Greetings. Welcome to the MaxLinear, Inc. Q3 2021 earnings 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. Please note this conference is being recorded. I will now turn the conference over to your host, Nick Aberle. You may begin.
Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's third quarter 2021 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO, and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared remarks, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for fourth quarter 2021 revenue growth expectations in our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, tax expenses, effective tax rate, and interest and other expense. In addition, we will make forward-looking statements relating to trends, opportunities, and uncertainties in various product and geographic markets, including, without limitation, statements concerning opportunities arising from our wireless infrastructure and connectivity markets and opportunities for improved revenues across our target markets.
These forward-looking statements involve substantial risks and uncertainties, including risks arising from competition, supply constraints facing the semiconductor industry, global trade and export restrictions, the impact of the COVID-19 pandemic, our dependence on the limited number of our customers, average selling price trends, and risks that our target markets and growth opportunities may not develop as we currently expect, and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks is outlined in the Risk Factors section of our recent SEC filings, including our Form 10-K for the year ended December 31, 2020, and our third quarter 2021 Form 10-Q, which we filed today. Any forward-looking statements are made as of today, and MaxLinear has no obligation to update or revise any forward-looking statements.
The third quarter 2021 earnings release is available in this Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenues, gross margins, operating expenses, income or loss from operations, interest and other expense, income taxes, net income or loss, and net income or loss per share on both a GAAP and non-GAAP basis. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in the press release available on our website. We do not provide 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's GAAP financial results.
We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. Lastly, this call is also being webcast, and the 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, Nick, and good afternoon, everyone. Our Q3 revenue was $229.8 million, up 12% sequentially. Non-GAAP gross margin was 61.3%, and non-GAAP EPS was $0.75. We also generated record cash flow from operations of approximately $84 million. Q3 revenue was up 47% year-over-year, with contributions from broadband access, connectivity, infrastructure, and industrial multimarket at 55%, 17%, 13%, and 16% respectively of overall sales. Despite the semiconductor industry's ongoing supply chain challenges, our financial outlook for Q4 is strong. It reflects continued improvements in our supply chain operations, strong secular growth trends across our end markets, and our company's specific growth drivers.
Turning to some of the Q3 business highlights, broadband revenue was $126 million in Q3, up 12% versus Q2, driven by new program ramps, share gains, content per platform increases, and strong end market demand. As service providers and operators ramp their capital expenses to address new bandwidth-intensive consumer application services, we will benefit from this organic mix shift to more technology-intensive consumer- premise equipment in the near and long term. We're also winning many platform designs across multiple geographies in new end markets such as fiber broadband, where historically we have had little share. These design win activities will provide a strong revenue growth over the next several years. Connectivity revenue was $38 million in Q3, strongly up sequentially at 21%. We expect Q4 to be our third straight quarter of solid double-digit sequential growth.
Our comprehensive connectivity portfolio spans Wi-Fi, Ethernet, and MoCA, and underpins our strong long-term growth trends. We see sustained momentum for our Wi-Fi products as operators address strong consumer demand for robust broadband access and connectivity services. Over the next several quarters, we expect the launch of a multitude of next-generation Tier-One platforms incorporating our WAV 600 and WAV 600 Release 2 solutions, including our tri-band offerings. This mix shift to higher-value Wi-Fi products will drive higher blended pricing as well. Also, our silicon content will increase materially as the attach rate of our Wi-Fi solution to MaxLinear's own gateway SoCs greatly increases as operators refresh their gateway platforms in the new upgrade cycle. In total, we expect connectivity to be one of our fastest-growing end markets for the next several years.
Moving to infrastructure, Q3 revenue of $29 million was essentially flat due to supply chain constraints related to package substrates for wireless backhaul products. Having said that, we expect wireless backhaul to resume strong growth in Q4. End market demand for wireless backhaul products remains strong, even as share gain for our microwave RF transceivers accelerates. Our microwave RF transceiver revenues outside of China will roughly double in financial year 2021. We expect to post similar growth rates in financial year 2022. Our 5G wireless access RF transceivers grew substantially off a low base in Q2, with an initial ramp in the North America end market. We'll have meaningful sequential 5G revenue growth in Q4 and also expect it to be a strong long-term growth contributor for us.
In the optical high-speed data center interconnect market, we expect modest shipments in Q4 as we initiate shipments of our 400G PAM-4 DSP products to our module partners. Given supply tightness across nearly all components within the optical space, we are building products to intercept anticipated early-stage ramps of 400G PAM-4 at hyperscale data centers. We're expecting strong growth for our PAM-4 products through 2022. We remain bullish on our position as a highly disruptive silicon provider. Our most recent product, Keystone, is the industry's first 5-nm 800G PAM-4 DSP product family, which has significant power and performance advantages over the competition. Based on solid customer sampling and interest, we expect a strong design-win cycle for Keystone in next-generation cloud deployments. Finally, our industrial multimarket revenue grew by 14% to $37 million in Q3.
End market demand continues to be strong across our product portfolio with lean channel inventory levels. In addition, our customer design win funnels for new and existing industrial products continues to expand. As a result, long term, we are confident that our industrial multimarket revenues will grow steadily as we continue to gain market traction for new and existing products. In summary, our company's specific growth drivers are now solidly in place with emphasis on share gains, new product cycles, and increasing silicon footprint with new and existing customers across all four of our end markets. With a continued focus on developing new and disruptive technologies across our high-value end markets, we expect to outperform semiconductor industry growth rates over the long term. With that, let me turn the call over to Mr. Steve Litchfield, our Chief Financial Officer and Chief Strategy Officer.
Thanks, Kishore. I will first review our Q3 2021 results and then further discuss our outlook for Q4 2021. Total revenue for the third quarter was $229.8 million, up 12% versus Q2 and up 47% year-over-year. Broadband increased by 12% quarter-over-quarter, driven by strong demand across our full portfolio of gateway solutions. Connectivity revenue increased by 21% sequentially as we saw broad-based strength across Wi-Fi, Ethernet, and MoCA. Infrastructure revenue was flat compared with Q2 as supply-driven softness in wireless backhaul was offset by strong growth in our 5G wireless access products. Lastly, our industrial multimarket business was up 14% sequentially as we saw strength in both high-performance analog and component demand during the quarter.
GAAP and non-GAAP gross margin for the third quarter were approximately 56.5% and 61.3% of revenue. Non-GAAP gross margin was up 110 basis points versus the previous quarter, driven by product mix and operational efficiencies. The delta between GAAP and non-GAAP gross margins in the third quarter was primarily driven by $10.7 million of acquisition-related intangible asset amortization and $0.3 million of stock-based compensation and performance-based equity. Third quarter GAAP operating expenses were $106 million, down sequentially and at the low end of our initial $106-$110 million guidance range. GAAP operating expenses included stock-based compensation and stock-based bonus accruals of $25.6 million combined, and amortization of purchased intangible assets of $5.8 million.
Non-GAAP operating expenses were $74.4 million, down $0.8 million versus Q2, and were below the low end of our initial guidance range of $75.5 million-$79.5 million. Non-GAAP operating margin for Q3 2021 of 29% was up 540 basis points sequentially as meaningful operating leverage was driven by strong revenue growth and lower expenses. GAAP and non-GAAP interest and other expense during the quarter was $2.7 million. Cash flow generated from operating activities in the third quarter of 2021 was $84.1 million. This was up substantially from Q1 levels, driven by favorable trends in DSO and higher net income. We have now generated $152.2 million of operating cash flow through the first nine months of 2021.
We exited Q3 of 2021 with $170.6 million in cash, c ash equivalents, and restricted cash. Our days sales outstanding for the third quarter was approximately 42 days, down from 60 days as we saw improvements in our shipment linearity. Our inventory turns were 3.5 times, down slightly from Q2. With that, let's turn to our guidance for Q4 2021. We currently expect revenue in the fourth quarter of 2021 to be approximately $240 million-$250 million, up approximately 7% at the midpoint of the range versus the previous quarter, and up approximately 26% versus the prior year. While supply chain issues continue to limit shipments, we are seeing a continuation of the supply improvements demonstrated during Q3.
Our operations team remains hard at work with the underlying goal of building the right products at the right volumes to facilitate customer builds and enable them to win in the marketplace. While we don't see supply demand equilibrium happening anytime soon, we believe that incremental improvements will be made on a quarterly basis going forward. Looking at Q4 by end market, we expect broadband revenue to be up quarter- over- quarter, driven by growth in cable and fiber applications. Connectivity is expected to be up solidly versus Q3, driven by continued strength across Wi-Fi, MoCA, and Ethernet. We expect infrastructure revenue to be up sequentially in Q4 as wireless backhaul shipments improve and 5G wireless access continues to ramp. Lastly, we expect our industrial multimarket revenue to be down slightly quarter- over- quarter, coming off a robust Q3 performance.
We expect fourth quarter GAAP gross profit margin to be approximately 55.5%-57.5% and non-GAAP gross profit margin to be between 60%-62% of revenue. As a reminder, our gross profit margin percentage forecast can vary within a given quarter, depending on the product mix and other factors. We expect Q4 2021 GAAP operating expenses to be up slightly, quarter-over-quarter, to a range of $105 million-$109 million. We expect Q4 2021 non-GAAP operating expenses to be up slightly from Q3 levels within a range of $73 million-$77 million. We expect our GAAP tax rate to be in the range of 15%-20% and non-GAAP tax rate of 6%.
We expect GAAP interest and other expense to be $2.7 million-$2.8 million, and non-GAAP interest and other expense to be $2.6 million-$2.7 million. In closing, we continue driving towards delivering sustainable and profitable growth at a faster pace than our semiconductor peer group. We are aggressively investing in key market areas with the goal of expanding our addressable markets while increasing our silicon content and improving our market share positions. At a macro level, our end markets are poised to demonstrate growth over the long term, driven by the proliferation of global networking and trend toward expanding consumer dependency on reliable and robust connectivity. In addition to solid top-line growth, we remain committed to delivering significant value for our innovative and differentiated technology portfolio.
While we have made meaningful progress expanding operating margins, we believe there is room for continued improvement as we look to combine a growing revenue profile with the disciplined spending methodology. With that, I'd like to open up the call for 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'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions. Our first question is from Tore Svanberg with Stifel. Please proceed with your question.
Yes, thank you, and congratulations on the strong results and outlook. I'd like to start on the connectivity side of things. To Kishore or Steve, could you just elaborate a little bit on the content increases that's happening there? It sounds like, you know, you got quite a bit more coming, especially throughout 2022. You know, any more color you can give on content gains and connectivity would be great.
Tore, maybe I'll just start off. Yeah, we've been talking a lot about these content gains within a gateway, and a lot of that is driven by Wi-Fi. We've seen a substantial increase from Wi-Fi 5 to Wi-Fi 6, but we do see this continuing, and we talked a little bit about that move from Wi-Fi 6 to Wi-Fi 6E and then even, you know, long-term move into Wi-Fi 7 as well. But we expect those content gains to continue to grow throughout that time. You're talking gateways, you know, historically were running $5-$7, and now you're talking well north of $10 of content per gateway.
For Wi-Fi.
That's very helpful.
In addition, you know, in the past, we did not have much Wi-Fi attached to our products. Even though we are the gateway SoC, we didn't have much Wi-Fi prior to Wi-Fi 6, WAV600 as we call it. Now we are replacing existing pre-existing Wi-Fi legacy solutions with our own Wi-Fi. You've got two things going on. One is the content per platform is increasing, one through expanded offering in Wi-Fi. Second, actually getting new Wi-Fi sockets in existing platforms that we did not have before. You're seeing this sort of, you know, a snowball in a very good way. In all our broadband business, you know, Wi-Fi is going to drive a dramatic increase in content per box. In some cases, it's, you know, 30%-40% increase.
In some cases, depending on the box, you know, and a bigger increase in the total BOM content.
Very good. Some of the other IP that you got from your Intel gateway acquisition include PON and Ethernet. I know you haven't talked a whole lot about that. I mean, obviously they're smaller businesses, but could you give us an update on some of the opportunities you're seeing for both PON and Ethernet, especially next year?
You know, if you really think about the worldwide market and broadband access, we all have to understand that fiber is such a much bigger opportunity than cable. The most important thing that's happening in the fiber market is that they're all upgrading the networks to a 10 Gb PON over time, and they are symmetric in nature, and therefore you get true 10 gig in both directions, and there are different tiers in the market. For us, you know, we have the most premier 10G XGS-PON gateway platform with the SoC processor, the highest-end Wi-Fi access point offering, the Ethernet, and including integrated PON front-end. What we have is the best offering in the industry out there.
For the last two to three years, the team has been engaged in getting a premier showcase in a telco provider as the flagship victory, which will then attract other fiber PON players in the world to copy this flagship carrier. We are very excited because the ramp is going to start sometime in the middle of next year by the operator, but the shipments towards that rollout has already started at MaxLinear, and we are really trying to play catch up on the supply constraints we have and really ship big time. Along with that flagship carrier, we are also winning other flagship carriers in Europe and smaller carriers elsewhere. There's a huge upside.
If you think of an accessible fiber market units of about 75 million boxes worldwide, and you would think that the top platforms are 20% of the market and the mid-tier is about 40% of the market, we have a huge runway to grow in broadband and as a full category. All of these have pretty high-end connectivities, especially in the fiber play, so you should also see connectivity grow. Frankly, our focus right now is really expand our fiber gateway offerings and grow the revenues, and all the design wins are taking shape nicely. Broadband as a category should be a huge growth driver for us. And outside of all the other investments we have in very exciting markets in connectivity, infrastructure, and high-performance analog.
Great. Just one last one for Steve. Steve, gross margin obviously continues to improve very nicely. With all the cost pressure out there right now, can you comment on the ability to sustain 60%-62% for next year?
Yeah, Tore. Cost pressures are definitely very high right now, and we're dealing with those and as many in the industry are. We've been doing our best. I think we're very pleased. We came in ahead of plan, getting above the 60% gross margin level last quarter and then hitting above 61% this quarter. It is exciting. In the short term, I think we're okay here. I think we're very comfortable, comfortably above the 60% range, and we're gonna continue to drive that product mix towards a higher gross margin. We've talked many times that we thought that we can get the overall business kinda up into the mid-60s%, kinda based on the mix and the products that we're selling today. We remain confident in that.
That being said, the cost pressures in the short term, you know, we'll continue to work around those.
The big key to our gross margin improvements has been all the things we just talked about in the prior questions about product mix changing, higher value content, and as our high-performance analog parts, products continue to improve in gross margins and with new product additions and revenue growth, which are pretty proprietary in nature, I mean, we are seeing the benefits of that. You should also not forget that with our infrastructure products, we also sell IP revenues that are really nicely helping gross margins right now.
Okay. Very helpful. Thank you.
Yeah.
Our next question is from Quinn Bolton with Needham & Company. Please proceed with your question.
Hey, guys. I'll offer my congratulations as well. Wanted to follow up on Tore's question. I think in the past, you guys seemed to be much more optimistic about growth in the connectivity business, where broadband might be sort of a, you know, kind of a lower single digit to sort of flatter outlook. It certainly sounds like from some of your comments around the PON and the fiber opportunity that perhaps that growth opportunity in the core broadband business is picking up. I'm wondering, can you level set us now on what you think the broadband segment standalone could grow? What kind of CAGR could it grow at, say, over the next two, three years?
Yeah, Quinn. Look, we're very excited about broadband, especially as we look out over the next couple of three years. We're seeing a significant amount of infrastructure build-out happening, upgrades happening in the network, right? I think we remain, you know, very confident in that. You know, kind of mid-single digits is probably a very reasonable expectation on that front. The connectivity side is, we've not wavered on that either. We're talking about, you know, our Wi-Fi specifically doubling next year. We're very confident in that. I think we're ahead of plan for 2021 and definitely expect to see, you know, significant growth in 2022 as well. It's still pretty early days when it comes to Wi-Fi and Ethernet.
I think the key point here is that we have not dwelled as much on the fiber platform growth because that's our style. When we are really shipping is when we tend to talk about things. I think Quinn, you're right about being bullish on broadband with new growth. Obviously, a whole new tab is being added to our business, which is called fiber, and it really plays in very, very nicely between the cable operators, the telco carrier providers, and our infrastructure investments in both cable and telco space. I think all in all, it's all coming together very nicely. It plays to our strength.
Yes, I mean, obviously, Steve has guided to you what he can stand by, but, you know, if I sound a little bit more bullish, you're absolutely right.
I appreciate that, color. Wanted to switch over to the infrastructure business. Sounds like you will have modest shipments of the PAM-4/400G DSP in the December quarter with kind of higher shipments in 2022. Wondering if you could give us sort of any comments around your visibility into that business. I know it's a pretty constrained environment, so wondering if you know as you look out into 2022, do you have orders or backlog in hand that you know sort of give you the confidence that that business is gonna ramp to you know more significant levels in calendar 2022? I know you've been engaged with one hyperscaler for the initial 400G designs. It sounds like perhaps those engagements are broadening.
Wondering if there's an opportunity to ship 400G DSPs to a second hyperscaler in calendar 2022 at this point? Thanks.
Quinn, clearly you always know more about this business than I would wager a guess. It's interesting you brought up a second hyperscaler on the 400G PAM-4 DSP. You're absolutely right. There's an opportunity where there may be another hyperscaler coming online with 400G PAM-4. We're trying to expand our footprint. Having said that, I wish we were farther ahead on the optical data center than where we are today. Obviously, we are relevant. We are the disruptive technology provider. Given the changed landscape, the companies love the fact that there's an aggressive innovator who's really continuing to invest and focused on investing. Our 800G PAM-4 is proof of that.
Having said that, we have struggled with the lack of incumbency in the past, and we are overcoming that lack of incumbency. The supply constraints clearly give the advantage to incumbents. We have been slow on the uptake. However, there is no doubt that this will be a big revenue growth contributor as far as in the longer term, and next year will be a good year for our growth for us. Knock on wood, so to speak, right?
If you look ahead to where things are in infrastructure generally as an overview, the market is now in the next generation is evolving from 400 G PAM-4 in the optical side and 50 times 8 gig PAM-4 times 8 on the electrical side is moving to a pure one-to-one lane. What I mean is 100- gig per lane optical inside and 100- gig per lane electrical at the outside. We're very well positioned. That I think will be the biggest market that spans across all data center folks.
I think, you know, being consistent and also really not taking our eye off the mark, despite all the tribulations we have been through so far, is gonna pay dividends in the long run for us. I'm pretty confident about that.
Great. Thank you, Kishore. Thanks, Steve.
Yep. Thanks, Quinn.
Our next question is from Ross Seymore with Deutsche Bank. Please proceed with your question.
Hi, guys. Thanks for letting me ask a question. I'll echo the congratulations on the strong quarter and guide. I wanted to first hit on the supply side of the equation. Steve or Kishore, I know it's tight. Everybody knows it's tight across the whole industry. Seems like you talked about incremental loosening, but the size of the upside you delivered in the quarter, the strong guide you gave for the fourth quarter, and the fact that your inventory went up the better part of 30% sequentially, those all sound like we're moving in the right direction at maybe more than an incremental pace. Is there something I'm missing in there that it's still tight but not nearly as tight as it was? Any sort of kind of incremental update on that dynamic?
Ross, you're really, you know, really zeroed in on the facts specific to MaxLinear. I would really want to give all the credit to our operations and engineering team for lining up alternative suppliers across both packaging. We're working feverishly to broaden that so that we can meet the great demand growth we are seeing in our broadband and connectivity space, especially connectivity, and also lining up for that optical data center that Quinn was asking about. I think supply is the key for more market share and gain.
That would become an asset for us. Our engineering team and operations team are doing a fantastic job. We have always been creative for our size, and we continue to do so. I also wanna touch upon the other fact, and hopefully that has not gotten missed here. We hit $84 million in cash flow from operations, and in an environment where we have also grown our inventory levels, right? The business is really very well positioned to generate a lot of cash. As our operating margin expands, you know, that should give us ability to even expand our supplier base, right? Suppliers like the ability. These days, relationships with suppliers are becoming more strategic. You have to make investments in them longer term.
We're taking all those active steps in terms of strategic investments to expand our capacity for the long term as well. I think all those factors have contributed to what looks like losing for us. However, you all know that everybody, the suppliers have increased prices by 20%-30%, at least. I think we are in a new world, and being creative on expanding supplier base is incredibly important.
Thanks for that color. I guess I'll sneak in two follow-ups and one question, and somewhat unrelated. First, is seasonality even a concept that matters right now, especially in your broadband business? Or is cyclicality and supply limitations the more dominant dynamic? Then the second, and admittedly somewhat unrelated question, you guys have done a great job on the OpEx side of things. Is roughly the $75 million or so, is that the new base off of which we should grow? Or is there some either lumpiness that we should expect going forward, or are there even more opportunities to whittle that down a little bit?
Yeah, Ross. I mean, look, with regard to seasonality, over the last two years, it's been pretty unique, right? I mean, you had a pandemic, and then you had supply chain shortages, so that's definitely been a bit challenging, and that's been the kind of overarching factor that we've had to deal with. I mean, I do think that we'll get back to seeing some seasonality in our business. I think, you know, you probably start to see that sometime next year as well, where typically we would see a stronger Q2 and Q3. I do think that we'll start to move back in that direction. With regard to OpEx, yeah. I mean, look, I think we've done a pretty good job.
From time to time, OpEx is gonna be a little bit lumpy as it comes. Especially where you've got larger mask and things like that. We've also stated that we would expect OpEx to grow next year at a modest pace. I think it's not an aggressive number, but you'll see it increase. Next year, as I look out beyond Q4, naturally in Q1, early in Q2, you've got tax implications and things like that, where you would naturally see increases in the first quarter. Otherwise, nothing extraordinary from an OpEx standpoint going forward.
Great. Thanks, guys.
Sure. Thanks, Ross.
Our next question is from Tim Savageaux with Northland Capital Markets. Please proceed with your question.
Hi, good afternoon. You guys hear me okay?
Hey, Tim. Yeah, just fine.
All right, great. I wanna come back to the kind of broadband growth discussion. Congrats on the quarter, by the way. I think it was coming out of Q1 actually, where you guys talked about, and this has been true among your competitors as well, kind of the broadband business transforming from that kind of GDP-type growth profile into something more significant. At that point, I think you were targeting mid- to high-single digits%, as a you know, kind of upward revision from that lower growth rate. You know, as I listen to your commentary on the fiber side, you know, that sounds pretty incremental to those previous expectations. Of course, you've got a much larger competitor, not quite the same product profile, but growing well into double digits% this year.
Once again, the question becomes, can I get you to sign up for a double-digit growth rate in broadband? I have a follow-up.
You're very good, Tim. Look, I mean, I think we've talked about this. I mean, we typically talk about it really in the context of connectivity and broadband, and we're more than comfortable with double-digit growth. I mean, we've also-
Right.
I mean, I think across the company, you know, double-digit growth next year seems very reasonable. Your question about, you know, overall long-term broadband, I mean, it just says kind of mid-single digits seems reasonable over the long term. Look, the fiber market is a relatively new market. We are getting penetration in it. I mean, Kishore spoke to it a little bit earlier. That is a much larger market. Are there some dynamics that can change there? Absolutely. Especially as we look out in this upgrade cycle, I mean, you've and I know you're particularly familiar with a lot of this build-out that's happening, even governments getting involved. I mean, there's a tremendous amount of dollars being deployed, a lot of upgrades to DSL platforms, historically all moving towards fiber.
We're seeing a lot of traction. We see some of those proposals coming out with ramps in 2023. That's kinda gives us that confidence that we've talked about before about the double-digit growth, you know, out over the long term as those new programs come in.
Right. Got it. You're right, factoring connectivity in there does
Make things a little more comparable and get you well into double digits, I suppose.
Yeah.
The follow-up was on infrastructure and really more short-term. You talked about some supply issues in microwave, but it sounds like, you know, as those loosen up and you get some, you know, incremental contributions from both, 5G and data center, it seems like your messaging was you expect connectivity to be your fastest-growing segment in Q4 in terms of the guide, but it sounds like infrastructure could be pretty close. Is that a reasonable analysis there?
Yeah. Well, look, I mean, I think we feel really good about our Q4 guidance on infrastructure. I mean, it's up. I mean, I think it is. I'm not gonna give you an exact number on what it is, but it's substantial growth in Q4. I mean, I think we've had a great year this year, you know, growing, you know, the whole year is gonna grow on the order of 60%, and I think we've got another super strong year coming in 2022, just as optical and 5G start to take off. So pretty exciting time when it comes to infrastructure.
I mean, that's the other part, right? Is that, you know, through our strategic acquisitions, we have grown the broadband revenue. The infrastructure alone, if you look over the last 12-24 months, I mean, 12 months alone, it's grown about 50%-ish, and then you take the previous years, so the trend will continue. In the grander, larger revenue of the company now, you know, that gets a little bit lost, but we have done very well on infrastructure as a company.
Okay. Thanks very much.
Yep.
Thanks.
Our next question comes from Alessandra Vecchi with William Blair. Please proceed with your question.
Hey, guys. I echo everyone's congratulations on a great quarter. I just had a follow-up on Ross's question with regards to inventory. As we sort of think about some of these longer longevity business line items with PAM-4 and 5G and now even like your broadband PHY, how should we be thinking about the ideal or the normalized inventory level in either a dollars or days basis going forward, like in terms of target?
Yeah. Hey, Alex. I think if you're referring just to the inventory build that we saw last quarter, I mean, it did come up quite a bit. I mean, we have a somewhat unique situation. One, I mean, big supply chain dynamics, right? We're having to bring in a lot of products, so there's a lot of things in WIP just to account for the growth, you know, that we see in 2022 and just over the next few quarters. We've gotta work hard to make that happen. I mean, we do have kits in a lot of cases where we're shipping out multiple products that are going into one application.
To the extent possible, we try to accommodate our customers so that we're not, you know, shipping onesie-twosies, but we're able to ship them all of their products that enable them to satisfy their demands.
The color to that is that, yes, we have inventory growth. However, it is not in equilibrium with respect to the other parts of the kit. That alone doesn't tell you the answer that our supply is loosening up because we need to add the other pieces of the shortages. And the revenue relative to our revenue growth has not grown enough, the inventory levels relative to the revenue growth we expect. We're still behind on where we need to be or where we could grow into. Our revenue expectation would have been higher had we had more supply available.
I guess that's actually what I was trying to get at. I wasn't so much worried about the $127 million as I was trying to understand, given sort of the change in your business over the last year, like where you actually want that to go to in a supply equilibrium, if that makes sense. Meaning, is the target like 120 days or 130 days, or is it...
Yeah. Well, I mean, it kinda depends on the products, but I mean, I would expect that it, you know, longer term, I mean, I think we can keep it under 100 days. But in this environment right now where everything is quite volatile, it's a little hard to say.
Okay. That helps a lot. That's what I was trying to get at. That's it for me.
Our next question is from David Williams with Benchmark. Please proceed with your question.
Hey, good afternoon, and thanks for letting me ask a question. Congrats on the quarter. Just wanna ask maybe a little longer-term question. Just thinking about the replacement cycle and the refresh and the CPE equipment that you're obviously doing very well in, how do those trends typically play out in terms of peak? What year do you see the peak shipments, and then how does that kind of trail off? How do you think, I guess if we're thinking about Wi-Fi 6 and then transition to Wi-Fi 6E, will that maybe elongate that cycle further out than what you would typically see?
Maybe I'll start. I'm not sure that I'll get your question exactly. A lot of the cable cycles are quite long, right? That's one of the things that we really like about this business. It's a pretty mature industry. They've got six to seven years runway before you see an upgrade. That enables us, you know, the investment needs aren't quite as substantial. The Wi-Fi is slightly different. There is a much faster cycle, much bigger market, and frankly, why we're investing heavily is because of the opportunity that we have there. That's
Kind of where we are today, I don't know if you.
You know, if you talk about products refresh cycles on connectivity, right? In the context of a broadband platform, like Steve said, take seven-year cycles for cable data, and you probably have two cycles within that seven-year cycle of Wi-Fi refresh, right? Wi-Fi goes at a faster cadence because the industry they cannot afford not to refresh the Wi-Fi. On the other hand, the access piece is typically a seven-year cycle. I hope that answers your question on how the refresh cycle plays out.
That was very helpful. Thank you. Maybe just on the RF transceivers. The base station deployments in China have been, I think a little bit slower than we had expected. Have you seen anything there in terms of a change in that dynamic? Maybe if you could talk about your exposure to China and how you're thinking about the 5G rollout over maybe the next 12 months.
Okay. Look, for us, we have been hit very, very hard by the U.S. position relative to, you know, relative to China on 5G access with the large wireless OEM, right? That was our opportunity to be a huge player. That has really hurt us big. I think that simply answers your question, what does China mean for us, right? On the other hand, the rest of the rollouts have been pretty slow. You're also seeing that they are not deploying, you know, huge massive MIMO solutions as was originally expected. In terms of 64 by 64 MIMO, they're talking about 16 by 16.
That blending has come down to, as I guess, reality has set in in general with a large TAM. Right now, the focus is about getting design wins outside of China with the various OEMs and, you know, the industry generally tends to be very slow and, frankly, conservative is a flattery for those guys. You know, you win one platform at a time, and that will add up to a systematic build-out in revenue growth. Not having incumbency has been a challenge as well for us. However, we expect it to be a long-term focus and growth opportunity for MaxLinear.
Fantastic. Just one more quick one. Are you seeing anything in terms of disruptions in China coming through? I know the last several weeks, there's been a lot of context around that. I'm just wondering if there's anything you're thinking about into the fourth quarter in terms of supply or pricing pressures, specifically related to the China power shortages.
Yeah. David, I don't think there's anything different over the last week or two than we're already dealing with. I'll put it that way. There's plenty of challenges out there. I think our operations team has worked and done a great job thus far, and I think you see that in our numbers, and we'll continue to do that. That creativity that Kishore mentioned earlier, I think is also super important from an engineering standpoint that enables us to stay ahead of the competition here.
Fantastic. Well, thanks again. Appreciate the time, guys.
Thanks.
Our next question is from Suji Desilva with ROTH Capital. Please proceed with your question.
Hi, Kishore. Hi, Steve. Congrats on the strong results here. You know, fiber to the home Wi-Fi attached versus cable, you know, first of all, what's the mix of your Wi-Fi you would say is more fiber versus traditional cable? And do you have a higher share in fiber? And if so, why?
I cannot speculate how the share will develop in fiber in the future, right? Right now, we're all excited about three years of hard work. We got the world's premier carrier going to be rolling out with a product and it's a full platform of MaxLinear, right? In general, in fiber, our products will be both Wi-Fi and the access piece combined. We'll have little or no platforms where there is no Wi-Fi from MaxLinear. The cable world is a bit different, right? That was a world we have been in for a long time, and we have had 50 ±% market share for years now.
Therein is where we are replacing existing Wi-Fi solutions on our platforms with our own Wi-Fi solution. That's where that story builds out. It's a very different story, and the cable world is also pretty bifurcated, right? There are people who buy pure voice and data modems, and there are ones who buy gateways where Wi-Fi is part of the full box, right? It's too much detail to get into, but the way to think about it is that in cable, we have an opportunity to take our share position and add more content with Wi-Fi. In fiber, we are gonna gain market share, and in every case, we'll have our fiber gateway processor with Wi-Fi and Ethernet combined. In some cases, MoCA also is a part of it.
Okay. Thanks, Kishore. It's very helpful. Just to follow up on that one, you know, in your press release, you talked about growth from content and share gains. I was curious if those comments were really more specific to Wi-Fi or whether there were two or three other areas you'd highlight as content or share gain opportunities near term to help the growth.
Suji, I think I hate to use dramatic statements like across the board, but there are multiple opportunities of replacement, right? For example, we are the only one with a dedicated 2.5 Gb Ethernet PHY product, right? We are the only ones with a quad 2.5 Gb Ethernet PHY product, right? That is now being deployed into the marketplace. We're going to get content increase there. Then on the Wi-Fi side, obviously, we talked a lot about it, right? I think there are many such opportunities. There's power management and we're doing some great work in power, and it always gets lost because we don't know how to cover it properly in these forums. We want to stick to the large themes.
Yeah.
We are surrounding our SoC platforms with our power solutions. That should add BOM. For example, to give you an idea, we ship around anywhere, let's say, around 20 million units of cable boxes, give or take. Then, if you add even a couple of dollars or three of power management content from MaxLinear's own solutions, when the gateways refresh, you can easily see us picking up anywhere between $40 million-$60 million revenue on power alone. This idea of a content increase is pervasive in our thought process inside the company because we're one of the few companies that don't just do mixed signal digital. We also can do pure analog products, which is a very uniquely differentiating feature about MaxLinear .
Okay, great. Thanks for that color, Kishore. Thanks, guys.
Yeah.
Thanks, Suji.
Our next question is from Ananda Baruah with Loop Capital. Please proceed with your question.
Hey. Yeah, good afternoon, guys. Thanks for taking the question. Yeah, congrats on the great results. A few if I could, but I'll be quick about it. Just with the strength in the revenue September quarter and then in the guide, being, you know, so much stronger in a constrained environment than what you guys were thinking. Well, I'd love to hear the context around what you think is occurring to have it be so strong. Do you think it's also a situation now where maybe just the growth profile is gonna be stronger for a while than you had originally anticipated? Should we think of the same kind of growth profile off of a leveled- up revenue base? Just have two quick follow-ups after that.
Ananda, I'm not sure where exactly you're going. Look, I mean, our growth profile, I think, has improved dramatically, call it over the last 18 months, right? With the newer products, whether it be, you know, some of the Wi-Fi products, the broadband products, and as well as our optical and 5G products. I think we're very confident in that growth profile. Clearly, we've been limited with supply. We're getting that addressed. I don't think we find any of this surprising. I mean, we've had this, you know, the bookings, the backlog, the visibility, but in a lot of cases, we've not been able to hit the supply. That's improving. I think we're getting better visibility.
I think we're again, I'll mention, you know, some of the things that we've done creatively, to change and to get more supply. I think has been important, and I think it's enabled us to up these numbers in Q3, Q4, and frankly, some of those actions will enable us to take more share in 2022 as well.
Yeah, I guess what I'm asking about, Steve, is in a constrained environment, I believe the vast majority of the revenue was organic. Correct me if that's wrong, but so you just put up, like, a 25%-
No, that's true.
Organic growth rate. Yeah. I mean, here's what I'm looking at. I'm sure I'm not the only one doing this. You know, you've been talking about double-digit growth, just put up 25% in a constrained environment, or you're guiding to 25% organic in a constrained environment. You know, presumably, you'll get less constrained. It just seems like you're a little bit ahead at least, or maybe you're just sort of, you know, doing better than you thought you would originally, you know. I guess really maybe the question is, when you say double digits, you would be thinking 20% normalized growth in a non-constrained environment?
Look, we're not gonna guide beyond the current quarter we're in. But do we have substantial upsides in markets that we haven't participated in? Are there significant market share gains that we have achieved and will continue to achieve? I mean, some of the things that Kishore spoke to a little earlier on the fiber side of the market. I mean, there's very large opportunities that we're seeing early traction on right now, and we're always looking to expand the overall TAM and ultimately grow the top line faster. I mean, we reiterated that several times in the prepared remarks, just talking about outpacing the semiconductor market, and we're very confident that we'll continue to do that.
You know, as we continue to be more strategic to our operators and service partners, you know, they are jointly investing in development activities for MaxLinear. Our future roadmaps have skin in the game for these people, and they're, you know, so we are also benefiting from their strategic investment in our development, both in terms of revenue forecasts in the future and current versus also the technology we are developing for them, you know, being endorsed by them, right? Whether it's financial or through revenue purchases. We have not even talked about all the other great things that are happening in infrastructure because of now an enhanced scale.
Right.
We've always packed a lot of technology in the company, right? That's been very critical. The other thing I really want to dispel, maybe this is familiar to all of you who have been following MaxLinear for a long time. We've had substantial organic growth over the last 24 months. You know, with the characterization of these revenues, that organic ability to grow organically should not be forgotten. I know there have been some spurious reports out there, but our organic growth has been very, very strong as well. I just want to reiterate that fact.
Thanks for that context. Just the follow-up is, as the gross margins expand, should we also expect the operating margins to continue to expand? Or might there be some investment you might do with the extra gross profit that you're saying?
I think, Ananda, we saw substantial increase, 540 basis points in operating margin improvement last quarter. I think you'll see in our guidance that that goes up again. Even at, say, a year and a half ago, we kinda talked about that ability to get north of 30%. I think we're executing on that and very excited about kinda what the future holds there.
I think, Steve, in your prepared remarks, you did sort of allude to the fact that we should see, we'll be spending less than the rate at which its revenue is growing, and that operating margin has opportunity to expand further. Sorry.
Thanks, Ananda.
Thank you, guys.
Our next question is from Sam Peterman with Craig-Hallum Capital Group. Please proceed with your question.
Hi, guys. Sam on for Richard here. Two quick ones for me. The first one, you know, in connectivity, sounds like you guys are pretty confident in Wi-Fi doubling next year. Again, you've got some good visibility there. I'm curious how, you know, MoCA and G.hn are trending within connectivity as well and any kind of visibility you have into the outlook for 2022 there would be great too.
Yeah, no problem, Sam. Yep. I mean, MoCA and G.hn continue to perform extremely well. We spoke about it a little bit earlier. Very strong in Q4 actually coming up here. Those areas have been constrained as well as far as getting product, but really good traction with our MoCA product, G.hn, seeing more and more applications with that as well.
There's a little bit of a difference between G.hn and MoCA, right? Right now, most of revenues at G.hn are more retail-oriented and some industrial markets, industrial IoT markets. Whereas MoCA tends to be much more very high quality of service, reliable backbone for connectivity services, connectivity solutions inside operator deployments in the home.
Okay. Okay, that's great. Thanks. Quick, just looking at your 10-K real quick. I mean, looks like your Customer B that I think you guys have picked up from Intel wasn't a 10% customer in the quarter. I'm curious if you think they will be for the year, if you can just give some color around whether that was, you know, customer specific or just other lines of business growing faster. Just what's going on there.
Yeah, yeah. Sam, I mean, with regard to the top customers, I think this applies to all of them. They all would like to have more product. Somewhat similar to our end markets, these things are a little difficult to call from quarter to quarter. But I would say we're growing significantly with all of our top customers and we're excited about that. We also wanna, you know, continue to execute and get them more products going forward.
Okay. Thanks, guys.
Thanks.
Our next question is from Christopher Rolland with Susquehanna. Please proceed with your question.
Hey, Chris. Are you there?
Hey, Chris. Operator, we might go to the next caller and maybe come back to Chris.
Okay, no problem. We have reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.
Thank you, operator. I just wanna let everyone know that we'll be participating in the upcoming conferences in Q4, maybe Stifel 2021 Virtual Midwest Growth Conference on November 11, the Benchmark Company 2021 Technology Conference on the November 17, ROTH Capital Partners 10th Annual Technology Event on November 18, Credit Suisse 25th Annual Technology Conference on November 30, Wells Fargo 5th Annual TMT Summit on December 1, Barclays Global TMT Conference on December 7, Oppenheimer 5G Summit on December 14, and the Needham 24th Annual Growth Conference on January 12. You should be able to see this list also on our website. With that, I wanna say that thank you all for joining us today, and we look forward to reporting on our progress to you next quarter. Thank you very much.
This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.