Earnings Call: Q1 2019

May 1, 2019

Greetings, and welcome to the MaxLinear 2019 First Quarter Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Nugent, Investor Relations. Thank you, Mister Nugent. 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 2019 financial results. Today's call is being hosted by Doctor Kishore Sindripu, 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 federal, applicable securities laws, including statements relating to our second quarter 2019 revenue, gross margin, operating expense, tax expense, tax rate, and interest and other expense guidance, as well as statements relating to trends, opportunities and uncertainties in various product and geographic markets, including, without limitation, statements concerning growth opportunities for our wireless infrastructure and connectivity markets, and improved revenues in our broadband markets. These forward looking statements involve substantial risks and uncertainties, including risks arising from competition, Our dependence on a limited number of customers, average selling price trends, risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect and numerous other risks outlined in the risk factors section of our recent ST filings, including our previously filed Form 10 K for the year ended December 31, 2018, and our Form 10 Q for the quarter ended March 31, 2019, 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 first quarter 2019 earnings release is available on the investor relations website 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 presentation 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 certain future charges, including stock based compensation and its associated tax effects. Non GAAP financial measures discussed today do not replace presentation of MaxLinear GAAP Financial Results. We're 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 Kishore Sindripu, CEO of Max Lanier. Thank you, Brian, and good afternoon, everyone. Thank you all for joining us today. Our Q1 twenty nineteen revenue was $84,600,000, consistent with our guidance and expectations of modest improvement in our Connected Home business, a seasonal slowdown in infrastructure and a macro driven overall industry weakness in industrial and multi market. End market revenue breakout was infrastructure at 26%, industry and multi market at 23% and connected moment, 51% of overall revenues. We had strong operating cash flows of approximately $16,000,000, driven primarily by gross margin improvements in our high performance analog business and lowering of overall operating expenses. More importantly, we continue to execute solidly on our core 5g wireless optical data center interconnect and power management initiatives comprising our high growth infrastructure revenues. Weakness in our connected home market is owed to technology transition challenges at our end OEM customers. The impact of U. S. Government import tariffs on our customer manufacturing supply chains and general market softness due to cable data or pay to spend. As such, we are excited about the potential leverage in our business model enabled by the combination of improvements in our operating cost structure and continuing strong execution on our 5G wireless and optical data center network infrastructure growth initiatives. Moving on to some of the more exciting product and technology highlights in the large and attractive networking infrastructure markets. In the 5G wireless market, we have strong network equipment customer design interaction following the launch of our 14 nanometer CMOS, wireless massive MIMO RF transceiver system on chip solution at Mobile World Congress in February. Additionally, in Q1, we started high volume shipments of our 10 ampere power modules, to a Tier 1 5g wireless OEMs remote radio unit platform. Our industry leading 5g radio frequency transceiver product delivers the highest performance and widest bandwidth along with superior system level integration and flexibility at 50% lower power consumption their competitors solutions. We are gaining strong customer traction by enabling base station designers to accelerate the development of 5G massive MIMO radios. But increasingly confident of being a major player in the 5G wireless access infrastructure rollouts slated for 2020. In 4g, 5g wireless backhaul, adoption of our wireless backhaul auto transceiver is accelerating across our lead, millimeter, and microwave modem customers. It will drive new revenue streams in the second half of twenty nineteen. Our RF solution unique is a post channel aggregation with double data capacity in existing wireless transport spectrum. As a result, we have strong operator and OEM engagements for current 4G and future 5G deployments. With the anticipated seasonal recovery in wireless backhaul modem shipments in Q2, our wireless backhaul business remains on track for strong double digit growth in 2019. Moving to the fiber data center interconnect market. We have secured multiple customer design wins for our inside the data center 400 EBIT PAM4 system on chip system solution. Several of these engagements were on display at Optical Fiber Conference in March. We also achieved an important milestone in Q1 with the commencement of pilot production shipments of our PAM4 SoC. Our strong product portfolio coupled with the ongoing robust optical module vendor partnerships enables us to be a major supplier in the 400 gigabit hyper scale data center upgrade cycles starting in the latter half of this year. In power management, we recently released a dual 13 ampere par module to production, which is our highest power solution thus far. It is currently being designed into multiple Tier 1 telecom optical fiber module solutions. We see strong traction for our high power modules and our high power roadmap across entire enterprise server, 5G wireless remote radio units and industrial markets. Overall, we are really excited that our focus and execution is bringing us closer to realizing high growth production revenues in the large and transforming 5G wireless access and the high speed optical data center interconnect infrastructure markets. In the connected home market, while we wait for return to the wired Connectivity Technologies into telcooperator and industrial IoT applications. This should lead to improvement in our Connectivity business throughout the year. On the 0 to 10 power line connectivity front, our enhanced wave 2 software roll out is accelerating the displacement of legacy power line whole plug based solutions and also enabling new industrial IoT applications. We hope to provide further details on these engagements in the next couple of quarters. 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 twenty nineteen results and then further discuss our outlook for Q2 2019. On revenue of $84,600,000, we saw Connected Home increased 1% driven by double digit improvement in both our cable revenues and an uptick in both satellite and G. Hn demand, offset by the expected declines in our tuner and MOCA categories. Our infrastructure business was down 3% sequentially due to a pause at one of our large backhaul customers, but our optical interconnect and HPA categories were up solidly quarter over quarter. On the industrial multi market side, sales were down 12% sequentially due to macro pressure, across our district distributor channel with some influence from continued trade tensions, consistent with the commentary from several of our analog peers in this space. GAAP and non GAAP gross margins for the 4th quarter were approximately 53.3% and 63.5 percent of revenue, respectively. This compares to GAAP gross margin guidance of 52.5to53.5percent and non GAAP gross margin guidance of 63% to 64%. The delta between GAAP and non GAAP gross margins in the 1st quarter reflects the amortization of $8,400,000 of purchase intangible assets from previous acquisitions and $200,000 of stock based compensation and stock based bonus accruals. 1st quarter GAAP operating expenses were approximately 52,900,000 which is below our GAAP guidance of $56,000 to $56,500,000 due to lower than expected restructuring costs intangible assets of $5,800,000, stock based compensation and accruals related to stock based bonus plan of 7,600,000 and $1,900,000 respectively and $1,900,000 in restructuring. Non GAAP operating expenses were $35,700,000, which was down $1,000,000 sequentially and below our non GAAP guidance of $36,000,000 to $36,500,000 due to disciplined expense management. We've continued to diligently work on moderating the spin during this transitional period with good success. We achieved a quarter over quarter decline despite a seasonal step up in payroll taxes, and we expect our quarterly spend to continue to come down through this year as we tighten the spend and larger development efforts slow in the second half of the year. Moving to the balance sheet and cash flow statement. Our cash flow generated from operating activities in the first quarter of 2019 was approximately $16,000,000 versus $24,200,000 generated in the 4th quarter 2019. We made $15,000,000 in debt prepayments during the quarter toward our term loan as we continue to focus on debt pay down with our cash generation. In addition, we recently made another $15,000,000 debt prepayment during Q2. This brings the total debt prepayments to $193,000,000 and our loan balance down to 232,000,000. Our day sales outstanding for the first quarter was approximately 64 days, which was slightly above the prior quarter day sales outstanding of 62 days. Our inventory turns decreased slightly to 3.7 compared to 4.0 in the 4th quarter. That leads me to our guidance. We currently expect revenue in the second quarter of 2019 to be approximately $83,000,000 to $88,000,000 up 1% sequentially at the midpoint of the guidance range. We expect connected home revenues to be down mid single digits sequentially with improvements in connectivity revenues, offset by declines in cable data shipments owing to continued end market weakness and choppiness in the DOCSIS 3.0 3.1 transition. Within industrial and multi market, we have seen improvements in our distributor sell through patterns and expect sequential improvements from the from a couple of key accounts, yielding expected double digit revenue growth. We expect low single digit infrastructure growth primarily driven by a resumption in wireless backhaul demand and incremental share gain. We expect 2nd quarter GAAP gross profit margin to be approximately 53% to 54% of revenue and non GAAP gross profit margin to be approximately 63.5 to 64.5 percent of revenue, up sequentially due to improved mix. As a reminder, our gross profit margin percentage for 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, continue to fund strategic development programs targeted at delivering strong top line growth in 2019 and beyond. With particular focus on infrastructure initiatives and our stated goal of increasing the operating leverage in the business. As such, We expect Q2 2019 GAAP operating expenses to decrease approximately $3,700,000 quarter on quarter to a range of $49,000,000 to $49,500,000, driven by reductions in restructuring, mask and payroll related expenses. We expect Q2 twenty nineteen non GAAP operating expenses to be down approximately $2,500,000 to a range of $33,000,000 to $33,500,000. We expect GAAP tax expense to be approximately 500,000 and a non GAAP tax rate of 7 percent. We expect interest and other expenses in the quarter to be $3,000,000 to 3,100,000 In closing, we are pleased to report progress in our infrastructure initiatives highlighted by our expanding design engagement and 400 gig data center market engineering milestones in our 5G massive MIMO transceiver platform and expansion of our infrastructure power management portfolio. As we navigate through a transitional period of demand weakness in connected home environment, we will continue to maintain strong profitability and cash flow generation while maintaining our pace of strategic investments. These infrastructure investments and strong execution, combined with an upcoming upgrade cycle in the data center and wireless markets position us well initiatives start to generate revenue in the second half of twenty nineteen and into 2020. With that, I'd like to open up the call for questions. Operator? A confirmation total indicate your line is in the question queue. Our first question comes from the line of Quinn Bolton with Needham And Company. Please proceed with your question. Hey, guys. A few questions. First, congrats on the nice OpEx reductions. Looking forward to kind of year end. Are you still targeting something in the sort of $32,000,000 to $33,000,000 range, Steve, or do you think it can get even lower than that? I guess I don't maybe I don't want to go into that level of specificity. I think, look, we've had some good progress. You can see from our guidance that we're looking forward to, a nice, decline in Q2. Q3, we've got some one off things. We've got some legal expenses that may fall into that one, so we don't see an exact linear decline. But I think for the year, we're on track to see a nice improvement. Okay. Great. And then, sort of on the product front, did did I hear you guys in the script talk about a PA product for wireless infrastructure? Hi, Quinn. This is Tishore. That's not a VA product. It's a high power module. So there's a Tier 1 OEM customer for wireless. 5 g wireless deployments that are being rolled out right now. And we have a we have a design win towards which we are we are shipping you know, high volume shipment started for these 10 ampere power module. They use multiple 10 ampere power modules in each remote radio unit. And so this is this sort of validates our thesis that coupling our radio transceivers with the power management devices over the long term is a huge winning proposition for us. At this point, our shipments in 5G is primarily a power module Our hope and expectation is that over the course of the roadmap evolution in our 5G product portfolio, we will expand our warm footprint include as much of the analog mix signal content as possible. Got it. Okay. So the power module from the sort of XR acquisition, moving to the cellular transceiver, outlook, can you give us sort of an update on just your transceiver and then the design efforts, it looks like at least a couple of your, the base station OEMs may be undergoing changes in their sort of ASIC design groups or or ASIC partnerships Obviously, your cellular transceiver, I would think, would would marry up pretty close with some of those 86. And so to the extent those 86 are changing How does that impact the outlook for your business? Do you think you can still ramp that product sort of second half of twenty twenty? So, Quinn, a very, very good question. The real landscape on 5G, the initial deployments, people you hear in earnings calls and so on for the company It's primarily FPG and these designs. They're very, very cost ineffective. So many of these silo operators now are doing their own custom digital ASIC product, and some semi custom product platform for the real 5 g, rollout that is expected to happen in 2020 latter, latter, part of 2020. So and really our chip has been designed to meet these new generation of chips that are coming from the major vendors. So we feel we're in a very, very good position. The timing is excellent. And really having the best product in the market, the smallest technology, knowing 14 nanometer CMOS compared to anybody out there and the levels of integration, we are actually feeling very, very gung ho about our positioning in the 5G wireless space right now. So I think if anything, it really the momentum comes in our direction with the way our chip has been designed and, you know, to ideally meet with the OEMs on DFE ASICs, if you will. Our next question comes from the line of Christopher Rolland with Susquehanna International. Please proceed with your question. Hey, guys. Thanks for the question. So between call it PAM4, the cable fiber node, you know, some of these 5 g products, including power management, the transceiver, the backhaul What which are you most excited about here? And what do you think is going to have the most revenue call it 3 years from now? Chris, this is Kishore. Obviously, I have to be excited by what's generating revenues today, right? And it's growing very, very strongly. With the wireless backhaul modems, both millimeter wave and microwave there with our RF transceiver. And that's a full system solution. We are the only vendor in the world that has everything on the platform, right? So I'm really excited about that. And I think we are in what I call the pole position to evolve that market in the way needs to evolve for several years to come. So that's a very siding strategic positioning for us. And of course, we got a couple now power management onto that platform. Obviously, I would be disingenuous if I didn't say that 5G is really, really the most exciting market they've lived 3 years out from now because on the competitive landscape, we are in a very, very strong position And it's really a very, very high performance market where your technology as we brought in full 4. So I'm very excited because the TAM is incredibly large. Very concentrated OEM customer base and also the competitive landscape is very, very thin down, right? So it's very good for us. And with a premier CMOS mixed signal player on the transceiver technology in the competitive landscape. And you already heard about upon management of that, there's more power that's going to be on those active antenna than ever they've bought. And so that's a huge multiplier as well. And then if you complete the optical data center space, I think it's the competitive landscape splitting down, but the, deployment, you know, ready to take off is not nowhere going to be as obtain is as it's going to be in wireless when it happens. So I would say the next most exciting market is optical fiber data center interconnect market. Having said that, I do want to point out that we've got great design and traction with the various optical module vendors that are all competing for a position at a major hyperscale data center customer who is doing, interoperability test and, initial interoperability test the various module vendors in plan for a rollout at the end of this year. So I think those tests are going incredibly well. When I spoke of pilot shipments, obviously, your module vendor. So until that gets the green signal for the hyperscale data center, we don't expect massive production ramps yet. However, we feel that towards the end of the year that should start happening. So I think they're all exciting. For me, the bigger excitement is that power management coupled with all these platforms is going to be a TAM or sand expansion that is much bigger than what we had thought originally. Takes time, but, it really it nevertheless panning out pretty nicely. Great. And Kim, well, that's on the power management win, but maybe you can talk about engagements for your super products and some of the other 5G products with the major OEMs. So out of the 5 large guys, do you have any confirmed wins for products outside of power management, or how would you say kind of that design processes going with them, or are you close? Do you think you're you're ultimately gonna nail 1 or 2 before the end of the year? And and and how does that ramp? Thanks. So I don't have the 5 large OEM guys, I would say 4 would be a generous statement. So let's assume 4 of the top 4 players. The 5th one gets a little bit more attention because they're early in a very small geography. So, I would say there are 4 top players. And we got strong engagements with all of them. And, obviously, Maxine is, R and D development philosophy is absolutely pretty key to never starting something as intensive in technology investments without a lead without at least, 2 lead customers signed up to be in a joint development with us. So I think that would answer your question. Are we going to get nailed 2 of those, right? But you know, the market is, it's so thin down on supplier basis who can offer the kind of technology that this one requires that we're getting natural traction with the remaining 2 as well. So I feel that all of the timing of each one's ramps will be different based on the plan form's timings, but I think, we should have all of them. When I say that, it's very rare for me to ahead of myself, but I think we're feeling very good about where we are. Thanks so much, Kisha. Our next question comes from the line of Tore Svanberg from Stifel. Please proceed with your question. Yeah. Thank you. A few questions, and let me start with connect Connected Home. So it, it, it seemed that that business was sort of steadily recovering from a low. And, and, you know, now it seems like maybe it's gonna revert back a little bit. Can you just update us on what's going on and, and especially actually, when thinking about some of these, supply challenges that some of your your, customers have. Tore, that's a very, very good point. I think right now it's sort of a please read this and fluctuation noise around the lows we talked about in the previous quarter. So we are actually waiting for return for strength. And the primary source of this you know, weakness is really a reordering of the supply chain manufacturing, you know, process. Process between a large end customer of ours, right? And then there's also macro weakness because a lot of these operators will Liberty Global or Comcast. You know, they require new assets. They spend a lot of cash and at the same time, There are some of them are, you know, baking up their assets like Liberty Global. So that's also created some weakness and softness in, in their spend patterns. So all in all, I think it's a weak environment in terms of what we are seeing, but we do, we do expect returned return of strength as we head into the second half of this year. So I didn't nothing has changed with the narrative there other than the fact that we thought this quarter would be lived stronger than it is. But it's exactly the same reasons that we had given before. Nothing has changed on that. Very good. And on infrastructure, I think in the past, you've talked about, growing that segment 20%, 20% this year. You know, given what's what's happening both on on wireless as well as on a data center, are are you still on track for for growing 20% I think we are on track, and we should pick up more speed. This is how I look at it with the factors that you mentioned. Right, the wireless and the optical data center. And then yet to happen really on the RF transceiver for 5 g wireless access, the designing process, and the ramps of optical data center is much closer, the phone you give it. So I think the next 12 months that, that, that should accelerate in terms of the growth beyond the double digit sort of low double digit rates that we assume right now. Very good. Just one last question on power to me that That's kind of the the surprise of today's call. How, I mean, how extensive is this attached business is gonna be for you mean, is this something that could be quite material already in 2020 or will it kind of start slow, and then kind of just grow more steady from there? I think let me explain what's happening. We have launched a lot of our products, which we don't speak about in earnings calls much. Because the categorization of our products is along the end markets, right, infrastructure, connected home, industrial, multi market. So lot of the stories lost in the way we described our earnings in our earnings call. But having said that, we launched a number of our products and there's a major, road map that's that has been developed both in, for the wireless, you know, market as well as the server market. And, in, and those products we announced by the end of the year, that the that you said, the new benchmark integration and, telemetry and, you know, and also efficiency. It's a totally radically transforming. So we feel that the attack program for the new products that will happen that are designing with the main chips will be a little slow in the beginning, but then it'll pick up steam in the next 18 months or so. Having said that, actually, our product portfolio and revenue has actually been growing quite steadily, ever since, you know, last 12 months or so. And we expect that to accelerate quite a bit on a standalone basis over the next 12 months. Very good. Thank you very much. Our next question comes from the line of Bill Peterson with JP Morgan. Please proceed with your question. Yes, I want to come back to Connected Home. Thanks for letting me ask a question. I guess with your largest customer now being acquired and you talked in the in the prepared remarks in the press release about the, the tariff related items. When should we think, I guess, 1st of all, the tariff related supply chain issues should be resolved. Is that maybe a second half then, your confidence in that? And just wondering, it's early on. Do you have any, any engagements with the customer had anything changed since the acquisition? So, obviously, what it's our largest customer, at least, you know, looking last trailing 12 months, we are constantly engaged with them, that we have 2 senior sales directors spending full time job on, you know, working with them. So we have a lot of customer input. The acquisition is now complete. Having said that, they're still resolving their manufacturing supply chain, you know, locations. So it should recur based on that. The ordering pattern should also return to some more normalcy. But there's more dynamics than the, manufacturing related issues, right? And and the manufacturing issues are a consequence of the tariff uncertainty right, due to regulations. However, there's also weakness beyond that that operators are ordering as much as well. But for us, right now, it is this, this, uncertainty in the ordering patterns of our, one of our largest customers is where, you know, we are seeing weakness So we expect it to return to some strength in the second half of twenty eighteen, twenty nineteen. So those are 2 different issues, but current issues are related to our biggest customer. Okay. Thanks for that color. Coming to the optical business, you announced a few, I guess, design wins and and traction in that space. I wonder if you could speak to the depth and breadth of your of your design wins and your pipeline as we look to the back of the yard. I guess first off, are you still on track for single digit millions this year? And then I guess can you level set us on where you now see the market opportunity this year, but more importantly, market opportunity for next year? So, obviously, we are on track on our design bin and design in, activities, but the roll out from the that will happen with our mass ramp on the hyper scale data center is going slower than what they had earlier anticipated. So we think we have forecasted this correctly in the expectation of the timing. So we are still not worried about it. So regarding the, so pretty differently, our forecasting process and the single digit, you know, millions of revenues you talked to, I think that should happen. It's in the ballpark. Nothing has changed in that story. Next, I would like to answer your debt compared to the portfolio. Look, This is our first entry into the data center market. So clearly on the breadth basis, we won't have the 100 gig NRZ and the 200 gig PAM 4, we are directly entering the market at the 4 100 gig PAM4. So it's our first entry in the market. And we feel very, our our engineering team should feel really proud that, they have executed from a zero position into this market to be the one of the leading players here. If not, the top 1, top 2 short. And, so but the depth of the portfolio is really indicative of the fact that we are the only one with with the full or system solution offering of the 400 gig PAM4 DSP SOC with integrated laser drivers, the only silicon integrated laser drivers with the 400 PAM4 SLC plus a core TIA system solution. They're the only one. Secondly, we also have 100 PAM4 offering for the breakout version and for other few 100 gig PAM4, you know, single lane fiber solution. And so that's completely fulfill the portfolio. You need to play in the 400 gig and 4 space, 100 gigabit single lane, fiber space. So obviously, there's a next generation of products that will be in a newer technology node that is going to support AT and T solutions and we're well positioned to be a a significant player in that too. So obviously, we are in this market to win and succeed and we present in a long term in enterprise space in a larger way. So I think those 2 are very, very secure. Regarding the revenues that you talked about for the next year, what does it look like? Really, I think it comes in layered nano. First, there's this big hyper scale data center customer. Then towards the second half of next year, there'll be 1 more that'll come online. And then from then onwards, it spreads to the rest of them. And obviously, while that happens, then you have 800 gig PAM4 sampling in the marketplace. And, at the end of next year, and, there's going to be more dynamic there. So all in all, it's all going very, very well, a little bit slower than what would contribute an upside However, on a baseline basis, we're in good shape. Okay. Thanks for that. Maybe one more. I guess wireless backhaul has been kind of the near term driver. A lot of this, you know, 4G, I guess if we think about, 5G, when you, when you have the full suite modems transceivers, what would you say the like for like content uplift is for your backhaul business? So look, you want to think about the, the 4 g and 5 g differences in two ways. One is that 5G is about data capacity increasing multiple fold. And then at the same time, the frequency space moving to much higher frequencies, right? So we have the millimeter wave modems that will probably the mix will change from microwave to millimeter wave modems. And then, you'll have the enhancer that comes with the radio transceivers. So I think that the quantum itself, you know, the ASP should increase maybe as much as 50%, to 60% in the content, bottom dollars that we can late months, the market moves over to 5 g. So, obviously, we'll also will have to do new products that enhance the offering that we have. And so there all goes in play. But in general, I would expect the market, Sam, for us because of ASV, primarily, to approximately double in dollar content for us. Our next question comes from the line Hi guys. Thanks for the question. Just on the gross margin front, obviously, Q2 gross margins are coming in a little better than I think, the analysts had modeled. On the last earnings call, you sort of talked about as some of the higher gross margin infrastructure products start to ramp up that we should expect sequential increases in the back half, given sort of the the mix on the cable data and infrastructure, view today, do we do you still think margins can go up in the back half, or how do we think about the long term gross margin target from here? Hey, Alex, it's Steve. I think you're right. I mean, this is definitely a little bit ahead of our plan. For Q2, I think, and especially kind of given the mix, right? I mean, with Connected Home coming down slightly in Q2, we were able to to work pretty hard. I mean, a lot of this kind of reflects on the work that we've done on the HPA side as well as reducing the cost structure And then there's, you know, there is some mix even within that HPA business. And so it comes through strong in Q2. I think we're still ahead of plan for the back half of the year. I think it picks up really heavily in Q4. Q3, I mean, I think hard to tell right now, right? I still think we've got some we've got to work through a couple of quarters of this back at the Connected Home business, right? And that is reflective of the mix. But I think we're very much on track to see this gross margin continue to move higher throughout 2019 and end of 2020 as well. Great. That's it for me. Oh, actually, one more. On the debt repayment side, similar, are you sort of targeting 80,000,000 for the year? On a total basis? Yes, so we had talked about that $80,000,000. We've said that, it is a little backend loaded, right, just kind of given the revenue, fit. I mean, we continue to get the leverage down. And so we've been pleased with the cash performance. And even in Q1 with the on the lower revenue number, I think we've done pretty well on the cash side. No, that's it for me. Thank you very much. Okay. Thanks. Our next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed with your question. Hi, this is Daryl on behalf Ross. Thanks for letting us ask question. It's nice to see the OpEx guidance continued downward trajectory. And by our math, it's probably almost 15% lower than it was in early 2018. So a pretty significant reduction there. I guess my question is, 1, where does the OpEx kind of bottom out? And 2, I think at what point do you think that the run rate of OpEx kind of preclude you potentially for making adequate investments to grow the top line? So, obviously, we wouldn't you know, we're not putting anything at risk as far as, you know, the upside in revenues, developing new products, that pipeline. And it just to some degree, happened this year, we've got several of the bigger programs that we're rolling off. Now that'll pick back up in early 2020. In fact, I'm you know, we've got some math. We have some early efforts that are even going on right now where we see Q1 in 2020 that'll go up a bit. So I would definitely keep that in mind. So in some respects, you'll kind of see, that decline to some degree end in Q4. We've been pretty consistent in the messaging around that, but it comes down throughout this year and then starts to increase in 2020. Now as you look out into 2020 on a year over year basis, I wouldn't, you know, expect any, you know, huge increases because frankly, because 2019 was very front end loaded. So I don't think we're giving up anything from a development standpoint. We're investing very excited about the future. And as these revenues ramp, you also will have the ability to invest more going forward. Awesome. Appreciate that. And just another quick one on 5G. So earlier, you know, we've talked about that maybe there'd be 50% more content, ASP. I guess if you're if you're just thinking a few years out as 5G kind of hits its potential peak investment cycle, what could you see your percent of revenues hit in terms of 5G content, and is that driven by ASPs, market share gain, etcetera? How would you break that down? Obviously, if you really look at the amount of revenues we have in 5G right now, defined as 5G, is little or nothing, right? The only revenues we cover in 5 gs, the backhaul deployments that are used dual purpose for both 4G and 5G. So, but I've laid out the story before, somewhere between 22 to 2025, Our infrastructure revenues will have we'll overtake our non infrastructure revenues. And I said that company's growth profile would be such that we will be somewhere between 600, to $800,000,000 in that time window in overall revenue and almost all the growth almost all the growth, really driver in infrastructure based products. So we expect that, 5 5G and data center interconnect and power management for infrastructure together to constitute some variability around $300,000,000 revenues in the timeframe. So substantial growth, obviously, timing is very hard to bracket. But, you know, we see pretty strong revenue growth in 5G, forward by optical data center fiber interconnects. Then, a power manager being a part of it. And then, you know, we're gonna see growth in, at that point, kinda activity in the home, in the connector room as well. So I think, if you really look at it where where, where, you know, where we why are we in this situation where, you know, where growth has been sort of, you know, hard to come, and coming in many different smaller products is because we made a decision. We made a payment 3 years ago that we're going to invest in really, really large TAM infrastructure to importing the large, the long and large investment cycles and investments. And, but you're gonna enjoy the revenues that will last a long term, you know, high quality revenues. So as a result, we just have to get through this to get there. And we're almost there. Things are tailing off. It's reflected in the OpEx. And we should be very, very well positioned to have a long term play in those markets. Thank you so much. Our next question comes from the line of Gary Mobley with Wells Fargo Securities. Please proceed with your question. Hey, guys. Thanks for taking my question. If you sure, glad to have you back on the call. I want to start with a question about the industrial multi market. I guess, per your guidance commentary, the industrial and multi market is, you know, poised to bounce back to the $19,000,000 revenue mark in June quarter, still off the pace from 2018. So do you think your close to shipping the end market demand with inventories being cleared, or do we still have some tailwind as we still get to catch up with true end market demand? So Gary, I think the way I would describe it, so we definitely went through this market adjustment. Q4 was down, Q1 was down. So we've seen, demand drop. I think that can you know, it improves. I think we've got some, kind of secular drivers mentioned a couple of bigger customers. We we've we've definitely seen things pick up there, and and we're expected to see that in Q2. And so know, I'm optimistic about the second half of the year, with regard to our HPA product line, specifically going into the industrial multi market, look, we're a small piece of the overall kind of industrial analog market. So I don't know that this necessarily reflects, you know, a huge shipped in the market per se, but as far as you know, MaxLinear's business, I think, we definitely do see it improving. Okay. And as most people on the call know, your largest customer was recently acquired by CommScope, Have you had any preliminary discussions with CommScope to determine the future, I guess, roadmap, both the products you're designing to at ARRIS, and then as well what the opportunities may be to penetrate some of, comms scopes products that you're not designing to today? Very, very good question. Colmscope is much broader than just cable data for us. We had we've had communication with them as and as we had started investing in infrastructure business several years ago. Obviously, having ARRIS part of CommScope, deepens that relationship, but these are very preliminary times And, and, you know, we are obviously, communicating with them, but the larger scope of interaction is just being worked out right now. And, with regard to the engagement within whichever areas, I would like to sort of refrain from comment right now. But obviously, we are in wireless infrastructure and so such markets and we have added contacts before we get them as well. There are no further questions in the queue. I'd like to hand the call back to management for closing comments. Thank you, operator. We'll be participating in the Goldman Sachs Leverage Finance Conference on May 7 in Rancho Palos Verdes, California, the JPMorgan Global Technology Media communication conference on May 14th in Boston, the William Blair Goldstar Conference on June 6th in Chicago, and, Stifel Cross Sector Insight Conference on June 10th in And so we we look forward to seeing many of you there. It's going to be a very busy investor calendar for us, but, Nevertheless, we look forward to seeing you. With that said, I want to thank all of you today and, hope to see you soon. Bye. Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.