Earnings Call: Q3 2020

Nov 5, 2020

Greetings, and welcome to the MaxLinear Inc. 3rd Quarter 2020 Earnings Call. At this As a reminder, this conference is being recorded. Would now like to turn the conference over to your host, Mr. Brian Nugent. Please go ahead. Call to discuss MaxLinear's third quarter 2020 financial results. Today's call is being hosted by Doctor. Kishore, Seadripu, 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 fourth quarter 2020 revenue, 4th quarter revenue growth expectations in our principal target markets, GAAP and non GAAP gross margin, GAAP and non GAAP operating expenses tax expenses and effective tax rate and interest and other expense. In addition, we will make forward looking statements relating to trends opportunities opportunities arising from our recently completed acquisitions of Intel's Home Gateway Business and of Nano Semi. Growth opportunities for our wireless infrastructure and connectivity markets and opportunities for improved revenues across our target markets. These forward looking statements involve substantial risks and uncertainties, including integration and employee retention risks related to the acquisitions, as well as risks arising more generally in our business from competition, global trade and export restrictions, potential supply constraints, the impact of COVID-nineteen pandemic, our dependent on a limited number of customers as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks is outlined in risk factors section of our recent SEC filings, including our Form 10 K for the year ended December 31, 2019, and our third quarter 2020 Form 10 Q, which was 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 third quarter 2020 earnings release is available in the Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenues, gross margins, operating expenses, income or loss from operations, income taxes, net income or loss and net income or loss per share 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 do not provide reconciliation of non GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges including Non GAAP financial measures discussed today do not replace the presentation of MaxLinear's GAAP Financial Results. Form more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. Lastly, this call is being webcast and a replay will be available on our website for 2 weeks. And now, let me turn the call over to Kishore Sindripu. CEO of Max Lanier. Thank you, Brian, and good afternoon, everyone. Our strong Q3 financial results were ahead of our guidance on an organic basis and also include partial quarter contributions from our acquisitions of Intel's Broadband And Wi Fi Assets and Nano Semi Corporation. In Q3, revenue was a record high at $156,600,000, up 1 40% sequentially, representing strong double digit organic growth and an overall healthy non GAAP gross margin of 58%. Our Connected Home business stood at 24%, infrastructure at 14% industrial monthly market at 10% and Intel's broadband Wi Fi ethernet asset acquisitions were at 52% of overall revenues. The stronger than expected broadband revenues were driven both by increase in demand as well as market share gains across multiple product lines. Our wireless infrastructure business also improved significantly recovering from a weak macro backdrop in the first half of twenty twenty. Before turning to the business highlights, I'm excited to welcome our Nano Semi Corporation IP And Design Team. We expect this acquisition will prove we are a game changer for our 5G business. ManasemI brings existing Tier 1 OEM licenses as the only as it is the only proven open market solution digital pre distortion technology, which is especially suited for and 5G macro and massive MIMO applications. Nanosetimibe IP Licensing business also expands the customer base across 5G baseband, test equipment and other wireless applications. Simultaneously, we are working aggressively to integrate these IPs into products, greatly enhancing our value proposition in 5G massive MIMO systems for both OpenRAN and proprietary 5G solutions. With the addition of Nanus MI, we have significantly bolstered our 5G wireless infrastructure competitive positioning and offerings in this large and rapidly growing 5G market. Now turning to some of the Q3 business highlights. In broadband access, our acquired Intel Assets immediately double our target addressable market to about $5,000,000,000, consisting of industry leading DOCSIS 10 GPON Fiber, an ethernet broadband access gateway SOC Technologies, combined with the state of the art Wi Fi Six and 6 C platform solutions. They're ramping shipments to a flagship DOCSIS 3.1 North America Cape MSO platform, comprising the full suite of Maxxige Cable DOCSIS gateway SOCs, including, most importantly, Wi Fi Six and 2.5 gigabit Ethernet. We expect our market share revenues to grow as deployments research due to the work from home dynamic, and net overall MSO subscriber growth. In connectivity, our new compelling suite of Wi Fi Technologies build upon our existing best in class smoker and g.n wireline connectivity capabilities. Our latest Wi Fi Six ER2 chipset is sampling to customers, and is undergoing test pet certification for Wi Fi Alliance. Notwithstanding the large MSO Wi Fi design success that I just mentioned, we are still in the early stages of penetrating the large Wi Fi cable MSO and carrier telco opportunities. Invired connectivity, demand for our flagship MOCA 2.5 is strong at a premier U. S. Telco operator, even as it ramps in a new gateway platform at a large Kirdi and telco. In Optical data center, while the industry's 1st 400 gig PAM4 deployments are slightly delayed, we are seeing meaningful progress by Tier 1 customers for our 100 G PAM4 offering also, which we expect to ramp mid-twenty 21 as new designs convert into production platforms. Both 100 gigabit and 400 gigabit PAM4 markets continue to have a tremendous growth outlook and will dominate cloud and edge data center deployments over the next several years. With our next generation 5 nanometer CMOS 800 Gigabit PAM4 SOC product, which we plan to sample in mid-twenty 21 confident in our ability to capitalize on this growing long term optical data center opportunity. Turning to 5G wireless infrastructure market, we saw strong double digit growth during Q3 as demand recovered from the COVID related installation delays in first half twenty twenty. In wireless backhaul, MaxSold's binary RF channel aggregation feature is now a de facto requirements in operator RFQs. This has uniquely positioned us to both win and continue to add several new design wins across Tier 1, Tier 2 and Tier 3 players. Meanwhile, we have received strong positive feedback on our new 14 nanometer CMOS 5G RF transceiver associate which is the industry's 1st 8x8 massive MIMO solution. In addition with nano semi strong IP portfolio, we're greatly enhancing our value proposition in 5G mass in MIMO systems. We continue to work aggressively to get our lead customers to market to drive strong growth in 2021. In summary, our organic initiatives in 5G wireless optical data center and high performance NEROS markets, combined with the recent two acquisitions, greatly expand our targeted market of high value rapidly growing broadband connectivity and network infrastructure platform applications, which will uniquely drive strong profitable growth in Q4 and beyond. With that, let me turn the call over to Mr. Steve Litchfield our Chief Financial Officer and Chief Strategy Officer. Thanks, Kishore. I'll first review our Q3 2020 results and then further discuss our outlook for we saw our Connected Home business up 30 percent sequentially, well above guidance, led by strong demand for cable products owing to the work from home dynamic and share gain. Our infrastructure business grew 12% sequentially, driven by wireless backhaul and access partly offset by weakness in our in Asia and inventory reductions. Our broadband and Wi Fi business acquired through the Intel acquisition, accounted for $82,300,000 during the quarter, well above our prior estimates. GAAP and non GAAP gross margins for the 3rd quarter were approximately 42.3% and 58% of revenue, respectively. This compares to GAAP gross margin guidance of 51.5 percent and non GAAP gross margin guidance of 63.5% to 64.4%, which excluded the impact of the dollars of inventory step up and $9,900,000 of acquisition related intangible assets as well as $300,000 of stock based compensation and accruals related to our 2020 bonus plan. 3rd quarter GAAP operating expenses were approximately $100,800,000, which was up quarter over quarter due to the acquisition and acquisition related charges. GAAP operating expenses included stock based compensation and stock based bonus accruals of 22,600,000 combined, amortization of purchased intangible assets of $6,100,000, acquisition costs of $7,800,000, and restructuring cost of $3,300,000. Non GAAP operating expenses were 61,100,000 up $28,500,000 sequentially, due primarily to the impact of 2 acquisitions that closed during the quarter. Moving to the balance sheet and cash flow statement. Our cash flow used in operating activities in the third quarter of 2020 was $16,600,000 versus $9,300,000 generated in the second quarter of 2020. Our loan balance stands at $387,000,000 back and the term loan A raised this quarter of $175,000,000 for the WiFi and broadband assets acquisition. We remain consistent in our intentions around uses of cash with priorities on debt paydown and strategic acquisitions. Our day sales outstanding for the 3rd quarter was approximately 61 days compared to 58 days in the prior quarter. Our inventory turns were 5.2 compared to 4.0 in Q2. That leads me to our guidance. We currently expect revenue in the fourth quarter of 2020 to be approximately 185,000,000 $195,000,000, up 21% sequentially at the midpoint of the guidance range. While we do expect adjust our end market reporting breakdown in Q4, we are maintaining the current breakdown in an effort to maintain transparency during this transition. We expect Connected Home revenues to be up again with growth driven by cable data and connectivity, which expecting tailwinds from the work from home dynamic as well as new customer program ramps to continue in Q4. We are working closely with our suppliers to support the increased demand as supply constraints have become more of a factor in the market. We expect infrastructure revenue to be down primarily driven by to leaving 40% to 44% of revenue and non GAAP gross profit margins to be approximately 56% to 59% of revenue. Approximately flat with the mix shift toward broadband and Wi Fi, partially offset by gross margin improvement in this category. As a reminder, our gross profit margin years. We continue to fund strategic development programs targeted at delivering strong top line growth in 2021 and beyond, with particular focus on infrastructure and Wi Fi initiatives and our stated goal of increasing the operating leverage in the business. We expect Q4 twenty twenty GAAP operating expenses to increase approximately $8,000,000 quarter on quarter to a range of $107,000,000 to $111,000,000, driven mainly by the full quarter impact of amortization of intangibles and stock based compensation and bonus. We expect Q4 twenty twenty non GAAP operating expenses to be up approximately 15,000,000 sequentially to a range of $74,000,000 to $78,000,000. Percent. We expect interest and other expenses in the quarter In closing, we are pleased to report improving dynamics in all of our businesses based on strengthening product cycles improve market dynamics and share gains. Our infrastructure efforts in PAM4 and 5G continue to set up well with meaningful growth coming next year as production platforms begin to ramp. We are encouraged to see considerable recovery in the broadband business as well as early growth from our Wi Fi with accelerating demand and emerging supply constraints. We remain focused on maintaining strong profitability and cash flow generation while continuing to execute on our integration opportunities. We believe we are uniquely positioned to deliver strong leverage in our business in the remaining portion of 2020 and into 2021. With that, I would like for questions. Your first question comes from the line of Gary Lee with Wells Fargo. Please proceed with your question. Sort of the baseline on gross margin and operating expense from the fourth quarter level once you fully great your acquisitions. And so thinking about that 57.5 percent gross margin guidance and the $76,000,000 in OpEx, how do you see any sort of improvement as you further integrate your 2 recent acquisitions and start to run I guess more favorably priced wafers from the Intel business, for example, and then as well as some OpEx synergies? Yes, Gary. Thanks for joining us. So I can comment a little bit. I mean, I think I don't think we've found anything different than we initially expected from a kind of a gross margin and the potential that we have on that front. So I do expect next year, we've talked about seeing the overall business able to exit the year somewhere in the 60% range. So I do see some nice improvements. I expect a pretty good step up in the first half of the year, and then just kind of trending towards that 60%. I think on the OpEx side, as you're aware and we've talked about the are some transitional services, that come with the deal and it's about 6 months worth of services. So I do expect to see that come down, kind of in late in Q1. And so we'll see some nice, well, I mean, improvements just that additional expense comes off. And, but overall, I mean, just synergies wise and the cost I think we're very pleased with the progress that we've been making on that front and improving the overall profitability of the business. Thanks, Steve. As a follow-up, I wanted to focus on the cable data side of the business. It's no wonder you guys are doing well. You can see it the strong gross sub additions in some of your bigger cable and so partners and you can see some strong trends within your largest cable gateway customers. And so I was wondering if you can put and rank order what is driving that business? Is it is it just general market uptick in the state home demand? Is it increased bill materials? Is it market share gains, whether it be for you or your cable gateway customers? So, Gary, hi. You know, it's all of those reasons really. You know, one of, you know, everybody and is upgrading their the quality and tier of their bandwidth, not just what they access, but what they distribute around the home. So it's driving a lot of upgrade in the boxes that are being deployed. So we are now pretty strongly trending towards full docs at 3.1 rollout in most of the major operators in North America. And for us, as we had lost market share earlier on in a major cable operator in North America. And now that's in full recovery mode. And but the good news is that, even, even so, our, the below materials we are supplying to these operators is increased quite a bit owing to the deployment of Wi Fi, 6 solutions. And, they're the best class today that are there. And so we're getting bomb expansion as well. And I think in addition, it's very clear that the K MSOs are gaining, net subscriber growth beyond just upgrade in the bandwidth and so on and so forth I would say there's some component of a pandemic driven work from home market dynamic has reinforced the need for more bandwidth. As well as viewing habits have now changed dramatically and a lot of people are at home now, right? So, so I think we're benefiting from all of those factors. Thanks guys. Your next question comes from the line of Alessandra Vecchi with William Blair. Structure segment and some of the puts and takes, with what I'm assuming is if you can help us sort out the impact of sort of the China band as well as maybe the timing of the large hyperscale ramp and how we should be thinking about that? Okay. Hey, Alex. This is Steve. So I'll kind of give you a little bit of, a highlight as far as kind of quarter to quarter impact. And then maybe if Keisha wants to jump in on some of the PAM4 stuff. But just from a China standpoint, well, so of all, I mean wireless infrastructure did extremely well in Q3. It was a nice recovery that we had anticipated seeing, thought we'd see it in Q2, but definitely happened in Q3. We see some of that kind of fallback a little bit in Q4. Some of it is definitely driven by China We've talked about that, the Huawei impact specifically. While it's not a huge number for us, we definitely see that come down as we take that out our numbers completely. On the optical side, I think we all now know that the PAM4 rollout in general has delayed the 200 gig PAM4 or 400 gig PAM4. So I think that as a result of that, our own expectations for revenue from the PAM4 market as pushed out as well. Having said that, we have a we have a select number of optical module customers who are, who are, getting ready for a potential ramp in the middle of 2021. And, we are going through the qualification process, which itself gets slower than we had expected, with the major hyperscale data center customer. That's on the 400 gig PAM4 side. On the 100 gig PAM4, it's a more secular, profile. It's not specific to any particular data center. So 100, the goal of 100 gig Pampers is now become how to reduce, how to replace 100 gig CWDM4 because it really drives the cost down quite dramatically the cost of the optics. So a lot of customers and companies are preparing for potentially replacing all 100 gig CWDM4 with, 100 gig single Lambda PAM4 be it in enterprise market or data center markets. So, I think that's going to be an exciting cycle. Once again, that's also going to be in the mid-twenty 21 onwards. So I would say, the delays are disappointing. But on the other hand, if you've seen the latest life counting report, reaffirms that the growth profile of the PAM4 opportunities for data center, whether it's 100 gig PAM4 or 400 gig PAM4, the single Lambda Technologies is a pretty, very, very strong future outlook and, with our investments in 800 gig PAM4 as well, with our latest generation with a fine nanometer investment that we hope to sample in the middle of next year, we'll be in a leadership position in terms of really enjoying as a part spend in the future growth of this market opportunity. And then just as a follow-up on on the PAM4 discussion. Obviously, recently, there was the the announcement that Marvell is is acquiring Inphi Can you walk us through how you potentially think about the competitive dynamic there and if it gives you any opportunity, to potentially grab a little bit additional share? Look, right now in the, in the PAM4 rule, there are 3 players, right? And we are among them. Marvell was not a participant in the data center market. And, and I don't see how they bring any additional, competitive positioning to the combined Marvell Inphi offering. For us, you know, it's quite exciting because we'll stand out as a pretty exciting young agile company that is investing, to grow And with our acquisition of Intel's home gateway assets, we also will have the scale to fund, finance limited technology nodes because, the SOC products are pretty big silicon hogs. And, you always want to be in the latest technology node, if you look at Wi Fi as well. So I think we'll be able to amortize and spread the development costs and fine nanometer across all these platforms. So I feel that we're actually in a very, very strong position. I think the infrastructure is a long game, and I think we should, think we have been repeatedly proven wrong where we think that things happen instantaneously, but then we also have been proven right. Like in a wireless backhaul where revenues really, really take time to come. But when they come, they are yours for a long time. So that's why I won't sum it up. That's really helpful. I'll put myself back in queue. Thank you. Thanks, Alex. Your next question comes from the line of Quinn Bolton with Needham And Company. Please proceed with your question. Hey guys, I wanted to follow-up on Alex's question. I can you give us some sense what do you think the holdup has been on the PAM4 qualification in PHY has been shipping, I think, into that lead hyperscaler now for over a year. So it doesn't feel like it's a market demand issue. Can you walk us through from where interoperability test Dean, I mean, are you running into some issues or what's really behind the delay? Actually, we you see the surprise news for me that, a competitor shipping were 1 full year. In fact, the real delays are, I don't know how much is pandemic related, but they are, And then there are China trade related issues with the import tax issues, whatever qualified vendors are there. The import issues with importation of China has been one blocker. And then there has been emphasis put on the data center to qualify non China based, module makers. And there have been a little bit slower on that with the module companies trying to get ready to get to the qualification. So I as far as I know, both in 200 gig PAM4 and 400 gig PAM4, you know, barely a few teams of, teams of thousands of quantities of PAM4 modules have shipped actually. So In fact, even have been told that there have been more 4 100 gig PAM4 quantity shipped, which itself is a statement that 200 gig PAM4. So I'm still to understand how a full year of shipments have happened as far as sell through goes. I cannot speak for sell in. Let's put it that way. Okay. And the second question, Steve, you gave us some insight, I think, into the 3 traditional buckets of Cormack linear. I might have missed it, but I don't think you gave us, an outlook for the acquired Intel business. I assume that's up because you get full quarter of that business, but any comments you could say about the infill business would be helpful. And then I guess where I'm driving at is, I'm a little surprised with the gross margins stepping down in the quarter, especially given some of the strength that the core Max linear cable data business. So just trying to think through the margin puts and takes into the fourth quarter, is it just you're getting a lot more contribution from the Incell business and that's what's causing the pressure quarter over quarter? Yes, sure. Quinn. Yes, no, you're exactly right as you're thinking through that. So we definitely have a whole lot more contribution in the quarter. So we so to answer the first part of your question, do see that continuing to prove much like our own broadband business, broadband and Wi Fi from Intel is going extremely well. And so we do expect that to grow in Q4. And yeah, there's just a bigger contribution from a, frankly, a lower margin product portfolio, right? And so that is bringing gross margins down slightly. As I mentioned a little bit earlier, am confident that we see this recover in the first half of next year. So it does come up was down a little bit more just not just, some of it's mix related, but then also you've got infrastructure coming down slightly off of a very strong Q3. So that combination kind of brings it down a little and then you'll see it move right back up in Q1 and Q2. And then last for me, just on the 5G cellular transceiver, can you give us any updated thoughts on when you think that starts a meaningful ramp? Is that also kind of mid 2021? Do we need to wait for the 2nd generation 8 channel before that revenue stream becomes meaningful? Just how should we be thinking about 5G? Thank you. Yes. So on the 5G side, interesting, right. We've talked a lot that we would see a small amount of revenues in the second half this year on track to see that. But they're really more meaningful ramp as next year. And it's interesting now with the dynamics with the trade dynamics in China that's definitely kind of had some impacts. I think overall 5G has slowed slightly. I don't know that it changes our outlook that much from an overall revenue expectation in 'twenty one, but So, I think that does definitely start in earnest. I'd mentioned in the prepared remarks about those ramps starting happening in the mid part of the year. So we are on track to see that. Your next question comes from the line of Torese Vonberg with Stifel. Please proceed with your question. Yes, thank you and congratulations on the strength here. First question, I looked at your 10 Q and I saw a new sort of revenue breakdown there is Is that how the new revenue breakdown will look like going forward? And, can you maybe elaborate on what's the difference between Connected Home versus Broadbandwifi just trying to get everything straight there. Yes. No, sure, Tore. Sorry, we were hoping to actually make that clear in our prepared remarks But so we did so the way we broke out the earnings, so we wanted to be just kind of transparent and we broke out in the Q3 results based on our previous 3 end markets. And then we had effectively one bucket that was for the broadband and Wi Fi assets from the Intel acquisition, so that it's very clear. Going forward, as we've stated, we intend to change those end markets. And so you'll see that on next quarter's earnings call as we break that out separately. So the answer to your question is what the intel piece is the broadband and Wi Fi assets that's broken out in the queue. Okay. That's great. And as my follow-up, you talked about some share gains there that you benefited from and obviously all the content growth, but are those share gains mainly on the Wi Fi side or have you seen some other products that you've gained some share with? So, Tore, no, no, it's not just, Wi Fi, right? It's a combination. Let's start with the first one, right? And cable It is large MSO. We had lost share and now, so we're getting the full platform. What does that platform include? Includes Max Media front end. It includes the Intel Docs of 3.0 SoC and the gateway processor. It has It has now the Wi Fi. It has got the 2.5 gigabit Ethernet and that's the and even MoCA, of course, right? So it's got all the combination there. So that's, that's pure volume unit growth by share growth. And there are other carriers who are, this has been public, for example, CenturyLink is, is, if you go back to Intel press release the past. CenturyLink is now ramping a new platform, various flavors of platforms where Wi Fi is an ad, on in the market. We're initially the we have gotten some share gains, versus our competition because there are severe supply shortages and, we have gained some market share, because supply shortages are at our, at our customer's end. So that's So you get the full volume impact of growth, right? And the volume increase as well simultaneously. Additionally, there have been some component growth the large, U. S. North American telco operator for our MoCA solutions. So if you say it's a of everything, that has been, that is nicely recovering on the broadband, but it's what we call the Connected Home and the Intel Assets. Be acquired, okay? Okay, great. Great. Just one last one. The 5 nanometer, that's going to be at your largest foundry today, right? 5 nanometer. Is it going to be what? Sorry? It's going to be, your partner would be your largest foundry there, right? Nanometer process technology. Got it. Got it. Okay. I mean, we don't dispose which foundry, but I think it's It's all news now. There are only 2 foundries in the world that are 5 nanometer capable, Samsung and TSMC. So, we would like to we are in one of them. That's correct. Your next question comes from the line of Ross Seymore with Deutsche Bank. Hi guys. Thanks for the question. Congrats on the strong results and guide. I just wanted to dive a little bit into the fourth quarter. I know your switching the segments up, but just to split it maybe at a higher level, organic versus inorganic, it seems like you're going to have 50% more time owning the, the Intel Home Gateway business. And then I don't know how much Nano Semi contributes, if any, but out of the 190,000,000 midpoint versus the 156 how much of that is organic versus inorganic position? Yes. So Ross, I mean, I guess, So we didn't break it out. I mean, what we talked about was, I mean, Connected Home is up in the quarter. Infrastructure is down industrial will be down slightly and the Intel business will be up. So I mean, all in, not the way I would position is not a whole lot's changed with regard to our expectations on infrastructure. There's probably only one slight difference. I mean, the mix is a little bit different, right. So the organic growth that we're seeing is really on track with what our original expectations were. But the mix is slightly different, definitely stronger on the connected home side and then a little lighter on infrastructure given the Huawei dynamic. And for my follow-up, I want to get into kind of seasonality sustainability. Big debate in a lot of this broadband business, even a mature computers and obviously investors is just how sustainable is it going to be? Is it a bunch of pull forward? Because we're from home or does this have legs and without getting into the persistence of COVID and all that side of the equation, maybe you could just start off with is there some seasonality to the combination of the Connected Home and the Intel Home Gateway business we should think about from our revenue perspective as we enter next year? And are you concerned at all that some of this is a bit of a pull forward that will lead to a little bit more of a low when we get into 2021? Yes, I mean, I think the way I would answer it, so we're definitely seeing an exceptional level of demand across the board, the supply constraints are probably adding, to that as well. But I would probably start and kind of echo a little bit of what Keisha was sharing earlier. I mean, there's a real recovery, kind of an underspend happened over the last 2 years. And so that, that kind of was on track. We had talked about it earlier in the year. So we've seen that. On top of that, I'm sure there's a little bit of work from home demand as well. But the other piece of this is, is that we're winning share back some of the supply constraints have hurt some of our competitors. And so we've definitely been able to take advantage of that. But then this bomb increase, right, having bringing more wifi, bringing more ethernet. These are all, you know, this is new dollars that we're bringing to the system, right, that we haven't had historically. So those are pretty big, dynamics that are very different. So is there a little bit of, of that, kind of work from home that maybe doesn't replicate? Yes, potentially. But this business, I mean, we're very confident we're running at a much, much higher level than what our original patients were. And that's really driven by share and the content that we have on these boxes. And having said that, we see a lot of interest in our product offering. And we are trying to carefully balance OpEx versus supporting new customers so on because software is a huge component of an SoC gateway business. And, we're trying to modulate the dynamic on profitable versus revenue growth as well. So we are I hate to say if you're giving up any revenue, but I think there's some truth to that, that we are, dragging a little bit on the expense side so that we can modulate profitability correctly. And I guess the last thing, Ross, I mean, just to further clarification and talk about that content increase, because I think that's part of your question as to where that's coming from. I mean, a big contributor as we look out into next year's Wi Fi, right? So we've talked a lot about that size of that business. And so this year for MaxLinear, so maybe that's in the $25,000,000 range. I mean, next year, that's expected to probably double or slightly above that. So there's good, contribution you talked about, well, where does that upside come from next year? I mean, this is all new content that we haven't had historically. Great. And I guess one final one on kind of what Kishore was pointing to about modulating the OpEx side. Steve, you touched a little bit on it before, but On the gross margin side, you said you'd kind of work your way back up to 60 exiting next year. That's helpful as kind of a band for us to think about modeling wise. From the OpEx side, the spread 76 now in the quarter you're guiding to, I know you said it'll drop a little bit late 1Q. Sounds like 2Q. Is there any sort of exit rates that we could think about akin to that 60% gross margin on the OpEx side of things connection? Well, I think what what we've said on this, and I think we've been pretty consistent about it. So there's a lot of costs that we still have to pull out of the business, right? We've got services, but we've also get just efficiencies that have to be realized over the next 12 months. And so we've kind of talked about being in the low 20s exiting 21. And I think we're on track to do that. And I think that was even set out early in April when we talked about it. So I don't see any problems, getting there. And then I think the real exciting part is we look at the Intel business in particular this business can definitely run quite a bit higher than that. And so we'll continue to see those efficiencies realized and that profitability level hit kind of exiting the year and moving into the beginning the following. Your next question comes from the line of Ananda Baruah with Loop Capital Markets. Please proceed with your question. Hi. Good afternoon guys. Congrats on the execution and navigating everything you have going on. A couple for me, if I could, Could you actually rank order, Steve, the sort of handful of influences for the broadband business? For 2021 that you just you just went through. Which one do you think? Well, I guess in what order do you think they will sort of be the the most incremental at least anecdotally. That'd be helpful. And then I have a quick follow-up. Thanks. Yes. I mean, I'm not sure that I can rank order them. There's a lot of dynamics going on right now and it's a little convoluted as these platforms roll out and how much you're gaining on just pure shit, just the difference I mean, Kishore spoke earlier about the share gains that we're getting, well, we are getting share gains from competitors, but we're also increasing content at the same time. So I don't know that I can rank order at all of them or having a really positive influence. And I think you'll see that continue throughout 'twenty one. It sounds like you think the least significant is actually the at home, the at home portion of it is of all the variant. I think it's a smaller portion. I mean, I think what people don't realize kind of that it's a step up that we're achieving through the share gains and the increased content. But around the edges, are we seeing exceptional event? Yeah, of course. But I think a whole lot of this is a more structural change where we've taken, more share and we have more content. That's that's very helpful. And then just quick follow-up. On the data center, at CSPs, Are you, I know, I think last quarter, you guys actually, you know, made mention, hey, listen, we're, we're sort of we're just starting to lean into this. So maybe don't use us as a proxy for overall spending. But I want to ask I wanted to ask if you have a sense of what the spending environment is there, because you actually made some comments a few months ago about about a 100 gig. And so, do you do you feel more comfortable making, making a hyperscale CSP spending environment, you know, kind of statement And if you do, like sort of what's your philosophically, how do you see things going on there right now? I mean, I'll take a stab at it, the question. I think you're referring to just kind of data center CapEx trends, right? We had commented on that. Last quarter. Totally. Yes. And bandwidth specifically, obviously, but yes, whatever you have. A little tougher because all this is a new market for us. So it's all upsides in our mind, right? So these are new programs. I think he's short commented on the market outlook. I think what we're hearing from our customers is really encouraging. Don't know that we have a, I mean, since we don't have a huge data center business today, I mean, again, it's all upside to us. I think it's I think we're really well positioned to take advantage of that both 100 gig and 400 gig markets. Okay, that's awesome. Thanks a lot guys. I appreciate it. Yes. Thank you. Your next question comes from the line of Bill Peters with JP Morgan. Please proceed with your question. Yeah, hi. Thanks for taking my question. I see the upside coming from the Intel asset. I have a clarification then a few questions. You're referring to Huawei. I guess if you can help us understand what they accounted for in the third quarter. I assume they basically go to 0 in the 4th quarter. Are you getting are you applying for licenses? Do you I assume you don't have licenses. You can clarify that. Yes, yes, Bill. Good to chat with you. So we don't break out exactly what Huawei contributes. We say it was slightly less than $10,000,000 on an annual basis. And so I think you can probably, you know, you can get a decent feel for that. And yes, we have pulled it out completely out of Q4. Okay. Just industrial multi markets, I think you were calling were flat to slightly up, but what, I guess, what didn't happen or what occurred where that ended up being down? And I guess more importantly, as you think about a recovery back to kind of a historical 19 plus, 20 plus 1,000,000 range. How should we think about that recovery into next year? Yes, Bill, So that's an interesting dynamic, right? It's been a quite a volatile year, really big declines in Q1. And then we saw really strong recovery in Q2. But yet, that didn't continue in Q3. We thought it would be flat to slightly up. I mean, it it did okay in the quarter, but, but it seemed like they were still consuming a fair amount of inventory. We do think kind of given the trade dynamics, some of the parts that were participated in, we think, some of these, this is a Chinese customers that are moving to a domestic supplier. So some of that business we think probably goes away for good. And then we've seen another portion of it that is kind of, some of these video cards that need to, you need to be in the home. And so, that's just taken a longer time to recovery. But we do expect that to continue or to continue to recover I think our really long term view of our industrial multi market as well as just our analog business in general, we've got some new power management products as well as interface We've been talking about them. They're hitting kind of the, around this timeframe first quarter of next year. We'll be sampling That's the real meaningful stuff that we've been working on over the last 8 year, year and a half. And so as those hit the market, start to get some design win traction, That's really the exciting part there. Now, that doesn't necessarily reflect on the short term dynamics in the kind of industrial multi market but I think that's really where we're positioned to come up with some newer products based on these customer inputs. Okay. And then I guess the last one, and thanks for providing the disclosures about the broadband and Wi Fi business, at least for now, helps us to try to frame the revenue opportunity. I guess that would calculate somewhere close to $110,000,000 to $115,000,000 in the 4th quarter. Hopefully, if you could confirm that's kind of the right zip code to think about. But more importantly, I mean, you have your, a lot of the Wi Fi business, you size that this year potentially next year. I'm hoping to understand the based off your design win pipeline, where you're picking up maybe some new content in areas like fiber, PON and Ethernet. When does Wi Fi Sixe start happening? How should we think about the progression of that business as we move through 'twenty one? Yes. I think that's a large and long topic. I just want to assure that it's very it's a very robust pipeline. And, we hope to share more information on being in the world's, more premier 10 GPON platform, which is, with sort of a Mercedes Benz with all the and all the moke and all the bells and whistles, hopefully at the next call. So it's a large topic to cover, in this call. But to answer your first question, I mean, you're in the right zip code. I think that aligns with what I said earlier. Okay, thanks and good luck with the, as you integrate that asset. Your next question comes from the line of Suji Desilva with Roth. Please proceed with your question. Hi, Kishore. Hi, Steve. Congrats on the progress here. Maybe you could talk about, since you've been acquisitive to some extent, what, your thoughts are on further acquisitions and what kind of balance sheet you might be willing to assume in any additional acquisitions? Hey, Suji. Yes, I mean, so clearly, and we had mentioned that we do intend to continue, to look at acquisitions and, I mean, your specific question about leverage and what we're willing to take on, I mean, I think we're going to be prudent with our market leverage. I think very fortunate in the way we were able to negotiate the Intel acquisition where we really didn't take on a lot of additional debt or leverage in that particular acquisition. And I think the cash flows are coming in probably a little faster than what we had originally anticipated. So that's going very well. So look, I mean, we want we've got 2 assets and we're right in the middle of integration, but I think it's progressing well. I mean, it is an asset purchase. So a lot of our work was done really early in the process. So I think that positions us well to be able to do something maybe as early as the second half of the year. But don't know that there's an exact number of leverage. I think a lot of that depends on the market environment as well as the asset itself. Okay, great. And then, I think this question was asked before, just maybe try to ask in a more general sense, what with the new profile of businesses the portfolio, what is the typical seasonality look like? I don't know if 'twenty one is going to be a typically here or not, but maybe you can just kind of give us some thumbnail for that? Yes. I mean, the only comment I would make, I'll do it typically see a little bit of softness in Q1 and softness in Q4. Q2 and Q3 is typically what we would see. And I, you know, these assets add to that. So that's what you would expect to see. What happens in the coming year? Hard to say, right? Because you're seeing a lot of strength. I mean, saw strength in the whole second half of the year that seems very strong heading into early next year as well. So, yeah, we'll definitely watch that determine how that seasonality rolls out in 'twenty one. Your next question comes from the line of Christopher Rolland with Susquehanna. Hey, guys. It's David Haberle on behalf of Chris. Congrats on closing the deal and the success that you've had there so far. It certainly seems like it's going better than expected. If I could on the deal, now that we've, you have the asset under your control, how are you thinking about long term growth of total business. Does this weigh on long term growth at all? Or it sounds like you have a lot of tailwinds kind of near term helping this business grow ended in 2021, but longer term, how should we be thinking about growth of just the aggregate max linear business? Yes, sure, David. So I think we've been pretty consistent in the messaging here. I mean, the, the Intel asset itself, we've talked a lot about what does that growth profile look like? I think in the short term, it's still, well, in the really short term, I mean, demand been, very good in these, in these share gains and are definitely contributing. The bomb increases are very meaningful. Overall, I think kind of that low single digit growth rate is what our expectations are. I think as ethernet and Wi Fi really start to pick up, you can definitely start see our ability to grow this at faster than that low single digit number. But it's still a little early and those are fairly small product lines today. I think where we have been investing and really where we're expecting a much bigger, growth opportunities from the infrastructure business Kishore, we I mean, you talked about it a little bit earlier, but our optical business is still very excited about market, the market opportunity itself is extremely large. And, and our positioning with the technology and the products that we have today, I think, works out very well. And then the 5G side, again, is a big investment opportunity and it's one I think we're positioned to take advantage of. So that's really where you see that, well over double digit growth you'll expect to see over the next 12 to 24 months. Got it, Steve. Thanks for the color there. And then if I could, also for you, Steve, your the gross margin range a bit wider than normal. Is this just getting a feel for operating the new business how that's going to play out or is there any more uncertainty in this quarter than others in terms of your mix? Yes, sure. Look, I mean, let's be honest, right. We're doubling the sides of our business with a very large acquisition that's done in a carve out. So they're, look, they're some uncertainty. Okay. So, a lot of moving parts here. So I think it would be prudent for us to just have a wider range. What I am confident about is as we move forward, and I mentioned this earlier, kind of going into next year, we get away these transitional services, we own completely that supply chain. Things get a lot clearer and we're a lot more confident than you probably back to see that range narrow again. Okay. And you just want to take into account that Q4 will be the 1st quarter. We even actually learn what what the real expenses are in many categories, right? So Q3 was a partial quarter and even in Q4, we have a lot transitional service expenses. So we have to go well into acute or Q2 will be the 1st clean quarter, actually. With no sort of TSA service costs. So I would say that, at this point, this is, we are making I would say pretty good steady progress. And I think our track record speaks for itself that we're very good at really managing our gross margins up we do a good job a bit and we really have a similar confidence about the acquired assets that we should do better than what we, we are saying at this stage. The last acquisition, I mean, to Keyesor's point, the last acquisition that we did, I mean, the business was doing kind of low 50% gross margin. We took it up over ten points over the next kind of year, year and a half. So we do really do have a good track record here. I mean, we're really benefiting by strong demand, right? And we've just in the hold of the business. So it's going to take us a little bit of time to improve the gross margin. So while it's a little bit, lighter in Q4 as we get our hands on this, mean, you're going to see a nice progression on the gross margin going forward. Ladies and gentlemen, we have reached the end of the question and answer session. And I would like to turn the call back to Kishore Cyripu for closing remarks. Thank you operator. I just want to let everyone know that we'll be participating at the you know, Raw Technology Conference in November 11th, the Stifel's 2020 virtual Midwest 1 on 1 Growth Conference on November 12, Needham Security Network And Communications Conference on November 17, the Wells Fargo TMT Summit on December 2nd, and Barclays Global TMT Virtual Conference on December 9 to 10. Just to remind you that all of these conferences are virtual. And we hope to connect the many of you there. With that being said, thank you all for joining us today. Happy, happy Thanksgiving. If you don't see you before then, I'll talk to you, and we look forward to reporting on our progress to you next quarter. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.