Earnings Call: Q2 2018

Aug 7, 2018

Greetings, and welcome to Max Lanier 2018 Q2 Earnings 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. I would now like to turn the conference over to your host, Gideon Massey, Investor Relations Manager. Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss Nextlin year's second quarter 2018 financial results. Today's call is being hosted by Doctor. Kishore Sindruppu, 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 third quarter 2018 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 assumptions and factors, concerning potential variability in our third quarter 2018 and management's current views of revenue and revenue growth opportunities in and subsequent to the fourth quarter of 2018 expectations. These forward looking statements involve substantial risks and uncertainties, including a risk arising from competition, our dependence on a limited number of customers, average selling price trends, and the accuracy of our assumptions concerning the reasons for increased variability and our revenue expectations. Risks that are markets and growth opportunities may not develop as we currently expect and numerous other risks outlined in the Risk Factors section of our latest SEC filings. Including our previously filed Form 10 K for the year ended December 31, 2017, our Form 10 Q for the quarter ended March 30, 2018, and in our Form 10 Q for the quarter ended June 30, 2018, 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 second quarter 2018 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 revenue, gross margins, operating expenses, income or loss from operations, pre tax margin, income taxes, effective tax rate, 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 a reconciliation of non GAAP guidance for future periods because of the inherent uncertainty associated with our ability project certain future changes, including stock based compensation and its associated tax effects. Non GAAP Financial Measures discussed today do not replace the presentation of MaxLinear GAAP Financial Results. We are providing this information to enable investors to perform more meaningful comparisons our operating results in a manner similar to management 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, Syndrome Boot, CEO of MaxLinear. Thank you, Gideon, and good afternoon, everyone. Thank you all for joining us today. Our revenue for second quarter 2018 was $101,500,000, which is down 8% sequentially with Connected Home down 14 and infrastructure down 5% and industrial multi market up 3%. Despite the top line revenue challenges in the the second quarter of 2018, we posted strong growth in operating margins, driven by favorable product mix, continued improvements in our high performance, analog product margins and tie operating expense management. As a result, we exceeded our earnings targets in Q2 and drove strong operating cash flow of approximately 36 $1,000,000. We will continue to manage our expenses prudently to preserve operating leverage and maintain earnings while we navigate through the adverse revenue impact of timing uncertainties of near term product transitions in our cable business and new design win ramps in infrastructure markets. In a few moments, Steve will cover Q3 guidance in detail. I would like to take a moment to update you on our DOCSIS cable business dynamics and market outlook. During Q2, our customers began to signal that their demand for DOCSIS 3.0 data gateways was slowing and also that the production ramp of our flagship DOCSIS 3.1 platform was delayed. Consequently, we are now witnessing a slowdown of our cable data audit as customers brought down their older DOCSIS 3.0 inventory in anticipation of an uplift in DOCSIS 3.1 orders which have been muted thus far. This was a factor in our Q2 revenue results, but impacts our Q3 guidance to a much larger extent. On the positive side, we strongly believe that our cable data product transition revenue challenges are temporary. We expect our customers to exit Q3 with significantly lower DOCSIS 3.0 inventory, which combined with the improving visibility of our customers qualification of their DOCSIS 3.1 platforms, provides us confidence that Q3 will be a bottom for our cable business. As this doctor's cable business is the largest portion of our Connected Home business, We believe that Q3 will also be the bottom for the connected home business as well. Separately, our infrastructure business remains our top priority and several of our industry leading product initiatives and customer activities are progressing solidly. The developing strength in our infrastructure business the bottoming of our cable data and Connected Home business in Q3 should position us to see some modest improvement in overall revenue growth in Q4 and longer term. Excited about the addition of Mr. Steven Litchfield as our Chief Financial Officer and Chief Corporate Strategy Officer and Mr. Mike Boulson, as Vice President of our Worldwide sales. There are 2 experienced industry veterans who bring over 42 years of combined industry experience to our leadership team. Moving on to some of the more exciting product and technology highlights in the large and attractiveness working infrastructure markets. I'm excited to announce that we have auto transceiver design wins with the 3 largest players in the wireless backhaul market and multiple Tier 1 OEMs have now begun to ramp up orders. On the wireless backhaul modem side, we are now ramping high end microwave and millimeter wave modems at numerous tier 1 OEMs underpinned by the strong development act deployment activity by carriers in India and rest of the world's markets. On the wireless access infrastructure side, we continue to up our strategic engagements with Tier 1 teaching customers. We are positioning our 14 nanometer wireless access transceiver roadmap and products to align with the largest with a large massive MIMO 5G wireless access market transition that is slated for 2020. Q22 2018 brings us closer to achieving another important milestone, which is the 2nd leg of our multiyear infrastructure initiative. Our fiber optic 400 gigabit PAM4 DSP and integrated TiA driver chips for inside the data center applications is drawing some strong engagement with the world's largest optical system suppliers. They're currently pulling in the production mass PayPal Duel to accommodate a large tier 1 hyperscale data center vendor who is pushing to accelerate design and testing activity ahead of initial deployments towards the end of 2019. On the cable infrastructure side, we are pleased with the continued level of engagement we are seeing for our full duplex cable remote by device. In addition, our virtual fiber solution is expected to ramp at 1 tier of a new European operator at the start of 2019. We are also actively engaged in field trials with an additional Tier 1 European operator. This is another example of our world class technology portfolio being leveraged, support our customers with superior performance, while providing meaningful cost savings by alleviating the need to replace existing wireline infrastructure. We also recently announced a design win with the Tier 1 customer, Devolo, which is launching an innovative line of power line networking products in Europe using our wave2g.hnmultigigabithomeconnectivity solution. Devalow was a customer that previously was a sole sourced HPNA, HPAV, complex standards based loan connectivity solution provider. We believe that Devolo G. Rich end product or ramp will be the beginning of an industry wide transition from legacy low deteriorated home plug technology to the superior performance and lower power G. HN technology standard. 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 Q2 business results and our forward guidance. Thank you, Kishore. I will first review our Q2 2018 results and then further discuss our outlook for Q3 2018. Our revenue of $101,500,000, we saw a Connected Home decreased 14% driven by the initial step down in DOCSIS 3.0 shipments affecting both MOCA and cable data products, combined with the lack of meaningful ramp on the DOCSIS 3.1 Our infrastructure business was down 5% sequentially. That said, wireless infrastructure continues to provide stability and our bookings outlook continues to be very positive. Within infrastructure, our high performance analog applications stepped down as expected owing to the ZTE band. On the industrial multi market side, sales were up 3% sequentially. We continue to be encouraged by the stability of our industrial business and look forward to benefiting from the new initiatives we undertook over the last year following our XR acquisition. GAAP and non GAAP gross margins for the 2nd quarter were approximately 55.5% and 64.6% of revenue, respectively. This compares to GAAP gross margin guidance of 54.5% and non GAAP gross margin guidance of 63.5%. The gross margin improvement was due to a more favorable product mix than expected and continued margin improvement on our high performance analog products from the XR acquisition. The delta between GAAP and non GAAP gross margins in the 2nd quarter was primarily acquisition related, reflecting the amortization of $9,000,000 of purchase intangible assets and 200,000 of stock based compensation and stock based bonus. 2nd quarter GAAP operating expenses were approximately $56,600,000, which was $400,000 below the GAAP guidance of 57,000,000. GAAP operating expenses included amortization of purchase intangible assets of $8,000,000, stock based compensation and accruals related to stock based bonus plan of $7,200,000 $2,000,000, respectively. $1,000,000 in restructuring and $300,000 in depreciation related to a step up in acquired fixed assets. Non GAAP operating expenses were $37,100,000, which was down $2,200,000 sequentially and $900,000 below our guidance of $38,000,000 due to disciplined expense rounding out our commentary on operating expenses, with the new revenue levels, we are working diligently to moderate the spend during this transitional period. We expect the overall operating expenses to come Moving to the balance sheet and cash flow statement. Our cash, cash equivalents and restricted cash balance increased 17,800,000 to approximately $75,100,000. Our ending cash position reflects the effect of $18,000,000 in debt prepayment during the quarter towards our term loan. In addition, we recently executed an additional 15,000,000 in debt prepayment during Q3. This brings the total prepayments to $128,000,000 and our loan balance down to approximately 297,000,000 Our cash flow generated from operating activities in the second quarter of 2018 was approximately $35,800,000. Versus the $12,000,000 generated in the first quarter of 2018. Approximately 75 days, which was in line with the prior quarter. Our inventory turns increased slightly to 4.0 compared to 3.9 in the first quarter. We continue to focus on long term target of approximately 6 inventory turns. That leads me to our guidance. We currently expect revenue in the third quarter of 2018 to be approximately $83,000,000 to As Kishore mentioned, our sequential decline is predominantly due to the weakness in our cable data platform, front end and related MOCA products. We expect Connected Home revenues to decrease approximately 30% to 35% sequentially and account for roughly 47% of overall revenue, due to the near term product transition headwinds that we mentioned earlier. We expect infrastructure to represent approximately 22% of overall revenues and industrial and multi market to present approximately 31% of overall revenues. Within infrastructure, we expect wireless infrastructure to continue to grow within the industrial and multi market segments we expect modest sequential growth from new PMIC and point of load regulator solutions. We expect 3rd quarter GAAP gross profit margin to be approximately 51.5 percent of revenue and non GAAP gross profit margins to be approximately 62.5 percent of revenue. Which is down sequentially due to lower percentage forecast could vary plus or minus 2 percent depending on product mix and other factors. We continue to fund strategic development programs targeted at delivering strong top line growth as we look forward into the first half of twenty nineteen and beyond. With a particular focus on infrastructure initiatives and our goal of increasing the operating leverage in the business. As such, we expect Q3 2018 GAAP operating expenses to decrease approximately 2,000,000 quarter on quarter to approximately $54,500,000, with the largest decrease coming from the removal of restructuring fees incurred in Q2. We expect Q3 2018 non GAAP operating expenses to be down $1,100,000 sequentially to 36,000,000 driven primarily by lower prototype and payroll expense. However, please note that while we intend to reduce our baseline operating expense run rate, in Q4, we're likely to incur a step up in mass spending related to our data center initiative. We expect GAAP tax expense to be approximately $500,000 and non GAAP tax rate of 7%. We expect interest and other expenses in the quarter to be $3,800,000. In closing, Q2 2018 results reflected another solid quarter that draws us closer to the beginning stages of our evolution to a multi product cycle based growth company focused on large networking infrastructure markets. Overall, I believe the company has executed well in a very tough environment with strong gross margin, earnings above plan and strong cash flows. While we are disappointed in the DOCSIS dynamics and in and its adverse impact on our near term confirmed by our largest customer on recent earnings call. We expect this ramp combined with the expected drawdown of our customers 3 point 0 inventories during Q3 to position us for improvement in Q4. While we don't typically provide this level of revenue guidance at this time, we believe that we'll see a modest improvement in the range of 3% to 7%. In addition, the 3 verticals of multiyear investments expanding wireless, wireline and access infrastructure remain on track for growth. Execute expeditiously to bring these innovative At this time, we will be conducting a question and Our first question comes from the line of tore Sandberg from Stifel. Please proceed with your question. Yes. Thank you. And, allow me to welcome Steve to, to these calls. So first question, in regard to the, Connected Home business down 30%, thirty five percent sequentially, is it fair today that that's kind of like big flush out of inventory of DOCSIS 3 point or gateways, or do you think there'll be still some reductions in Q4 but, but, you know, that will be offset by, Doxon 3.1 ramps. Just just trying to understand, you know, how severe, you know, the actual correction is for Q3. So, Tore, first of all, thanks a lot for the welcome and I'll do my best to answer the questions today. So Yes, I mean, that is the intent and hopefully that was conveyed in the language that we spoke to today. The intent is to kind of see this bottom out in this quarter and we start to see that recovery Look, this is a dynamic market and this transition has caught us off guard previously, but we're optimistic that we see that improvement in Q4. Absolutely. So that's helpful. And go ahead. Sure. And I think that, you know, in the previous earnings calls, of our customers, you may have noted their own dynamics in which we refer to in our script. Got it. And then on gross margin, I'm a little bit surprised it's coming down. And I get the lower revenue, but, I would have thought that the mix would have actually helped you, in, instead of weighing on gross margin. Could you just elaborate a little bit of that, please? Yes, I mean, just briefly on that, I mean, yes, so revenue is definitely a contributor on it. But it is, I mean, the the particular cable business is higher gross margin business. And so it does see an impact next quarter. Okay, very good. Just one last question for Kishore Kishore. You mentioned, you know, one large hyperscale customer being very interested in your Canfor product. But I believe you also, you know, you mentioned maybe a, an end of 'nineteen production ramp, you know, we've heard from, some of your peers that they're actually seeing you know, Panned 4 for the gig being pulled in somewhat. Maybe you could just, you know, share with us, you know, what what would you believe are some of the dynamics in that market right Thanks. Tore, as you're well aware, we were the 1st company to sample a 400 gigabit PAM4 DSP at the conference and we demonstrate with customers with built, with built systems. And since then, we have been engaged to working with all the major optical system suppliers. So we are talking to the same system suppliers who are, who are in constant engagement with hyper scale data, one particular hyper scale data center company. And we with whom we also directly engage, it really happens in a phased manner. We basically do a pilot deployment for interoperability test is quite substantial. So you'll see some initial ramp and then they go through some additional exhaustive checks and the real production ramps don't start till the end of twenty team. So yes, so it's a matter of interpretation of what constitutes a full ramp rather than whether we're going to see some revenues prior to that. Our next question comes from the line of Gary Mobley from the Benchmark Company. Please proceed with your question. Hi guys. Welcome, Steve. I wanted to delve a little bit deeper into the cable data business and the composition of that business. Can you confirm that the cable data of the DOCSIS business in the first quarter of 2018 was somewhere in the ballpark of 25,000,000 Am I in the ballpark there? So my apologies. I'm the new guy here on Monday 4. So Gary, I can't break that out for you today, but I mean, it is the majority of that Connected Home business. And that's definitely what's driving the decline, you know, coming next quarter. Mean, the point of the question is, is that in cable data, you're expecting about a $20,000,000 degradation from recent highs in the third quarter, presumably the vast majority of that is cable data. I'm just trying to get a sense of of whether or not that business can recover to previous levels based on your content and, and, Endoxys-three zero one and as well. Your market share at your main customer and your main customer's market share at the cable MSOs? Yes. So I mean, I think we're comfortable with the content change from 3.0to3.1. So I don't think there's any problem on that front. And so we do see this as just a transition. And as we come out of 3.1, we'll feel we'll be in a very good position. I also want to emphasize that if you look at the cable market, there are 2 main systems suppliers on the chipset side. And no matter what the dynamics are in the supply chain, the health of the 2 chipset vendor systems, is paramount to have new innovations, inventions moving forward. Having said that, our major customer, has already signaled that they are now qualified and they'll be ramping. And, we we, but, however, there's usually a lag between them ramping and then then starting to deplete their inventory of, already parts that they have taken before we start seeing resumption in orders in a healthy way. But I do want to emphasize that we we do not have any doubt in our mind that, there is no loss in, relative market positions for our products in the cable data market and we expect to get back to the levels we were before as a ramp picks up steam. It's a matter of timing, whether it happens in two quarters or three quarters or even lesser than that. So I think at this stage, it's still early. So we're being very cautious given the history of last two quarters. So we want to be careful about not getting ahead of where we can really safely guide to. Okay. And last follow-up question. What was that $1,900,000 restructuring charge related to? It was primarily XR related. And that's headcount reduction? Lease related facilities and such. Our next question comes from the line of Quinn Bolton from Needham And Company. Please proceed with your question. Steve, looking forward to working with you again. I guess for, for either of you, you know, if you look at Connected Home being down 30% to 35% and cable data being the majority of the business. It sounds like cable data is down by 50% or more in the third quarter due to the transition I guess, as I look forward to your initial thoughts on q4, guiding revenue up only 3 to 7% still feels like there's a lot left for the cable data business to grow as you enter 2019? I'd like your thoughts on that, and then I've got a couple of follow ups. Thanks. Yes. Yes. I mean, you're absolutely right. I mean, I think you've kind of read through the numbers correctly as we see it. We're being cautious I mean, consumer statement previously, I think indicated that we are being careful as we look throughout over the next couple of quarters through this transition. But yes, we absolutely see a lot more growth coming in 2019. Okay. And then I guess the second question related is you're seeing this pause in docs 3.0 as customers work down inventory. Obviously, your largest customer is starting a ramp with the largest US cable vendor for DOCSIS 3.1. But if you look outside of that customer and that specific cable MSO, are you seeing other cable MSOs and o DMs also draw again inventory, or is this related specifically to kind of 1 OEM and 1 cable MSO? Quinn, that's an excellent question. And the answer is, twofold, right? If you listen to the earnings call for the biggest customer, you saw them mention heavily about component shortages as well. So it's a very, very important factor. In fact, the reason we were so challenged to forecast correctly last two quarters is that due to the component shortages, they have been ordering just in time other chips if they cannot assemble the full kit assembly. So the MLCC capacitors and memory situation prior to that, they were ordering based on what they could really assemble in boxes. So that is particular problem is actually pervasive across the industry. And that's all the impact in order patterns. So going to the next question, the outside of the U. S. Main off comcast. The other operators that are slated that are coming online are chartered and then Liberty Global in Europe and now there are Liberty global assault methods to Vodafone. So they are all supposed to be coming online sometime in the next 12 months. And, at this point, it's very hard to say who is on time and who is delayed. However, I would like to tell that even through 2019 Doctor. 3.4 will be the biggest share of cable data shipments. It's just that the inventory worked on that's happening date of birth, there are transitions expected. And MLCC shortages have also contributed to an adverse impact on our ability to forecast revenue and our absolute revenue potential. Okay. And then just lastly on the PAM4, solution, it sounds like you mentioned an additional tape out or not an additional, but a tape out in Q4 that will result in some higher OpEx in the fourth quarter. I assume that that's the PAM4 production chipset. If it is will you be sort of ready to go to production or at least this interoperability in the first quarter of 2019 can you just sort of address if that is a production tape out of FAM4, when would you be able to ship that to customers? Thank you very much. Quinn, we're very, very, look, we were not a name that was ever mentioned for inside the data center for fiber optic. We are actually quite pleased sometimes with a little bit of a smile that our competitors mentioned as, reality speaking, a big market and we are in the front run of status even though the leads can change time to time. So the production mask, when MaxVIA, you find these are real production mask, and, that means we're ready to ship in high volume quantities. Regarding interop, we do not need the production parts. In fact, we are interopting right now with the original silicon that we've already sampled to customers. And, and the sample quantity is because of the higher ASPs tend to be very meaningful in terms of COGS, in terms of our OpEx spend and, incremental revenue we derive from sampling itself. Yes, we do not need the production mask for doing drop test. We, in fact, proceeding forward by ordering more wafers of our first tape out to go to drop and then follow-up with a very high volume, high yield, high margin gross margin product tape out with the production mask for really high volumes. Okay. Thank you. Our next question comes from the line of Ross Sameer from Deutsche Bank. Please proceed with your question. Hi guys and welcome aboard Steve. Just wanted to see how the ZTE dynamic is playing in. I know you guys said it was a headwind to some of your high performance analog business, but what's the assumption on that going forward for you? I believe in the past, you said it was about a $5,000,000 headwind given the ban in 2018 and just want to see what was in your guide for the remainder of the So that's correct. It is about $5,000,000. We are, at least on the high performance side, we're starting to see some of orders for that product now. But on the rest of the business, it's still probably delayed. So it's probably over the next couple of quarters. You'll start to see it roll back in. Then you mentioned a couple of times in the transcripts or at least in the press release about the sell in versus sell through side of the equation. Do you have your arms around the dynamic, of of resales versus sell in and and what's the expectation built into the midpoint of your revenue guidance as far as channel inventory in 3Q? So I'm not going to on day 4, I'm not going to claim I know it perfectly, but, but as far as where we are right now with regard to the channel and, and kind of, demand in general, I mean, look, I mean, numbers have come down quite a bit. I think we're very comfortable. I mean, this is not the time to be stretching. I think we're very conservatively positioned, with respect, you know, we're not there's no excess product in the channel if anything is coming down. And then my last question is one for Kishore on the infrastructure side of the business. On the connected home, everybody is looking forward to that bouncing back off this low, but in the infrastructure side, that seems to be really the growth driver going forward for the company. Can you just talk chronologically about how some of those new design wins fold in over course for the next 12 to 18 months? And if that has been pulled in or pushed out versus what you might have thought a month or 2 ago? Thank you Ross. I think in what we thought month or 2, I think nothing has changed on the infrastructure outlook. We have been consistent how the infrastructure revenues play out, but actually we're very happy that the wireless backhaul is growing very strongly. And that will continue to drive and it's on pace to really, grow in the next year very strongly as well. So we are very happy about that and both of the modem and the radio transceiver side on the, and then the next leg of growth, it's a matter of a timing is will be based off, will be based off our Telluride product. This is the 400 gigabit PAM4 solution. And that timing would be to the later off of second half in terms of definition of being a production ramp. So that's what we call through the end of 2019. Simultaneously during that period end of 2019 beginning of 2020, we expect to see, our 5G That's in MIMO radio transceiver, to also start, start shipping. And then following that, a year or so or earlier than that, we start we expect our cable fiber node remote by ship to be start shipping into the cable infrastructure. So you have 4 legs of growth, if you will, the wireless backhaul, which is really, which has really been the driver of the growth in infrastructure currently is doing very well. We've got a very strong booking outlook for it, looking ahead. And then we have, TillyRide, which is the 400 gigabit PAM4 DS solution, system solution, which includes the TiAs and the driver that is integrated. Then we have the the what we call the Blackstone product, which is the 5G massive MIMO radio transceiver, and followed by the cable full FiberNote solution. So lots of good growth ahead. Each of them address substantial TAMs and TAMs. So we really expect this to be very strong growth drivers. But I also want to bring out something else. And I think this is getting lost in the dim of what's happening on the connected home. If you really look, you know, based on where the revenue composition of the company is next year represents the 1st year sometime in the middle of next year. We will cross the critical 50% point on non connected owned business, basically it would be infrastructure and industrial multi markets. And industry multi market revenues are also growing pretty nicely based on initiatives that we have done, primarily in, you know, power management and, power management products. So I think those both categories are going to continue to grow. Connected Home is going to be stable for a while. Once you enter the stability phase and we're going to start growing from there. So I'm really excited that the long roadmap of big investments over the last 3 years to position the company as a true analog RF mixed signal DSP5 powerhouse targeted at really high value large TAM markets infrastructure is right at the threshold of becoming a reality. And, so it's a pretty exciting time as we enter 2019 for us. That's great. Thanks for that exhaustive list. Very helpful. Our next question comes from the line of Christopher Rolland from Susquehanna. Please proceed with your question. Hey guys, I want to echo the congrats for Steve on the new position. Congrats, Steve. So last year, you guys blamed your revenue shortfall on a movement from analog to digital channel stacking. But you really haven't mentioned either in a while. Should we think of that as having ramped down on the analog side and then digital never really ramped? Where are we on that? Well, I think at this point, Chris. I mean, I think we're just trying to kind of pull back a little bit on some of the color that we're adding right here. I mean, you can I'm sure you've picked up clearly the takeaways here at Cable cable data is really what's hurting the revenues right now and that's a lot of the driver for next quarter. And so we'll start to give a little color we move forward, and I get a little more comfortable in the role. Okay. Sounds good. And then, you also mentioned, headwinds for MOCA as well. I assume that's kind of connected with your largest customer, but perhaps you can maybe expand there and give us some other puts and takes. I think as you mentioned in this script, it's really related to our cable data platforms where, where we have in the docs, data platforms, MoCA goes as an attach element. And anytime that platform orders drop, move the drops accordingly. So there's nothing there is nothing more material than that, but then the fact that they go one hand in hand, basically. Sure. And then, and then Kishore, why I have you. On the DOCSIS side, what gives you confidence? And you already hit on this, but what gives you confidence that you're not you or Intel, for example, aren't losing market share, to your biggest competitor. I mean, I think there were some thoughts that maybe your biggest competitor is bundling more. How do you have confidence that that not true, that's not working and that your market position is solid? Oh, it's really simple because the operators do make cisions on who the chipset vendors are, the OEMs don't get to make the determination, especially for the major operators where this transition is going away. Going on. So when you talk about us not shipping into Office 3.1 due to a customer platform, qualification being delayed, It just means that this particular chipset platform is not shipping in the time frame while it is being qualified. It has got nothing to do with any diversion of our customer moving to another platform for this operator. So I don't think you need to worry about some, some, what I would say, some tactics on competitive sport to somehow gain unfairly market share. So, you know, I can't speak for the strategies, but they're well known. I'm just been told. So So I think we feel very good. You asked me, how do you feel confident that the inventories are coming down? I think it's very simple. You do the throughput demand for the end end customer for your OEM and you know how much you have shipped and you realize that they're pretty much down to a trickle in their inventories. And they won't be able to ship anything if they don't buy anything in Q4. It's as simple as that. So our OEMs do that all the time as they come to the end of the year, but they have been unusually, proactive about this due to the component shortages, during last quarter in this quarter. So, and honest to the fact is we cannot respond to their needs if they please delayed orders even though we have got some buffer in our own system. Our next question comes from the line of Alessandra Vecchi from William Blair. Please proceed with your question. Hey, guys. Just on the on the MoCA side, I think over the last couple of quarters, you guys have been stating that you expected the rollout of the major telco operator to start beginning at the very end of this year of early 2019. Sort of any update on that? Oh, absolutely. That preparation with the rollout is going quite well. I think we have some limited order quantities in Q3 force later that we have some bookings for. But the real, so we and they're already sitting on some inventory, honestly. So So we feel that they may start, it could happen in Q1 or Q2 depending on how the auto patterns flow, but that is expected to happen right now. Okay. And then similarly, just on the GHN side of things, you had sort of talked about this year revenues getting to 20,000,000 from $5,000,000 last year. Do you guys still feel pretty confident in GHN holding up and continuing to be strong? I think the way we look at the whole product line is a full connectivity category. And G. Rodichan, right now is clearly the growth driver for us. And, That's looking very, very promising. And it is, I do not recall that we said 20 per se, but the bottom line is that it's it's been a great acquisition for us, great technology, and it's growing very nicely. And, and it's getting tremendous interest in applications, a variety of power networking solutions outside the home in industrial IoT and other applications. So those are more in the initial business development and customer interoperability phase, but you should expect to hear us to start talking about PowerLine Networking in the industrial IoT space over the next couple of years. Okay. Thank you. Our next question comes from the line of Suji Desilva from Roth Capital. Please proceed with your question. Hi, Keisha. It's good to be working with you again. Good luck in the new role here. So on the data center talked about a customer who, wanted you to pull that in. Sounds like a fairly high probability opportunity for you guys. What's what's the magnitude of that addressable market for that customer for that end market for the optical part? So, Suji, it's very, very difficult to size opportunity by the customer. But suffice it to say that you want to look at a huge data center, how many ports they have. And generally, they don't start replacing ports in existing data center. So the way it works is they tried it all in a sort of a mini data center sort of environment. And then the interrupted event, once that is looking good, they start rolling out. So you can look at it as a substantial opportunity in 2020, let's say, anyway, between 250,000 ports to maybe 500,000 ports in 2020. So if that were the case, you can see that based on the market assumptions that we would get of the data center, it's a very, very meaningful growth opportunity, right? So, you have to do the math and the ASP, let's say 250,000 ports then, you know, and then you run the math on, the chipset solutions on maybe the $50 to $100. And then, you know, and if there are only 2 suppliers at that point in time because if they interrupt today, then, you know, it's a very, very meaningful growth opportunity for the company at this data center alone. But hopefully by the time the other data center companies that are coming online, and, it'll be a larger, visibility to a much bigger ramp. And I think that's a critical, statement to me, right? In a sense that here we are, we have been talking about infrastructure, we are at the brink of some major things happening. We have visibility into the design win pipeline, design wins that will ship in the next 12 months or so. I think that, if you call it the show me story, well, and I think it's getting to the brink of that point right now. So I'm pretty excited and we've always executed the technology. I feel really good about it. Okay. And then just a quick clarification on DOCSIS 3.0. I just want to understand, are we at the point where these programs starting to wind down in favor 31, or we still have a long tail here, and this is just kind of interruption of that of that tail of demand. I mean, 3.0 is going to be a long lived story because so much of the world outside of the United States is really even DOCS 2.0. And 3.0 piggybacks on, 3.0, right? And, so I think 3.0 will be one of the one of the longest lasting docs and standards And, 3.1, will take a few years to get to a kind of market penetration outside the U. S. And a major and another major operator. So in Europe, for a while to come. That actually is actually an interesting point for us, right, because we have great position and stability in 3.0. And 3.1, we will, we will get the major operators or our, what I call meaningful share. And, so it's not a bad place to be as a company. All right. Thank you for the clarification. And I would like to turn the call back to Kishore Sindrupa for closing remarks. Thank you, operator. As a reminder, we will be participating in the Piper Jaffray tech Technologies Select Conference on September 5th in Laguna Niguel, California and the Stifel Growth Conference in September 6th in San Francisco. The Deutsche Bank Technology Conference on September 13th in Las Vegas. We really hope to see many of you there and share all the exciting progress we have made in between. With that being said, we thank you all for joining us today. And we look forward to reporting on our progress to you in the next quarter. Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.