Greetings, welcome to MaxLinear 2018 Q1 conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Gideon Massey.
Thank you, operator. Good afternoon, everyone, thank you for joining us on today's conference call to discuss MaxLinear's first quarter 2018 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO, and Adam Spice, CFO. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable security laws, including statements relating to our second 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 second quarter 2018 expectations.
These forward-looking statements involve substantial risk and uncertainty, including risk arising from competition, our dependence on limited number of customers, average selling price trends, the accuracy of our assumptions concerning the reasons for increased variability in our revenue expectations, risks that our market and growth opportunities may not develop as we currently expect, and numerous other risks outlined in our SEC filings. Actual results may differ materially from currently forecasted results. For a detailed discussion of the risks and uncertainties potentially affecting these forward-looking statements, we encourage investors to review the section of our SEC filings captured risk factors in our previously filed Form 10-K for the year ended December 31, 2017, and in our upcoming Form 10-Q for the quarter ended March 31, 2018, which we expect to file shortly.
Any forward-looking statements are made as of today. MaxLinear has no obligations to update or revise any forward-looking statements. The first 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, 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 to project certain future charges, 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 of our operating results in a manner similar to management's analysis of our business. Lastly, this call is being webcast and a replay will be available on our website for two weeks. Now let me turn the call over to Kishore Seendripu, CEO of MaxLinear.
Thank you, Gideon Massey, and good afternoon, everyone. Thank you all for joining us today. We are pleased to report Q1 2018 revenue of approximately $110.8 million, which is down 3% sequentially, but is up significantly by about 25% year-over-year. During Q1, we witnessed strength in broadband cable data, G.hn home connectivity, and wireless backhaul infrastructure revenues, which were offset primarily by weakness in China optical, North America satellite, and some legacy terrestrial tuner applications. In Q1 2018, we posted strong growth in operating margins driven by favorable product mix, a one-time reversal of a customer rebate accrual, and tight operating expense management. As always, we continue to manage our expenses prudently to preserve operating leverage in the business, even as we navigate through the timing uncertainties of new design win product ramps.
Before I delve into our Q1 highlights, I would like to step back and provide an overarching view of our product portfolio. As we look at MaxLinear's portfolio, we have both stable and slow growth revenue products, as well as high growth revenue components that comprise our connected home infrastructure and high-performance analog, industrial, and multi-market revenues. Together, they constitute a scaled and increasingly diverse company with the ability to invest in addressing the high-value, large network communications infrastructure end markets. These products have a unifying underlying theme of technology excellence and a platform-centric view of the world. Over the last four years, we have embarked on several new growth initiatives, primarily in infrastructure, that we believe are on track to begin yielding revenues in 2018 onwards.
Specifically, as we look at our design win funnel in connectivity, hyperscale data center solutions, and wireless infrastructure, we see strong evidence of increasing revenue growth, with product ramps beginning in the second half of 2018. The timing and magnitude of these initial ramps rely on several factors beyond our control. We will provide better resolution on these exciting growth vectors in our upcoming investor interactions throughout 2018. Having said that, in Q1, in terms of technology milestones, there were several exciting highlights that instill confidence in the success of our ongoing strategic revenue diversification initiatives into wireless and wireline communications network infrastructure markets. In March, at the Optical Fiber Communication Conference, we demonstrated the industry's first 60-nanometer CMOS 400 Gigabit PAM4 data center transceiver with integrated laser drivers and a companion TIA family.
This family of products provides the low power and high performance required for QSFP-DD, OSFP, and COBO form factors for inside the data center high-speed fiber interconnect applications. At OFC, we demonstrated our silicon with three of the four largest optical system suppliers, supporting our view that we are in a leadership position entering a crucial stage of the next major inside the data center fiber interconnect upgrade cycle. In Q1, we also started sampling the industry's first full duplex or FDX DOCSIS 3.1 cable fiber node or Remote PHY system on chip device, which enables 10 gigabit cable data services to subscriber homes. By moving to FDX Remote PHY, cable operators can upgrade their existing passive cable fiber nodes and newer installations to active fiber nodes to create a distributed cable network infrastructure.
This distributed full duplex-based Remote PHY node infrastructure enables fiber-like capacity using existing coaxial cable network, which connects the nodes to subscriber homes. The FDX DOCSIS 3.1 fiber node is a good example of the type of leveraging investment opportunities that exist in our core broadband markets that we believe in turn will spawn further attractive revenue growth opportunities in next generation connected home and infrastructure platforms. Additionally, we recently announced a new product supporting virtual fiber capable of delivering 20 gigabits per second of throughput over coaxial cable, alleviating the need for operators to deploy costly fiber alternatives. This is particularly important for operators seeking to deliver fiber-like performance in densely populated urban settings.
In wireless infrastructure, we continue to be encouraged by the strong levels of engagement with tier 1 network equipment makers across all three of our wireless infrastructure verticals, namely wireless backhaul, 5G wireless access, and fixed broadband wireless AirPHY solutions. As mentioned in our press release earlier today, we recently entered into a formal partnership agreement with the world's largest wireless networking equipment maker for wireless backhaul products. This is a significant milestone for us and bolsters our confidence in our ability to expand our analog mixed signal technology platform into the large wireless communication market. Moving on to some of the first quarter's notable business highlights. Our connected home revenues decreased approximately 1% sequentially, with strength in G.hn and cable data offset by weakness in North America satellite, MoCA, and legacy tuners. Our G.hn power line home connectivity business continues to scale with strong telecom and smart utility deployments.
In satellite video, while our European revenues remain strong, we are facing macro demand challenges in the U.S. market owing to the delays in broader market adoption of 4K content and subscriber losses. Moving on to infrastructure. While our Q1 infrastructure revenues were down 3% sequentially, they grew approximately 78% on a year-over-year basis. The modest sequential declines were attributable to expected continued softness in China optical and a step back in last mile access solutions, which are expected to resume their sequential growth increases as we progress through the year. Our wireless infrastructure business continues to be an encouraging bright spot, posting strong sequential increases of more than 40%, driven by strength in wireless backhaul across a broad set of tier 1 OEMs.
Relatedly, in Q1, we announced the industry's first and only CMOS radio transceiver enabling channel aggregation functionality for the wireless backhaul market that enables multi-gigabit wireless backhaul links over licensed microwave spectrum. We also announced a 5 gigabit per second 16K QAM-based microwave modem SoC supporting the highest throughput bitrate for microwave point-to-point wireless transport for a 5G wireless world. In optical, the continued slowness in the Chinese metro optical market has had a knock-on effect with regards to delays in the ramps of our new TIA and driver design wins. Optical remains an exciting future growth opportunity for MaxLinear, with the previously noted excitement related to our PAM4 DSP cloud data center solution. Lastly, our industrial and multi-market revenues decreased 5% sequentially to 22% of overall revenue, driven primarily by ramp down in touch sensor products for the handset market.
We are encouraged by the market traction on recently announced universal PMIC devices being deployed on low-power FPGA and compute platforms such as the Raspberry Pi platform. We are excited by the diverse set of opportunities these products serve. We continue to expand our high-performance analog roadmap to address large and diverse end markets by entering new platforms as well as increasing the silicon BOM content on our existing platforms. Before turning the call over to Adam Spice, our CFO, I would like to extend my deep and heartfelt gratitude for Adam. He has been an invaluable colleague and partner in our 70-year plus journey of transforming MaxLinear from a fledgling and nascent IPO company generating less than $100 million in revenues in 2010 to one with seven times the revenues in 2017.
Even more importantly, he has been integral to evolving our strategic roadmap from a consumer and broadband operator market-focused company to one that is well on its way to becoming a broad-based, high-frequency analog and mixed signal SoC leader, also addressing the extremely large wireless, wireline network infrastructure and industrial multi-markets. As we make solid progress towards hiring a very capable new CFO to succeed Adam, we are grateful to Adam for helping us in this transition period. We wish him all the best, and we will miss him very dearly. With that, let me turn the call over to Mr. Adam Spice, our Chief Financial Officer, for a review of the financials and our forward guidance.
Great. Thank you, Kishore. I will first review our Q1 2018 results and then further discuss our outlook for Q2 2018. On revenue of $110.8 million, GAAP and non-GAAP gross margins for the first quarter were approximately 56.5% and 64.9% of revenue respectively. This compares to GAAP gross margin guidance of 55% and non-GAAP gross margins guidance range of 63%. The overage relative to GAAP and non-GAAP guidance was due to more favorable product mix than expected and a reversal of a rebate accrual on a legacy connected home platform. The delta between GAAP and non-GAAP gross margins in the first quarter was primarily acquisition related, reflecting the amortization of $9 million of purchased intangible assets and $200,000 of stock-based compensation and stock-based bonus accruals, and $100,000 in depreciation of stepped-up acquired fixed assets.
Q1 GAAP operating expenses were approximately $58.2 million, which was $700,000 above the GAAP guidance, with the overage primarily related to the prototyping expenses for our Remote PHY full duplex cable infrastructure chip previously referenced by Kishore. GAAP operating expenses included stock-based compensation accruals related to our stock-based bonus plan of $8.4 million and $2.2 million respectively, amortization of purchased intangible assets of $8 million and $300,000 in depreciation related to a step-up in acquired fixed assets. Payouts under our 2018 performance bonus plan, if earned, are expected to be settled primarily in shares of MaxLinear stock, which are expected to be issued in Q1 2019. Non-GAAP operating expenses was $39.3 million, slightly below our prior guidance of $39.5 million and up approximately $1 million sequentially due to the previously referenced prototyping expenses related to our Remote PHY full duplex cable infrastructure chip.
Rounding out our commentary on operating expenses, at the end of the first quarter 2018, our headcount was 757 compared to 753 at the end of the fourth quarter of 2017. We continue to evaluate our staffing levels globally, particularly following our recent acquisition activity to strike a balance between driving near-term operating leverage and staffing key long-term growth initiatives. Moving to the balance sheet and cash flow statement. Our cash equivalents and restricted cash balance decreased to $17.1 million to approximately $57.3 million. Our ending cash position reflects the effect of $25 million in debt prepayment during the quarter towards our term loan. This brought the total prepayments to $95 million through the end of Q1 2018 and our loan balance down to approximately $330 million.
Our cash flow generated from operating activities in the first quarter 2018 was approximately $12 million versus $21.7 million generated in the fourth quarter of 2017. The sequential decline in cash flow generated from operating activities was largely attributable to the revenue linearity in the quarter and the quarter end falling over a Singapore bank holiday, which stranded cash receipts over the quarter boundary. Relatedly, cash collections have rebounded strongly thus far in Q2, enabling a further $18 million in debt repayments quarter to date in Q2. We continue to focus on deleveraging aggressively and are comfortable with a new cash balance target of approximately $60 million. Our days sales outstanding for the first quarter was approximately 75 days, or 22 days more than the prior quarter, which is a function of the high quarter end AR balance.
Our inventory turns decreased to 3.9 turns in the first quarter compared to 4.2 turns in the fourth quarter and are a focus of our ongoing Exar integration efforts to better align with MaxLinear's target model of approximately six inventory turns. That leads me to our guidance. We currently expect revenue in the second quarter of 2018 to be approximately $100 million-$110 million. We expect connected home revenues to decrease approximately 8%-10% sequentially and account for roughly 57% of overall revenue. Infrastructure to decline approximately 7% and represent 18% of overall revenues and industrial and multi-market to increase approximately 5%, contributing approximately 25% of overall revenues. Within connected home, we're expecting relative stability in cable data and strength in both satellite gateway and G.hn connectivity, offset by weakness in terrestrial TV tuners and MoCA connectivity.
Within infrastructure, we expect double-digit growth to continue in wireless infrastructure on the back of a particularly strong Q1. Modest sequential increases in last mile access offset by continued weakness in China optical that is exacerbated by the ZTE shipment ban. With the ZTE shipment ban also contributing to weakness more broadly in power management and interface products within our infrastructure as well as in industrial and multi-market segments. The overall impact of the ZTE shipment ban to our revenues is estimated to be about $5 million in 2018. Within industrial and multi-market, we expect a modest sequential increase as growth in mix for entry-level compute platforms and interface solutions offset softness in our touch sensor solutions in handsets and the previously referenced ZTE shipment ban effect.
We expect second quarter GAAP gross profit margins to be approximately 54.5% of revenue and non-GAAP gross profit margins to be approximately 63.5% of revenue. As a reminder, our gross profit margin percentage forecast could vary plus or minus 2% depending on product mix and other factors. We continue to fund strategic development programs targeted at delivering attractive top-line growth as we look forward into the first half of 2018 and beyond, with a particular focus on infrastructure initiatives and our goal of increasing the operating leverage in the business. As such, we expect Q2 2018 GAAP operating expenses to decrease approximately $1.2 million quarter-on-quarter to approximately $57 million, with largest decrease coming from lower R&D spending, professional fees, and payroll. We expect Q2 2018 non-GAAP operating expenses to be down $1.3 million sequentially to $38 million, consistent with the GAAP expense trends.
We expect GAAP tax expenses to be approximately $500,000 in the quarter and a non-GAAP tax rate of 7%. We expect interest and other expenses in the quarter to be $3.8 million. In closing, Q1 2018 results reflect a quarter in which we faced a slight decline in the top line, but managed tight controls in operating expenses and continued to follow through on our commitment to aggressive deleveraging. Despite current choppiness to our near-term outlook, we are as encouraged as we've ever been by the growing diversity and depth of our product portfolio, as well as the continued execution that our company has demonstrated. We believe MaxLinear shareholders are uniquely positioned to benefit from a diversified set of technologies enabling greater data capacity across consumer, connected home, wired and wireless infrastructure networks, and the diverse growing demand for high-performance analog and mixed-signal solutions across industrial, automotive, and multi-market applications.
Lastly, this is my final earnings call with MaxLinear, and I'd like to take this opportunity to express my sincere appreciation and thanks for the constructive relationships developed over the last seven years with many of those on the call, and I wish MaxLinear and all of you the best in continued success in the future. With that, I'd like to open the call to questions. Operator?
At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star key. Our first question is with Tore Svanberg with Stifel Nicolaus. Please proceed with your question.
Yes, thank you. First question is on the guidance for Q2, specifically related to Connected Home. I believe you mentioned both MoCA and the tuner business coming down sequentially. What's going on with MoCA there? Is this sort of some last-time things, and what are the prospects for MoCA beyond the June quarter?
Hey Tore, this is Kishore. What's going on here is that we are seeing the MoCA transition from being a standalone product on DOCSIS 3.0 platforms to an integrated version where we only get close to about 40%-50% of the overall ASP of what used to be our original MoCA product. As a result, on the MoCA revenues, inside the home, we are seeing a contraction due to ASP reduction and also with the delay in the rollout of the new platforms from major telco operators towards the end of the year, you're seeing that the MoCA is showing a decline. My expectation is that the decline in MoCA revenues in the latter half of 2018 will be stalled, and we should start seeing some pickup inside the home connectivity as the telco operator hopefully starts ramping the revenues on the new platforms.
I do want to mention that MoCA is a very strategically important networking technology platform for the company. It's today manifesting inside the infrastructure market for last mile access. As Adam mentioned in his guidance, we expect the last mile access revenues for the rest of the year to primarily grow on the back of MoCA-based ceiling technologies, primarily in Asia. All in all, MoCA, as you look at from a connected home versus a non-connected home market, it actually has got very healthy prospects in front of it. I also want to mention that there is a telco carrier that has adopted MoCA, and that is going to be ramping revenue somewhere to the end of the year while there is a timing uncertainty on MoCA in terms of the connected home.
That's very helpful. As my follow-up, Adam, could you talk about the ASC 606, what type of an impact it had this last quarter and what you're expecting for next quarter? Just kind of going through the math so we just get an apples-to-apples comparison.
Yeah. 606, the adoption of 606 definitely kind of had an impact. If you look at where we were heading kind of into Q1, we took a strategic direction to lean down the inventory in the channel at the end of Q4. I'll get back to kind of an apples-to-apples comparison, but we wanted to have as little inventory in the channel as possible ending the year because under the change, any inventory that was in the distributor channel at the time, we would not be able to recognize revenue for it. We basically, want to think of it this way, we took inventory down below where kind of customers and distributors would normally be sitting. We leaned it down, and then there was some channel refill in the first quarter.
Now, if you want to get to, if you want just the absolute math there between, there was approximately an impact about $13.3 million as a result of adopting 606 to our benefit in Q1. If you think about looking at kind of normal levels, you would say that if we went back and looked at what the distributor inventory channel was, let's say at the end of Q3 of 2017, which was kind of a normal level, then now compare that to where we ended Q1.
If you go back and look at the queue from Q3 2017, there was about $17 million in deferred revenue at the time, and if you do an apples-to-apples comparison of a recount for what that would be at the end of March, even though there's no longer deferred revenue under the new 606. It went from about $17 million to about $19 million. The net change is about $2 million in apples-to-apples comparison, Q3 of last year to Q1 of this year. Part of that is just related to the fact that we've got some new platforms that are getting ramped, and you naturally would have a little bit more of an inventory, a channel build, if you will, as you prepare for some of these newer ramps. That's really the most, I think, cogent way to explain the implications of 606 in Q1.
We do think it's a Q1 phenomenon. If you believe, as we do, that the inventory levels are back to their normal levels now at the end of Q1, pretty much you've seen the effect of 606. Going forward, it should be pretty much stasis, except for the fact that as you grow and you grow your business, obviously, relatively speaking, your inventory levels and your channel will grow to reflect the growth of your overall magnitude of revenues.
That's helpful. I'll step back in line. Thank you.
Our next question is with Ross Seymore with Deutsche Bank. Please proceed with your question.
Hi, guys. Not to be terribly repetitive after what Tore just asked, the guidance is definitely weaker than the Street expected. You guys went through some of the moving parts in there, but I guess, what's the ASC 606 assumption, if anything? Is that negative or positive sequentially into the quarter? What was surprising to you versus what the Street clearly expected heading into the second quarter?
Yeah. To answer the first part of your question, again, you can think of it this way. We essentially held off. If you look at the way we were recognizing revenue last year before the adoption, we would've recognized revenue on sell-through, right? We actually, again, stopped replenishing the channel as we got further and further into Q4. The benefit of that to us was as kind of a snap back to refill the buffer levels at the distributors in Q1. Again, it's a Q1 event. We don't see any linger of impact in Q2. We're back to kind of normal disty inventory channel levels. You shouldn't see any more effect of the adoption of 606 in our current view. What changed the overall softness right now, again, we were in line with what we were expecting for Q1.
We didn't provide any guidance for Q2. Obviously, the Street had a somewhat higher number. I think if you look at what was likely the delta in expectations that the Street had going into the quarter versus where we ended up with our current guidance that we announced today, it's probably more softness on the MoCA side than we were anticipating in the second quarter. I think we had a couple million dollars-ish of adjustment related to the ZTE effect. When you take kind of overall China softness in optical continuing a little bit more, exacerbated by ZTE, and ZTE affects multiple product lines across the company, we had MoCA step back more than we were expecting it to. A little bit more softness in the guide on the terrestrial side of things, because normally the first half of the year in terrestrial is soft.
It's usually a stronger second half business related to Chinese New Year and Christmas TV sales and so forth. It's just a little bit softer than we would normally have expected it to be in the Q2 period. That pretty much explains the primary delta. I think you've got a few million dollars here and there. You've got, again, a few million dollars related to the ZTE, probably $2 million in aggregate. You've got perhaps a couple million dollars of continued optical softness. You probably had a couple million dollars of MoCA, and those are really the primary, I would say, weak points, and tuners maybe another couple million. There's a couple, there's like four buckets of roughly $2 million. $2 million from ZTE, $2 million from tuners, $2 million from MoCA, and then $2 million from China optical overall.
I think that's the rough reconciliation of what has changed over the course of the last few months. Kishore, is there anything different?
No, I think that is absolutely correct. It's a little bit of all these pieces, and we also saw some softness in some satellite as well for North America. If you add up those pieces, they are the familiar items. However, if you take them all in aggregate, they've added up to the delta, I would argue, between what the Street estimates are and where we are today. Having said that, like I started off my remarks, we are really in a period with lots of new product design wins in our platforms that are expected to ramp, and the timing uncertainties of those also affect how the guidance evolves.
At this stage, while we're pretty excited about the design wins of all the new platforms, because these are infrastructure markets and they have long lead times and generally they're sluggish in the way they start the ramp, we are still coming to sort of understanding how these markets work. We're really excited about how the backhaul is finally picking up in a strong way. It's grown extremely strongly, and we got a number of design wins that are ramping very strongly right now. You can also argue that that's almost like 3 to 4 quarters later than we had expected originally. It's just getting trained and tuned to the latest markets that we are entering.
I guess one last question for Adam. On the gross margin side, you mentioned that there was a one-time benefit in the first quarter. Could you size that for us? I assume that goes away in the second quarter.
Yeah. Roughly call it about $2 million was the impact in Q1 of the rebate reversal.
Is that the only thing that's leading the gross margin to come down sequentially in the second quarter guide?
That's a primary contributor to that, yeah. If you really look across the products, we're not seeing a lot of movement in the gross margin. It's really a function of mix, right? As long as there's not a significant mix change, then the only thing that really swung it Q1 to Q2 is really that rebate reversal that was recognized in Q1.
Got it. Thank you.
Our next question is with Suji Desilva with Roth Capital. Please proceed with your question.
Hi, Kishore. Hi, Adam. Adam, good luck in the new role there. The OpEx reduction you were able to get in the guidance here, how much more opportunity is there from the integration of acquisitions?
Suji, I could answer that. As you have seen, there's one thing that we control is our spending, right? We have always shown incredible discipline. If you really look at how we have so smoothly managed to keep squeezing the OpEx without hampering our execution, I think we continue to improve on our OpEx tightening through the year and barring any tape outs in Q4, which we know we have one already. I think that if you subtract the tape out of the picture, you will see that the non-tape out related expenses are going to be really trending downwards in this year.
We are very happy because part of the decrease in the OpEx comes from the fact that for the last three years, we have been investing in infrastructure markets and pretty much primarily, and all of those are coming to completion with the exception of one product that will sample at the end of the year. I think the big part of those expenses are getting behind us. We're getting the benefit of those, not as much from an integration process on the operation side, but much more on just the big R&D items behind us.
Okay. Then on the smart home broadband, can you talk about the DOCSIS 3.1 ramp and your leverage to that? Will that be lumpy, or is that something that should be a steady contributor to you guys as the year progresses?
Actually, one of the items we did not cover in particular because it's kind of a stable base of revenue, is our really strong presence in cable data markets. Actually, we are seeing a developing scenario. Normally, if you think about it, the Q2 period tends to be a peak cable operator window. However, the DOCSIS 3.1 rollouts are delaying, and it's a very slow ramp that has started. As a result, there is some level of concern and anxiety that operators are switching over to more DOCSIS 3.1, and therefore the ordering patterns in DOCSIS 3.0 are slowing. There could be two net benefits out of it, right? One is that they are where we see them they are today in terms of the conversation we are having.
The other thing is that because you're switching to a new standard, there could be certainly a snap back increase in volume in DOCSIS 3.1 ramp, and really sets in strongly towards the end of the year. I really don't want to get ahead of that expectation because we want to see it to happen, and then we will communicate that to you. There is some upside potential for DOCSIS 3.1 ramp start towards the latter half of 2018.
Okay. That's helpful color. Thanks, guys.
By the way, before we jump into the next question, I just want to clarify for Ross. I got a little more data in the background. The effect of the rebate reversal in Q1 was actually $1.2 million, not $2 million. $1.2 million is the correct number.
Our next question is with Quinn Bolton with Needham & Company. Please proceed with your question.
Hey, guys. Just was hoping for a little bit more color or clarification on the infrastructure guidance. I think you said it's going to be down 7% sequentially. In the script, I think you said the only part of the business that was going to be weak sequentially was optical. If I'm correct, I think optical was less than $1 million in March. Even if we went away entirely, it doesn't sound like that takes infrastructure down. What else is down sequentially in infrastructure in Q2?
Yes, optical does go down a bit. The total optical revenue in Q1 was around $600,000 in the quarter. That's going down to, takes about a half a million dollar step down. That's about a half a million dollar sequential decline. Again, there wasn't much to begin with, but there is some there. The other more meaningful piece was some of the power management interface and video compression chips from the Exar acquisition that are included in our infrastructure bucket. There we have the impact also of ZTE, as I mentioned in my prepared comments. ZTE kind of factors in across multiple layers of that infrastructure business. That's part of the declines, and it's kind of mixed across few different areas.
But if you think about it, there's a little bit of video compression weakness, and then there's just kind of miscellaneous pieces across that portfolio that came over that was pretty stable Q4 to Q1, then looks like it's taken a bit of a step back in Q2.
Okay, this is probably the third or fourth quarter in a row where the outquarter guide has fallen below the Street consensus. You guys seem excited about the second half ramp. Do you call into question your forecasting, or how do we get comfort about this second half ramp given sort of the recent history with the volatility in actual results versus consensus estimates?
It's a very good question, Quinn. I do believe that there has been some disconnect with estimates from the Street versus where we think we'll be. Even within our own estimating process, we have developed some gaps. I think largely this is attributable to the fact that we got multiple pieces in our business, before the Exar acquisition or going in, our backlog will be pretty strong, and there's a transition in the business that's happening from a backlog perspective entering the call. I think that as the business has become larger, estimating the details, we are still working through it. I think that error we are rectifying. However, as long as there are new product ramps that we are dealing with, there is going to be some uncertainty on ramp and timing.
I think that at this stage, at this point, we are as cognizant about it as you are, we are also very hard on ourselves on why this keeps happening. However, I think that this time we have a better stock of the situation because we have to learn from the past. Our thinking is that really looking at it, if you look at Q2 guide, and normally we don't guide beyond that, I just want to give some color. I really believe that Q3 would look similar to Q2 in that range, though I don't know the exact numbers, we should start picking up revenue growth as we exit the year in a more meaningful way.
I do think that we have had a hard look at it, we are working through it's just that when these revenue ramps are there's uncertainty on the timing and the size of the ramp. Within our connected home business and Exar business, we are seeing some volatility on certain products, we definitely have to do a better job of it.
Great. Sorry, not to sound too negative, I just wanted to ask lastly about the infrastructure ramp that you guys talked about, some of the new product design wins. It seems to me that the full duplex fiber node solution probably doesn't ramp. I think the single PAM4 platform, again, probably doesn't ramp. It seems like a lot of that ramp that you're looking for in infrastructure comes from the wireless infrastructure products. You're up 40% sequentially in March, another double-digit percentage sequentially in June. You're already working off a strong base. Is there any more color you can provide on some of those design wins that will keep growing off a pretty healthy base in wireless access and microwave backhaul?
Yes, I think on the wireless infrastructure, the wireless backhaul is really beginning to kick some steam now. I think the big part is that finally, our own organic development on microwave backhaul RF transceiver is picking up some momentum. At the same time, a larger OEM who we had the design win in place in Europe, they're beginning to pick up more product right now because they're seeing some business momentum now. Looks like there is some level of froth, or froth is the wrong word, some spontaneous growth coming back into the telecom markets in wireless, maybe in preparation for 5G. We are seeing the benefits of that. I think there's more growth ahead, primarily of new revenues on the backhaul modems and our microwave wireless backhaul RF transceivers. We're feeling very good.
We did announce, as you saw in the press release and in the script, about our partnership announcement with a major wireless OEM for our wireless backhaul solution. That also predicates a strong engagement on the 5G wireless access in the future. You're right. Really, on the infrastructure, we are relying on wireless backhaul as a big driver. Secondly, we are also expecting growth to come up for last mile access primarily in the MoCA technology-based ceiling product line in the Asian market. We've got a number of design wins there, and they are beginning to generate some money as well. I think those are the two we want to look out for. We wish we had optical leg going in on the telecom side, but that's a weakness now that we cannot count on.
If you move from the wireless infrastructure growth as a first layer of growth, the last mile access is the next layer of growth. The next timing layer in 2019 would be the PAM4 DSP 400 gigabit product that we've announced and demonstrated at the OFC. Following which, you will see a pickup in 5G wireless access, hopefully to the latter half of 2019, 2020, and then cable fiber nodes. That's the cadence. You really want to look at infrastructure as every six months, one new product starts ramping in the categories over the next 18 to 24-month window. These markets are what they are, and like we said in our script, we've got a strong base of connected home revenue that is allowing us to invest while it's extremely profitable.
We are also spawning new growth opportunities in the connected home through infrastructure investments in full duplex infrastructure that will spawn new activity in the platform side. I think all in all, we feel very excited. It always is the case that there's a lag behind the results and where we are in the design win pipeline.
Thank you, Kishore, and good luck, Adam.
Thank you.
Our next question is with Christopher Rolland with Susquehanna International Group. Please proceed with your question.
Hey, guys. Thanks for the question and congrats, Adam. We'll miss you. DSOs and accounts receivable, I think you mentioned Singapore holiday and also timing of customer orders. Maybe you could just break out what this Singapore thing was, how much that actually hit receivables, and why so back-end loaded here? It seems like a really big jump. Thanks.
Yeah. The Singapore bank holiday itself was probably around $7 million. It was roughly around that $7 million in the quarter. Again, it was just a function of there was a Singapore bank holiday at the end of the quarter, we ended up collecting it shortly thereafter. We feel very good about where we're at on our aging. We've really never had a problem with our aging, and they still look very good. Again, like I mentioned in the prepared remarks, we had strong cash collections in April and early May, which allowed us to pay down an incremental $18 million. We feel good about where we're at there. It was just kind of unfortunate timing.
As far as the back-end loaded, I can't really answer that with a lot of great color because it seems like you try to predict what your customer's behavior is. Not to mention the fact that they held onto their payments that caused you to kind of crawl over the quarterly boundary. I think each of our customers has their own kind of behavioral patterns and their own incentives for either kind of wanting to have more or less product on their balance sheets and also the cash on their balance sheets. It was just an odd quarter where a couple things came together, and it resulted in a weird spike at the end of the quarter. Again, things normalized as we progressed through Q2.
Okay. As we look at Connected Home year-over-year, perhaps you can just move us, walk us through some of the moving parts here in terms of what the biggest segments were and what the biggest kind of disappointments are, what's causing that drop. Is it mostly this move to DOCSIS 3.1 that didn't happen as quickly as you thought, or is it something related to digital channel stacking? I know that that was an issue as we were moving from analog to digital. Did that happen, and did you get the share that you want? What are the big chunky things that have created the year-over-year drop?
If you look at the biggest year-over-year drops really in the Connected Home piece, the tuner piece is down pretty substantially, right? If you want to, the old saying, turn a sow's ear into a silk purse, you can look at the areas where we've had challenges in our Connected Home have been in the areas which really aren't the long-term strategic focus for us. If you're going to have weakness, those are the areas to have it in. Tuners, satellite gateway, and then the discrete MoCA. Less so the discrete MoCA, but more on the tuners and the satellite gateway. If you look at the amount of year-on-year decline, this time last year, tuners were approximately $10 million in the second quarter, and that declined to around $3 million or so that's built into our current guide.
You had about a $7 million year-on-year decline in that tuner business. Again, the tuners end up being our lowest gross margin. As that drops off and gets replaced by other revenues, it's actually beneficial to our gross margin mix. Again, that's a little bit of a silver lining. If you look at the other parts that have fallen off a little bit more than perhaps we would have liked and influenced the year-on-year compares. Also, the digital channel stacking, as you mentioned before, was running about, let's say, about a little over between $5 million and $6 million this time last year, and now it's running below $2 million. The question is, what's driving that? I think the main takeaway from that is, again, as Kishore mentioned, North America Satellite is having a hard time, right? They've got subscriber losses.
There's not been the availability of 4K content to drive the upper end or higher level deployments of these digital ODUs. That said, we've done very well in securing design wins and ramps outside of North America. Actually, when we now start to look forward, again, Kishore said we don't give guidance and we're not going to give guidance for Q3. I will say that right now, the way if you look at our digital channel stacking business, it should be a very healthy step up Q2 to Q3. The second half looks much better than the first half in the digital channel stacking, and that's not based on a recovery in North America as much as deployments in the rest of the world where we put our focus.
Also, if you look at the tuner business, that also looks to take a pretty healthy step up in Q3 and even more so and then again in Q4. That's more seasonally driven, right? We've said before, the second half of our tuner business is the strongest time of year for that business, and this year looks to be no exception. We're looking at more than a doubling of Q2 to Q3 on the tuner side and then staying up and increasing even more in Q4. Generally what I'm saying is that the year-over-years have been tough, but right now the forecast would indicate that some of those tough areas actually have some rebound to them in the second half of the year. Do they get back to where they were last year? No, they don't.
As far as if you want to consider in the last year, Q2 is the peak for those businesses I'm referencing. It doesn't get back to peak levels, but it does start to increase sequentially. That's the way we see the business now. Again, I think there's a little ray of sunshine in there and the fact that these things help our overall gross margin profile as we remix it with higher quality, higher margin infrastructure and other connected home products. We're going through that transition.
Got it. Thanks, Adam.
Sure.
Our next question is with Tore Svanberg with Stifel. Tore, proceed with your question.
Yes. I just had a follow-up question, and before I ask that question, just wanted to thank you, Adam, and good luck in your new venture there. Kishore, you talk about design wins and infrastructure for the second half, but there's uncertainty on timing. Could you at least rank for us where you feel relatively better as far as timing is on a lot of the new products?
Actually, I feel good about the design wins in the wireless backhaul because they're all slated to start in the latter half of 2018. The last-mile access designs are done. They're primarily in China, Asia. There's always timing uncertainty on those because these are a long time coming, but we do have the design wins. There are also design wins in G.hn, which is basically the last mile access using power lines technologies. That is where we have more uncertainty given even though overall the G.hn technology platform is doing fantastic compared to last year. It's going to be very sporty growth this year. We're talking about a business that was in the $5 million range, getting in the range of $20 million, right?
However, in the infrastructure space, there are design wins for G.hn at Korea Telecom in the Thailand operators and so on and so forth, where they've stalled taking product, and I'm just wondering when those things come back. I think these operator businesses are fraught with lumpiness, and we still remain to see how the wireless telecom operators play.
Still, there is uncertainty on the last-mile access related to G.hn or G.hn technology, as we call it. There is some uncertainty in China on the last-mile access based on MoCA technology. However, the wireless backhaul ones are in good place, in good standing, and there is reasonable upside in the wireless infrastructure backhaul. We are hopeful that will overcome any uncertainties in the last-mile access going into the second half of this year.
Okay. Just one last question. Optical now, I guess, is down to $100,000 or so.
Yeah.
Do you have any visibility at all on how that business progresses for the second half? Obviously excluding ZTE.
Tore, in my book, as me as an operating manager, I consider that sort of noise on the telecom side right now. All the action is in the new designs, and we are trying to secure those new designs and see if we can ramp this. All in all, the telecom market is really going through a stalling process. Whatever shipments people are taking are preexisting technologies, therefore, we don't see any big ramp coming whatsoever. Our new designs there are stalled. Remember, in that market, our designs were at ZTE and FiberHome. ZTE is now out of the picture, FiberHome is all what we are relying on. I would say that long haul, telecom, metro, right now, I don't even pay any time to sort of gauge the size of those revenues in the second half.
I spend more time on the new products on the 45 gigabaud and 64 gigabaud market. Those are definitely one or two away on the telecom side. I think revenues-wise, I wouldn't want you to be overly interested in that relative to MaxLinear. However, on the data center side, I think we are very well positioned, and that's when the whole trajectory changes on the optical side.
That's very helpful. Thank you.
Ladies and gentlemen, we have reached the end of our question and answer session. Now I would like to turn the call back over to Kishore Seendripu for closing remarks.
Thank you, operator. As a reminder, I want to let all participants and listeners know that we will be attending the Stifel 2018 Cross Sector Insight Conference on June 12th and the William Blair 38th Annual Growth Stock Conference on June 13th. As always, we hope to see many of you there. However, in closing, I once again want to thank you all for being such robust participants in our investor calls when Adam has been leading those investor calls. I'm personally very thankful for Adam for being such a great steward of MaxLinear's transformation and his interactions with the investor base of MaxLinear. Thank you very much.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.