platform, right? consequently I'm indeed excited almost that. And I deem we are in, what I call, the tug stand ought evolve that impartial at the method it needs ought evolve although little years ought come. consequently that