Earnings Call: Q1 2020

Apr 29, 2020

Greetings, and welcome to MaxLinear's Q1 to 2020 earnings call. At this time, all participants are in a listen only mode. A brief question and answer session will follow the formal presentation. Please note this conference is being recorded. I would now like to turn the conference over to your host, Brian Nugent. Thank you. You may begin. Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's first quarter 2020 financial results Today's call is being hosted by Doctor. Kishore, St. Dripu, 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 second quarter 2020 revenue and GAAP and non GAAP gross margin and operating expense. In addition, we will make forward looking statements relating to trends, opportunities and uncertainties in various product and geographic markets. Including, without limitation, statements concerning opportunities arising from our announced definitive acquisition agreement for Intel's Home Gateway Business, growth opportunities for our wireless infrastructure and connectivity markets and opportunities for improved revenues in our broadband markets. These forward looking statements involve substantial risks and uncertainties, including risks related to our proposed acquisition of Intel's Home Gateway Business, such as integration and key employee retention risks, as well as those arising more generally from competition, global trade and export restrictions potential supply constraints, the impact of the COVID-nineteen pandemic, our dependence on a limited number of customers, average selling price trends and risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risk factors is outlined in the risk factors section of our recent SEC filings including our Form 10 K for the year ended December 31, 2019, and our first 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 statement. The first 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 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 a reconciliation of non GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project future certain charges. Including stock based compensation and its associated tax effects. Non GAAP financial measures discussed today do not replace the presentation linear GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. Lastly, this call is also being webcast and a replay will be available on our website for 2 weeks. And now let me turn the call over to Keith Shorestein Dripo, the CEO of MaxLinear. Thank you, Brian, and good afternoon, everyone. We are pleased to report strong gross margins of 63.8 percent on $62,000,000 of revenues in Q1 2020, and cash flows from operations of approximately $6,700,000. We're also encouraged by our stabilizing forward outlook in this unprecedented COVID-nineteen pandemic environment. Our Connected Home business stood at 52% of total sales while infrastructure and industrial multi market revenues represented 28% 20% of overall sales, respectively. Despite the pandemic, our world class drug Diverse team continues to successfully execute on critical strategic engineering initiatives and customer milestones in 5G wireless optical data center and high performance analog markets. Our impending acquisition of Intel's Connected Home Assets more than doubled our target at this market to about $5,000,000,000 and consists of industry leading DOCSIS 10 G PON fiber and ethernet broadband access PSOC Technologies along with the state of the art Wi Fi Six and Wi Fi Sixe platform solutions. Combined with our ongoing 5G wireless and optical data center infrastructure initiatives, we are ideally positioned to address all the bandwidth expansion and network data bottleneck opportunities in the cloud as well as into and throughout the home. The disruptive work from home mandates all over the world backlog into market, we are diligently supporting our OEM to ramp the industry's first 400 gigabit PAM4 deployments at our GLI hyperscale datacenter customer. Our 2nd generation Tularide DSP system on chip solution for single Lambda 100 gig PAM4 application was recently recognized as industry's best by 2020 Lightwave Innovation Reviews. We've also rapidly expanded our industry design wins several Tier 1 customers for 100 gigahertz PAM4. Recently, Optobe Technology And Center Photonics announced sub-three and a half volts 100g DR run optical modules, serving hyperscale data centers using our solution. We believe single Lambda 100 gigabit and owned Gabit PAMPA solutions will dominate data center and 5G wireless frontal deployment over the next several years. Turning to the 5G wireless infrastructure market, we have recently completed the production tape out of our industry leading 14 nanometer CMOS 4 by 4 massive MIMO quad RF transceiver system on chip solution. We are on track for initial 5G revenues in 2020 and strong multi year growth beyond. More broadly, we have furthered our engagement with all Tier 1 OEMs and customer feedback continues to confirm that our 5G RF transceiver has the highest performance, double the bandwidth at 400 Megahertz and superior system level integration at up to 50 lower power consumption versus competition. We hope to share more exciting developments in 5G access in our next earnings call. In 4G and 5G wireless front and backhaul, we are also witnessing acceleration in E bandmillimeter wave design engagements with Avia, Technetic GX and cycloo, each announcing innovative solutions using our 20 gigabits per second millimeter wave dual modem and 2.5 gigabits per second microwave modem chipsets. EVAN is very attractive due to larger blocks of available spectrum and lower licensee costs, especially for 5G cell densification. With the growing base of RF design wins for microwave backhaul coming to production, and expansion to millimeter wave deployments where we have a firm leadership position. We are increasingly confident of expanding our wireless backhaul revenue run rate this year and beyond. Moving on to the connected home market, During Q1, we saw a resumption in our flagship multi gigabit MoCA wired connectivity platform deployments. At our major fiber telco operator end customer as well as an uptick in our G. Hn business. Wired connectivity remains an important growth driver to relieve in home connectivity bottlenecks and our and G. Agents solutions will benefit from that market dynamic. In closing, I'm increasingly confident that the impending Intel Connected Home Assets acquisition combined with our organic initiatives in 5g Wireless, Optical Data Center And High Performance Analog Markets will uniquely benefit maxly a shade of holders by addressing an ever increasing targeted addressable market of challenging broadband connectivity and network infrastructure platform application With that, let me turn the call over to Mr. Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer for a review of the Q1 business results and our forward guidance. Thank you, Kishore. I will first review our Q1 2020 results and then further discuss our outlook for Q2 2020. On revenue of $62,000,000, we saw a connected home business up 7% sequentially with an improvement in MoCA shipments related to our major telco program. Our infrastructure business decreased 14% driven by softness in wireless backhaul and a normalization of our high speed interconnect business after a strong Q4. Our industrial and multi market business was down 37 percent sequentially as seasonal weakness was compounded by Pocket of supply challenges related to COVID 19, distributor inventory reductions, and overall demand weakness. GAAP and non GAAP gross margin for the first quarter was approximately 49.6% and 63.8 percent of revenue, respectively. This compares to GAAP gross margin 4%. Purchased intangible assets from previous acquisitions and $200,000 of stock based compensation and bonus accruals. 1st quarter GAAP operating expenses were approximately $50,900,000, which was above our GAAP guidance of $46,500,000 to $47,500,000 due primarily to acquisition costs. GAAP operating expenses included stock based compensation and stock based bonus accruals of $9,600,000 intangible assets of $5,700,000, acquisition costs of $3,300,000, restructuring charges of 500,000 and IP litigation cost of $100,000. Non GAAP operating expenses were $31,700,000 which was up $1,700,000 sequentially due primarily to a seasonal step up in payroll taxes and higher design tool spending. This was slightly below non GAAP guidance of $32,000,000 to $32,500,000 due to continued disciplined expense management. We have been successfully managing the spend during this transitional period with Q1 non GAAP OpEx down 11% year over quarter of 2020 was $6,600,000 versus $28,100,000 generated in the fourth quarter of 2019. Our loan balance remains at $212,000,000 and our net leverage ratio was roughly flat at one point six times. We remain consistent in our intentions around our uses of cash with priorities on debt paydown and strategic acquisitions. Our days sales outstanding for the first quarter was approximately 66 days, in line with the prior quarter. Our inventory turns were down slightly to We currently expect revenue in the second quarter approximately percent quarter over quarter with declines across most of our product categories. Taking with our Q1 results, the guidance implies the first half 2020 connected home revenues of approximately $60,000,000, consistent with our prior outlook of approximately $30,000,000 per quarter, albeit uneven. Looking beyond Q2, improving bookings visibility gives us confidence that our connected home revenues should improve in the 2nd half. We expect infrastructure revenue to be up by roughly 15% with improvement across each product category We expect our industrial and multi market to increase approximately 15% recovering from an unusually low Q1. We expect 2nd quarter GAAP gross profit margin to be approximately 49% to 49.5% of revenue, and non GAAP gross profit margin to be approximately 63.5% to 64% of revenue, essentially flat sequentially. As a reminder, our gross profit margin percentage forecast could vary plus or minus 2% depending on product mix and other factors. Even as we are focused on reducing our run rate spend levels, we continue to fund strategic development programs targeted at delivering strong top line growth in 2020 and beyond. With particular focus on infrastructure initiatives, and our stated $3,100,000 quarter over quarter to a range of $54,000,000 to $55,000,000, driven mainly by seasonal payroll increases and engineering prototype expenses supporting our product development roadmap as well as stock based compensation and bonus accruals. We expect Q2 twenty twenty non GAAP operating expenses to be up approximately $1,300,000 sequentially. To a range of $32,500,000 to $33,000,000. And non GAAP tax rate of 6%. We expect interest and other expenses in the quarter to In closing, we are expanding design engagements in the 100 Gig data center market, expanding adoption of our e band modems and RF transceivers, and engineering and customer milestones in our 5G massive MIMO transceiver platform. While we see cross currents in our end market dynamic, attributed to COVID-nineteen, we are navigating to the best of our ability, supply challenges, and potentially further demand disruptions as work from on maintaining strong profitability and factoring in a financially and strategically compelling acquisition in the Intel transaction, we believe us in 2020 and beyond. With that, I'd like to open up the call Thank you. A confirmation Our first question comes from the line of Tore Svanberg from Stifel. Please proceed with your question. Yes, thank you. First of all, you're guiding the infrastructure segment to be up 15% sequentially. And I think you said all sub segments will grow. Could you just elaborate a little bit more on that? Especially in light of the hyperscale business taking a breather in Q1? Yes. Absolutely, Tory. So as we had really expected coming into Q1, we did expect infrastructure to be down slightly. In Q2, we expect that to recover a little bit when see all segments. I mean, the biggest contributor was the backhaul segment. And, that's been the biggest portion. And so we would that to pick up. We've talked about a couple of larger OEM deployments that are happening that we've won historically As we see those start to roll out, that'll be a contributor. We'll start to see the HSI business start to ramp in Q2 with more high performance analog is another area that was down a fair amount in Q1 that we'll start to see recover in Q2. Great. Thank you. And could you also give us an update on the single Lambda, Lambda 100 Gig business, at least based on what I can tell you guys are the only company out there with a solution there. Yeah, I mean, if you could talk about design win traction, you know, or even where some of the deployments are happening at this point? So, hi, Tori, I'll take the question. Yes, you know, as much attention as the 400 gigabits per second market has gotten historically because of the datacenter market an even bigger addressable market size is a single Lambda application of 100 gigabit As you all know, there's a substantial established market in 25 A400 gigabit market using NRZ Technologies. And the natural successor price, but really a cost optimized outcome is a singlelander, a single lane 100 gigabit solution. And in that market, being in the power envelope of 3.5 lower incredibly important and we're the only ones who meet the power budget. As a result, we have an accelerating momentum in design wins And with almost all the major Tier 1 module OEMs in various stages of completion and announcements, and the count is pretty close to the near the, you know, so many of the 10 OEMs. We expect this market eventually to be bigger in the Lambda market site and initial revenues to start outside of the hyperscale data center folks, the 1 hyperscale data center that we have mentioned, is sometime in the towards the end of this year or a little earlier. So we feel very good we're having we are we have several quarters of lead on our competition and it's a great place for us to be in. Great. Just one last question. The Intel Gateway business or the acquisition, is that still on track to closing in early Q3 And could you just update us on which sort of hurdles you still have to go through there from a regulatory perspective? Sure, Tore. This is Steve again. So, yeah, so we are on track. We still see this closing in the hopefully it'll be at the beginning. As far as regulatory hurdles, it was really, just HSR and we did complete that. We put out a press release regarding that. The other big one is the work council negotiation And that's ongoing, but should be on track for a completion in Q3. Great. Thank you. Negotiations pertain to Europe specifically, Germany and Austria in the EU countries. And that's really the only hurdle in front of us right now to close. Our next question comes from the line of Gary Mobley with Wells Fargo. Please proceed with your question. Hey, guys. Thanks for taking my question. I'm curious if you've heard from some of the cable MSOs about any sort of impediments to broadband gateway installations whether or not that is impacting or implicated in your 2Q guidance or what your thoughts are on that front? Hey, Gary. I'm happy to give you an update. So As far as you're talking about, impediments to deployments, I assume, I guess I'll maybe give you a little bit of general Yes, I'm just talking about any COVID-nineteen related, quarantine issues, prohibiting any truck rolls and whatnot. Yeah, right. So a lot of these guys, so truck rolls, we actually saw that in Q1 we saw some impact in Q1 primarily in Asia where those truck rolls were limited and now we're seeing them kind of roll around the world. But a lot of these products and part of the interest right now is the self install capability. And that's something that's super critical to our customers to be able not only because of COVID-nineteen, but frankly just for the economics of it all. And so they most all of them now either have an existing self install capability or ones that they're trying to improve upon, going forward. And that's one of the big drivers because there is we definitely have heard a lot about increased demand and wanting to get these out quicker so that they can take advantage of that. So we are seeing that right now. And that is consistent with the optimism in our narrative today regarding the demand and backlog own business right now. Relative to what we had witnessed over the last several quarters, we hopefully touch food are seeing a consistent, you know, positive outcomes. Okay. I guess what we've heard a lot, during this earning season so far is a lot of semiconductor companies talking about really trying to identify whether strong order trends are related to true end demand or whether ODM's or distributors are just buying ahead out of fear of supply chain bottlenecks you have any sense as to where your inventory is staying out there with your distribution partners and whether or not days in the channel where were did increase during the first quarter? So, on the sales side, on the distribution channel, it actually we don't see an accumulating situation. We have very strong sell through as we entered this quarter, actually quite strong sell through. And so even and as our backlog is building up, we don't feel that there is a sort of stocking going on on distributors on our products, basically, right? We can't speak for the rest of the industry. We have not had supplier lead time issues developing yet. We have managed our operations quite effectively. So our customers are not any irregular, long lead times that we have heard other people guide to. So we are not seeing any of these distributors stocking up inventory scenarios. If we go with a sell through that they're experiencing in the quarter, then we would say that maybe it is a positive set of good demand for our products. Got to note that in Q1, our industrial multi market products that were that are primarily sold through distribution, took a huge hit in Q1, but now we're seeing a strong recovery and it's not a case of buildup of inventory in the distributors. It's strong sell through as well. So I don't think their narrative necessarily reflects our distribution sales at all. So Steve, do you want to add any more color on that? No, I think you've covered it, Kishore. Yeah. I mean, we definitely saw, you know, a lot of fluctuations in Q1 and we're watching closely, but near the tail end of the quarter, like many others have identified, we saw big pull, a lot of increased orders at the end of the quarter. But we've seen seeing that continue, But as Keishore noted, it's really we're seeing the sell through. It's not just in the distribution channel at all. Although, I mean, we're absolutely watching it closely, just to manage the numbers. Got you. All right. Thank you, guys. Our next question comes from the line of Quinn Bolton with Needham And Company. Please proceed with your question. Hey, guys. Congratulations on the results. Just wanted to follow-up on that lead time in one of your big competitors Broadcom currently put out a letter to its customers stretching out lead times to as long as months. Does that present any opportunities for you in the Connected Home business? And perhaps more importantly, have you heard of any problems with tomahawk3 or tomahawk4 based switches that could delay the 400 gig ramp at your largest customer And then I got a follow-up. So, we can't comment on our competitive lead time issues. It's at the Hemos that has got demands on foundries and assembly and test. And there is and we heard they have their own test facilities in Malaysia and stuff. You know, my Malaysian, the severe lockdown. So and we barely do any business in Malaysia. So while I can't speak for them, Yes, we do have heard about their lead time challenges. Does this present an opportunity for us? We don't know. We can always, wish that it does present opportunities for us, but it's a more recent acknowledgment of lead times on the competitive supply chain. So I don't want to conclude anything yet, but Outside of that, even heading into this call, we are seeing very strong backlog build up, not just for Q2. We are also seeing certain level of momentum towards Q3 though I don't want to talk about Q3, given all the volatility related to the pandemic, but we are having strong sell through. So I would say our demand is real. And hopefully, the next one is called, I can say, Hey, the recovery has started and connected home in a very dependable manner. So, we feel good where we are. Regarding the 400 gig and Tomahawk 3 or Tomahawk 4, look, we are still working with our OEM, we have been signed a Tier 1 OEM module maker develop our 400 gigabit solution. They've had some disruptions because all these companies who are non Chinese, they have had disruption due to the corona pandemic and we are really working very hard through this combination of remote and as need base is going to lap or testing to make sure that they can come up to speed and start being able to provide, in a continuity for the pilot and the ramp at the large data center customer. So it's hard to say how the large end customer themselves is impacted. The hyperscale data center side, but we are doing everything to make sure that we are positioned to ship when they're ready to take, right? That's been our steadfast goal. And so one of the things I really want to really acknowledge all our employees, they've done a phenomenal job under these pandemic environment. I mean, our execution initiatives have surprisingly been one of the most punctual ones that I've seen in a long, long time, which makes me rethink about the world in general, right? So anyway, I'll let you ask the next question. Sure. My next question is just sort of a follow-up on that backlog building you're seeing in the Connected Home business. Is that fairly broad based or is that I perhaps to more of a specific carrier going through a gateway upgrade, just to trying to get a sense of how broad based that demand is or that that not inventory, but the backlog build is, looking into the second half in the connected home. So the very, very good question. In general, my sense is that any gateway platform upgrades that any operator is looking at given the importance of self installation that Steve talked about, they're very shy to do any upgrades right now. Of brand new platforms. And the upgrades in the brand new platforms are really in cost downs. Right now in docs is 3.1 in the cable side. And on the fiber side, the platform that are shipping are the upgraded ones. So I don't expect any new upgrade platforms rolled out given the self installation nature that they're focused on. So the backlog we are seeing is really strong for existing brand platform that were already qualified and rolled out ahead of the pandemic situation. And so the backlog is consistent for that. But you want to remember that there are 2 platforms. There's a docs of rebar into a platform being replaced with already qualified 3.1 platforms. That upgrade is happening pretty robustly right now, but the operator is not rolling out any newly built, ratified, but not sufficient volume shipped, upgraded platforms. They're not going on that adventure right now. So that's what I want to tell you. Okay. Thank you. Our next question comes from the line of Christopher Rolland with Susquehanna. Please proceed with your question. Hi, it's David Haberle on behalf of Christopher Rolland. Thanks for taking our question. I guess first on the Connected Home business, can we talk about some of the puts and takes for the 2nd quarter and the guide down 15% quarter over quarter there? From what you're seeing from a work from home perspective, is that really benefiting MoCA and G. HN? And how is that being offset by increased cord cutting as lives goes away. Kind of, what are the puts and takes into 2Q and then longer term? How does work from home and cord cutting play into your forecast? So I think right off the bat here, I want to cut the cord on the cord cutting, so to speak. I think that the there's no more video business that we care out or is meaningful in our revenues. So that phenomenon doesn't affect us cord cutting. I think cord cutting is now given it's prevalent is persistent. And generally at a secular level, we are benefiting from that as a data networks company. So it's very clear now that there's a focus in the homes and throughout the network with its data center, our home, especially everybody's ordering more and more data bandwidth capacity. It's very clear. Whether there are a few offers in this room and all of us and half of us have done upgraded store bandwidth or bandwidth boxes right now. So I think that that is real and everybody is going to have a more robust broadband access and distribution network inside the homes even after this pandemic situation subsides. That's just a new reality. So regarding court cutting, yeah, I mean, that's done for us. As far as we are concerned, it's only a world of what I call non linear video, which is basically based on over the top content as far as we are concerned. Steve, if you want? Yes, I guess, David, the only thing I'd just, kind of provide some more color on was just the mix of the business. Within the connected home. So we highlighted on the call, I mean, MoCA, Chida HN continues to do very well. Mean, we do have a very large platform that we saw really moderate in Q4. We were expecting it to kind of move sideways and I would I would say it actually picked up quite a bit more than what our original expectations were. So that was a MoCA platform. That's doing very well. Getting a lot of traction on G.hn in Europe as well. So that's something that going it's smaller number, but a nice contributor in Q1. And we expect that to continue throughout the year. The one area, satellite was the other one. We talked about that. That was down quite a bit last quarter. Satellite now, as we had mentioned, was going to be less than $10,000,000. And so it's not as relevant at this point. Cable data Kishore kind of alluded to this. Kind of stay I would say it's stabilizing here and we feel really good about it. Consistent, I mentioned in my prepared remarks that we're on track to do that $30,000,000 a quarter for the 1st 2 quarters. Now with some of the backlog, kind of filling in the way that it is and some of the insights or color that we're getting from our customers right now, we're optimistic that we'll see that pickup in Q3 and Q4. And we're definitely seeing signs of that now. Got it. I appreciate the color there. And I guess for my follow-up on industrial and multimedia. So it's a bit weaker than we would have anticipated. Were there any supply constraints in 1Q or 2Q in this segment? So there were, a variety, yes, kind of across the board weakness there. We absolutely had a couple of suppliers that we were unable to, to deliver product for. So that hurt It was really a combination of items. That being said, late in the quarter, we did see some pickup. We've gotten production kind of in order. Our supply chain guys have done a phenomenal job in addressing this and being responsive. And so we've seen nice orders and follow through at the beginning of this quarter just in April alone. Great. Thank you. Our next question comes from the line of Alessandra Vecchi with William Blair. Please proceed with your question. Hi guys. Just to follow-up on the industrial and multi market segment. Can you maybe help us frame how we should think about the growth there longer term relative to industry growth? Yes. So there's been a tough one. Hey, Alex, this is Steve. A tough on the call, no doubt, we going into the end of last year, saw the weakness in just general kind of cycled decline. We expected that to continue in Q1. And I would say it did so in earnest. Now that being said, we've already seen some nice recovery. And so we're encouraged, but it is to navigate the volatility. That being said, long term, we felt like this is a business that can grow at least right now kind of 2% to 3%, 4% a year. And we've seen a pretty big decline year over year at this point. But no reason to think that we don't get back to that. And frankly, we've talked openly about growing this business, getting up to the high single digits with some of the newer we have some new power management products that are coming out, some new interface products that we've actually been working on over the last year, year and a half expected to hit the market late this year. So you would see contribution more in 2021, probably in the second half. So I would say that the product development investments given the breadth of the end customers and market in what was originally the XR product portfolio, It's taken us a while in getting the upgraded products. They're all getting ready now and they're sampling And by the and so I really, we will see some boost in growth rates once these are launched or launching right now. I think next year, we should see pretty strong uptake from those. At what levels should we do the increase? It's it's become hazardous to model it given the volatility you've seen in the last several months and couple of quarters. So since we don't know these markets like the platform markets, because we just want to wait and start doing a little bit more sort of historical based planning in terms of what growth you can expect with various products we're launching. Perfect. That's really helpful. And then just I just want to make sure that I am personally super excited about hypercommodal analog component. So they're absolutely excited about it, the products we're doing. It's all we feel comparatively, we bring a lot of capability and IP to this thing. And the proof will be in the pudding as these products will be announced and launched. And I think our the customers will love it. Some are already loving it. Obviously, we have already developed we are developing these products with customers input, right. So just that there seems to be a very stable market and takes long. But once you have it, you keep it. That's the way you look at it. Understood. And then just on a more housekeeping item, you guys have done a tremendous job on operating expenses. If memory serves me right, you have some big tape outs in Q1 and Q2. And yet the operating starts still well contained. How do we think about sort of OpEx as we move through the second half and into next year? Yes. Alex, good question. So we've definitely done, I would say, kind of given the COVID-nineteen pandemic situation and just overall revenue dynamic We've tried to be as disciplined as possible here. We do have some big ramps, ongoing right now. So we want to make sure that our customers are poured in every way. But we've been able to manage some of those expenses and we're coming in a little bit below the first half of the year expenses versus where we had originally planned. That being said, I think, OpEx for the year, while it's still early, you're exactly right. We did have some mask and prototyping that was going to escalate in Q2, particularly. And you see this in our guidance, whereas you're expected to see more come down in the second half, kind of move sideways. But I think from an annual standpoint, we're pretty close to on track to our original expectations. Okay. That being, I think, was it the $3,000,000 year over year? I mean, we've not given an exact number, but somewhere in that ballpark, is reasonable. Yes. Okay. Perfect. That's super helpful. That's it for me. Our next question comes from the line of Bill Peterson with JP Morgan. Please proceed with your question. Yeah, hi. Thanks for taking the question. It's another one on the industrial multi market probably the most questions you've gotten on this segment, maybe ever, but it's come down pretty meaningfully between power management and interface was more one more impacted than the other? And as I guess you think about the recovery in the second quarter and presumably beyond that, what would be driving that recovery And then, you know, again, maybe similar question on geographies that primarily in China, just if you can give any color on on where the issues were and what brings it out into recovery mode? Yes, Bill, probably not, I huge amount of differentiation between power and interface. But geographically, probably does speak volumes. Q1 was very weak. That's when you saw a lot of impact in Asia. I think Q2 You're starting to see that recover. And I think that you would expect that to come from Asia, China in general starting to see recovery. So as we look through those orders and that we're getting right now, say, in this particular month, we're already seeing that recovery recovery happened there. So, from a geographic standpoint, absolutely, weighs pretty heavily. And it's also particularly for thing for us. We have tried to understand it because on the sell through basis, distribution inventories are not are thin right now. So we're also perplexed. So we could only imagine it to be a brick wall like demand collapse in Asia, especially China, for the product because in manufacturing has come to a grinding halt during those periods. So we cannot see any patterns here of what has happened, but the recovery is very strong. So again, in Asia, So I think your guess is as good as ours on this one. Yes, sure. I recognize that. And maybe a follow on to an earlier question regarding the interconnect business for wired interconnect business. The 100 gig opportunity, again, it sounds like you have some pretty good competitive advantages here. Can you help us, I guess, size the market opportunity, maybe relative to 400 gig? And it sounds like this would be more drilling later in the year than in the next year, but us understand what the revenue contribution could be as later this year? Well, it's true. I mean, it's early at this point to understand the mix right, because our recognition will be based on what we ship to the various module makers, right, so to speak. But if you really think about the entire market, when you look at all these both to refer to the proxy, but everything is how many how many 100 gig ports are being sold, right? And Generally, if you look at the entire market, 30% of the market is data center guys, remaining center, 70% is non hyperscale data center folks, right? If you just look at analyze the overall market, and I bet you in that 70% of the market, a substantial majority will be single lane, 100 gigabits per second market, right. So while we are all sort of in Ameren with the hyperscale data centers, there would be more 200 gig, 400 gig and in the future 800 gig products. But the remaining 70% of the market will be 100 Gig Single Lambda, single lane markets for a long time to come. So it's a pretty strong replacement market, if you will. So, so, but then based on the ASPs, you could see them to be fiftyfifty in dollar terms, but I can't give you the exact dollar terms, right? So we will have good whenever we have 4 100 gig, we'll also have 50, 100 gig backlog. Dollars rise probably it's a fifty-fifty, you know. Our next question comes from the line of Suji Desilva with Roth Capital. Please proceed with your question. Just to be fair on the, on the large customer 400 gig ramp, what is the linearity of that ramp and it starts up, 8 patients in the second or third quarter? Can you give us a sense of that in the next few quarters? It's not linear at all right now. It's hardly linear. There's not enough any track record, right, right now. So So let's put a distributor. Let's just celebrate. It's going to happen. I mean, it happens. And once we see trends, I am sure you will all be thrilled that Maxine actually can come through on its convictions of its capabilities and investment, Hoopa, if you will, right? And so let's not talk about linearity at all, right? I mean, I don't linear at all, right? So let's keep it that way for 2020 right now. But and it's going to be discrete for Sabra a while to come because it's going to be with 1 data center customer. So So, you know, it'll come in spike and then settle down and then it'll take 2 or 3 quarters, 3 quarters to settle down honestly. So let's wait for it to ramp, right, at the end market itself, okay? Yes. Okay. I appreciate the candor response. And then, you've been asked a lot of questions on the Connected Home. I guess my question is really, you sound like you're seeing order strength now, and that's giving you confidence second half twenty twenty is going to be sell through, just what is driving the demand pull from that angle? Is it just normalization here or is there something else going on? Any color there would be helpful. Thanks. So look, let's look at the color here, right? The demand for broadband at home presumably is increasing. And therefore, operators are doing well on the data market and they are more interested spend money on that. That's the way to think about it. This is my thoughts, okay. So the second piece is that our recovery, we don't have much product in the industrial multi market automotive, which anybody's got exposure to automotive. I think we'll continue to see, sort of, you know, the roundlings effect of it. So hopefully our Q1 issues are really related to the China situation and nothing got to do with the auto. So since we don't have automotive exposure, sort of a manufacturer slowdown. So therefore, we're seeing a recovery due to incentives or whatever people picking up manufacturing be picked up in China and other Asian countries. And then, in the industrial segment, we also stuff that goes into telcos not telco infrastructures, really. And those are also being rolled out with 5G. So I think there's enough incentives on those monitor devices on the 5g equipment that's being rolled out, even though our own 5g radio transceivers are yet to ship yet. So I think the trends on those kinds of things are going to help us, right? And on the connected home, it's at all time. We're also tired, right, and luckily building up. And then on the, on the wireless side, we've had these designing is going on and design wins and the ramps have taken time because each country is going through its own corona issues. Or for example, India, the entire wireless operator suddenly had these huge spectrum, you know, debt issues that did it pay back, the government, a lot of other kinds of stuff going on. And finally, we're starting to see a pull through happening. So we just have new designs that are product cycles that are creating backlog. So that's what drives. I think maybe it's our turn to start having some good fortune in the way things have returned in our direction. I just want to be careful but I'll do my Indian prayers for them, okay? Our final question comes from the line of Tim Savageaux with Northland Capital Markets. Please proceed with your question. Hi, good afternoon. A couple of questions on the infrastructure side of the business. First, with regard to if you want to comment on Q1, that's fine. I think because I think China was maybe part of the weakness from perhaps both a supply and demand perspective. As you look at this recovery into Q2 and infrastructure, I wonder if you could make any specific comment with regard to what you're seeing out of end markets in China, maybe across backhaul or optical transport or wherever you're participating. And I think last quarter, you talked about targeting 15% to 20% growth for the infrastructure segment in calendar 'twenty. I wonder if you could provide an update there. Yes, Tim. So let me make sure I get all of your question here. So we do see Q2 in industrial disc recovery. I mean, we were expecting some softness in Q1, maybe not quite the level that we saw, but we were expecting soft in Q1 and expecting that to start to recover backhaul. Again, I'll reiterate, I mean, it's probably the biggest portion of that. And as you know, we can get some bigger hits, some bigger recoveries. So that's encouraging. High performance analog is probably the one that was impacted more in Q1. And so there's definitely a recovery aspect of that in Q2. You got HSI, which will start to contribute more in Q2. Not huge. I mean, I expect that to contribute much more kind of in the second half of the year. And then access, which we're very excited about probably comes in much later in the year. So that's kind of the way we see it. I mean, as far as the growth for the year, I mean, look, this is a, I mean, infrastructure as a whole is something that we've invested heavily in. The business with what's going on in massive MIMO as well as in the data center. I mean, you've heard us talk about this. You've heard Keyshort talk about it. I mean, this is a product line is doing less than $100,000,000 that we think over the 3 to 4 years can be a $300,000,000 to $400,000,000 product line. And there'll be some big ramps. They're just beginning in the second half of this year. In almost each category. So much more significant contribution in 2021, this has nothing to do with the COVID 19 or anything like that. These are organic ramps that we've been investing in heavily as you're aware. We'll start to really have a much more meaningful impact in 2021. Okay. And just to clarify quickly, now I heard your kind of initial discussion on the overall infrastructure drivers. I was basically asking if you had any commentary on China as a driver there in particular. Across, across the infrastructure segments? Rollout is the big one that will affect us positively, but it really happened towards the end of the year, right? And the beginning of next year, and there's a big tender out that really sets the stage. They're looking at developing new cost on flat arms, which is where we enter the market. And those are still being validated. That's just the honest reality of it. In fact, I think the 5g robot got a bit delayed in China also due to the corona situation. And, the 2 players in China, ZTE, Huawei, and a small company called Datong that's been mentioned. But that would be the 5G play. And along with 5G comes the transport networks, but 5G is not a big wireless backhaul, front haul transport network in China. So we only will benefit on the access side and not in the transport network. And then, we do have some optical transport products in TiAs and driver. We should benefit from that. And, and on the, so I think those are the main main constitutions of our growth story in China. Having said that, these players also shipped product for wireless OEM, a big equipment to other countries outside of China where we have the design wins for the wireless backhaul. And that's actually the one that's generating momentum right now that Steve I talked about it earlier, but microwave and millimeter backhaul is going strongly and that's really meant for non China market by Chinese OEMs. So those are the areas of infrastructure related growth we expect out of our China customers. Thanks. On the data center side, China is still behind, right? They're evaluating issues, but I think China China is quite behind on the I don't want to say quite behind let's assume a year behind where the U. S. Is currently on the PAM4 sort of product lines. But they would be much more interested in 100 gigabit PAM4 solutions. That's the reason, I, I, we are so excited with 100 gigabit PAM4 solution using single Lambda that would eventually find its way the 5G front haul markets and backhaul markets as well, okay? Thanks. We have reached the end of our question and answer session and I would like to turn the floor back over to management for any closing remarks. Thank you, operator. I just wanted to let everyone know that the part is putting the JP Morgan Global Technology Media And Communications Conference on May 12, the Needham 15th Annual Virtual Technology Media Conference on May 20th. The Bank of America 2020 Global Technology Conference on June 3rd and the Stifel Nicola's 2020 Cross Sector Insight Conference on June 8 to June 10th. Just want to remind everyone that all these conferences are going to be held virtually and we hope to connect with many of you there. With that being said, we thank you all for joining us today. And we look forward to putting on a progress to you next quarter. Thank you very much. This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.