Greetings and welcome to the MaxLinear Incorporated Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brian Nugent. Thank you, sir. You may begin.

Thank you, operator. Good afternoon, everyone and thank you for joining us on today's conference call to discuss MaxLinear's second 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 comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for third quarter 2021 revenue, revenue growth expectations and our principal target markets, GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, tax expenses and effective tax rate and interest and other expense. In addition, we will make forward-looking statements relating to trends, opportunities and uncertainties in various products 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 a limited number of customers, average selling price trends and risks that our markets and growth opportunities may not develop as we currently expect, and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks is outlined in the Risk Factors' section of our recent SEC filings, including our Form 10-K for the year ended December 31st, 2020 and our second quarter 2021 Form 10-Q, which was filed today. Any forward-looking statements are made as of today and MaxLinear has no obligation to update or revise any forward-looking statements. The second quarter 2021 earnings release is available in the Investor Relations section of our website at maxlinear.com. In addition, we report certain historic - 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're providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. Lastly, this call is also being webcast and a replay will be available on our website for two weeks. And now, let me turn the call over to Kishore Seendripu, CEO.

Thank you, Brian and good afternoon, everyone. Our Q2 financial results highlight revenues of $205.4 million, non-GAAP gross margin of 60.2% and non-GAAP earnings per share of $0.53. Broadband revenues stood at 55%, connectivity at 15%, infrastructure at 14% and industrial and multimarket at 15% of overall revenue, respectively. While Q2 revenue was up 215% year-over-year, it was still muted by the ongoing manufacturing supply chain challenges. However, our robust Q3 revenue guidance shows that we are steadily overcoming the impact of these supply constraints. Turning to some of the Q2 business highlights, broadband revenue was $113 million, down 9% due to the impact of supply constraints, even as bookings and end market demand grow strongly. Our operators are accelerating new, near and long-term capital spend to upgrade infrastructure and CPE technologies to support bandwidth-intensive services and for additional subscriber gains. We are well-positioned to strongly benefit from this upgrade cycle due to an approximate 3 times increase in the value of our silicon content in the next-generation CPE Platforms, which include gateway SoCs, access modems, Wi-Fi, Ethernet and power management solutions. Our broadband growth is expected to outpace the market for the next several years as we gain share in existing markets and expand into Fiber PON and Hybrid Copper PON and Fixed Wireless Access. Connectivity revenue grew strongly to $31 million, up 14% sequentially, recovering nicely versus Q1 as supply improved. We foresee sustained strong momentum for our Wi-Fi products as consumer demand for higher bandwidth connectivity rises, attach rate over Wi-Fi on our existing broadband platforms accelerates and operators rollout more robust broadband access and connectivity services. Our significant WAV600 and WAV600 release product design wins in next-generation Tier 1 platforms, which also offer Triband Wi-Fi capabilities, will be ramping in 2022 and anchor growth for the next couple of years. Moving to infrastructure, Q2 revenue of $29 million was up 2% sequentially versus Q1. Wireless backhaul revenue grew to greater than double Q4 2020 levels. 5G wireless access also grew owing to initial shipment revenues from our 5G RF transceivers. We expect 5G wireless access to maintain sequential growth throughout '21 and into 2022 based on the backlog and anticipated supply improvements. Our optical data center business continues to progress as we prepare for our module customers to ramp shipment of our 400 gigabit PAM4 DSP in late 2021. In May at the Optical Fiber Conference, we also formally announced our 800 gigabit PAM4 DSP product family in 5 nanometer CMOS technology called Keystone, which has significant power and performance advantages over competitive solutions. Based on strong customer sampling and interest, we expect a strong design win cycle for Keystone in next-generation cloud data center platforms. Excitingly overall, our increased scale and industry-leading technology portfolio have generated momentum for strategic partnerships with key players across our infrastructure end markets, which include large NRE investments to support our development of new products for them, committed target volume shipments and schedule. In Q2, we signed one such strategic agreement with an industry leader, and expect many more such arrangements in the future. Finally, our industrial multimarket revenue also grew strongly by 10% to $32 million in Q2, as solid end market pull-through and customer demand continued. Furthermore, our distributed channel inventory levels are also lean, as we steadily improve supply for our industrial customers to keep up with their demand, and as our design win funnel for existing and new products continues to grow, our industrial revenues are expected to grow very strongly. In closing, we are focused on developing new technologies and launching new products across all of our four end markets. It will enable us to expand our addressable markets, gain market share with new and existing customers and increase our silicon footprint content per platform. These companies' specific growth drivers are solidly in place, and we hope to outperform the semiconductor industry growth rates in a sustainable fashion over the long-term. With that, let me turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.

Thanks, Kishore. I will first review our Q2 2021 results, and then further discuss our outlook for Q3 2021. Total revenue for the quarter was $205.4 million, down 2% versus Q1. Broadband declined by 9% quarter-over-quarter as supply constraints within gateway SoCs hampered our ability to meet end market demand. Connectivity revenue increased by 14% sequentially as Wi-Fi shipments rebounded from Q1 levels and MoCA revenue increased by double-digits versus Q1. Infrastructure revenue increased by 2% compared with Q1, largely driven by continued recovery in wireless backhaul and increased contribution from our 5G access business. Lastly, our industrial and multimarket business was up 10% sequentially, as we saw strength in both high performance analog and component demand during the quarter. GAAP and non-GAAP gross margins for the second quarter were approximately 54.8% and 60.2% of revenue. Non-GAAP gross margin was up 160 basis points versus the previous quarter and we were successful in exceeding the 60% level faster than expected, following the Intel Connected Home acquisition in Q3 of 2020. The delta between GAAP and non-GAAP gross margin in the second quarter is primarily driven by $10.7 million of acquisition-related intangible asset amortization in addition to $0.3 million of stock-based compensation and performance-based equity. Second quarter GAAP operating expenses were $110.3 million, up sequentially and above the high end of our $102.5 million to $106.5 million guidance range. GAAP operating expenses included stock-based compensation and stock-based bonus accruals of $25.4 million combined, amortization of purchase and tangible assets of $5.8 million and excluded a $3.8 million payment that we received during the quarter for a jointly funded broadband infrastructure project, which reduces our internal R&D costs. We will receive milestone payments in the next two years subject to certain contingent repayment obligations that we don't believe we will trigger. We don't expect to receive any payments related to this project in Q3. Non-GAAP operating expenses were $75.2 million, up $2.6 million versus Q1, and at the midpoint of our guidance range of $73 million to $77 million. Non-GAAP operating margin for Q2 2021 of 24% was essentially flat quarter-over-quarter despite lower revenue and slightly higher operating expenses due to the strong performance of gross margin. During Q2, we had a $5.2 million GAAP expense due to a loss related to the extinguishment of debt, while GAAP and non-GAAP interest expense during the quarter was $4.3 million and $4.1 million, respectively. Our cash flow generated from operating activities in the second quarter of 2021 was $7.9 million. This was down from Q1 levels largely driven by an increase in accounts receivable due to the supply-driven linearity of shipments during the quarter. We generated $68.1 million of operational cash flow in the first half of 2001, up from $15.9 million in the first half of 2020. We exited Q2 of 2021 with $131.4 million in cash, cash equivalents, and restricted cash. Notably, during the quarter, we executed upon a new $350 million senior secured Term Loan B, the funds were primarily used to repay and terminate our existing credit facilities and pay fees and expenses, and the remaining proceeds are available for general corporate purposes. The new loan facility will extend our loan maturity and lower our interest and amortization expenses. Furthermore, we have already made a principal payment of $20 million during the month of July against this new debt facility. We also established a $100 million revolving credit facility which expands our borrowing capacity and provides us with additional strategic flexibility to execute on our key growth initiatives going forward. We remain consistent in our intentions around the use of cash with priorities on debt pay down and strategic acquisitions. We also purchased $4.5 million of stock during the quarter as we continue to utilize our $100 million buyback program. Our day sales outstanding for the second quarter was approximately 60 days, up from 38 days in the prior quarter due to shipment linearity. We expect linearity to improve going forward and for our DSOs to return to historical levels in the next couple of quarters. Our inventory turns were 3.9 times, essentially flat with Q1 levels. With that, let's turn to our guidance for Q3 '21. We currently expect revenue in the third quarter of 2021 to be approximately $215 million to $225 million, up approximately 7% at the midpoint of the range versus the previous quarter. While a difficult supply environment continues to inhibit our shipment profile, we have seen some early-stage improvements in product availability that are allowing us to better support our customers. We believe this trend will continue over the next several quarters. Looking at Q3 by end market, we expect broadband revenue to be up quarter-over-quarter as modest supply improvement is enabling us to better fulfill our cable, fiber, and hybrid operator backlog. Connectivity is expected to be solidly up versus Q2 driven by broad-based strength across Wi-Fi and MoCA and Ethernet. We expect infrastructure revenue to be flat to slightly up sequentially in Q3 as strength in our wireless access business is offset by near-term lumpiness in our wireless backhaul business, which has ramped materially year-to-date. Lastly, we expect industrial multimarket revenue to be up sequentially as this market continues to improve. We expect third quarter GAAP gross profit margin to be approximately 54.5% to 56.5% and non-GAAP gross profit margin to be between 59.5% to 61.5% of revenue with the midpoint slightly higher than Q2 levels. As a reminder, our gross profit margin percentage can vary, plus or minus 2% within a given quarter, depending on product mix and other factors. We continue to fund strategic development programs targeted at delivering strong top line growth in 2021 and beyond, with particular focus on infrastructure, broadband and connectivity initiatives and our stated goal of increasing operating leverage within the business. We expect Q3 2021 GAAP operating expenses to decrease approximately $2.3 million quarter-on-quarter to a range of $106 million to $110 million. We expect Q3 2021 non-GAAP operating expenses to be up approximately $2.3 million versus Q1 to a range of $75.5 million to $79.5 million. We expect GAAP tax expense to be approximately 0% and a non-GAAP tax rate of 6%. We expect GAAP interest and other expense to be between $2.9 million and $3 million and non-GAAP interest and other expense to be between $2.8 million and $2.9 million. In closing, we continue driving towards our ambition to deliver sustainable and profitable growth ahead of the semiconductor industry average. Over the long-term, this will be achieved by demonstrating technology leadership, which will allow us to expand our addressable markets, while increasing our silicon content and improving our market share positions. Our end markets are also poised to demonstrate solid growth profiles due to the proliferation of global networking and the trend towards expanding customer dependency on reliable and robust connectivity. Beyond revenue growth, we remain committed to demanding value for our products as evidenced by recent gross margin expansion and driving operating leverage with modest spending growth being focused on high return R&D projects. These initiatives coupled with our disciplined capital allocation strategy will allow us to continue scaling MaxLinear, while creating meaningful value for shareholders. With that, I'd like to open up the call for questions.

Ladies and gentlemen, we will now be having our question-and-answer session. Our first question comes from Tore Svanberg with Stifel. Please proceed with your question.

Yes, thank you and congratulations on the strong results. Could you talk a little bit about your relative visibility? I assume you're fairly booked for Q3, but even beyond Q3 and especially when thinking about the broadband business, because obviously you had some delinquent backlog there. So why don't we start there first?

Yeah, Tore, good to chat with you. Absolutely. Lead times have continued to be quite stretched and customers have definitely been booking out all through next year. So we've got multiple quarters of very strong visibility. And yes, we are working hard to improve on deliveries and we've made some, as you can tell, some modest improvements, but we definitely have more to go.

Great. And you also announced an NRE customer this quarter. Could you just elaborate a little bit on that? I mean, obviously you probably can't talk about, you know, who it is and the exact amount. But is this a one quarter thing? How should we think about it impacting the P&L?

Yeah, Tore. So this is something that we've been talking about a little bit as the industry has consolidated; we're seeing more of these NRE payments. And so we do expect to see more going forward. I mean we've seen them increase over the years. But we'd expect to see more going forward. I can't go into this one specifically. But there are several of them they're over multiple quarters. So you could - as you know, these projects take a couple to three years often, and you would expect some of these NRE dollars to be spread out over that timeframe.

Okay, just one last question. Kishore, you mentioned the PAM4 business contributing to revenues at the end of this year. I hope you could add a bit more color there. And especially as we start thinking about 2022, is this sort of early revenue late this year or still the beginning for a pretty big event next year?

So, Tori, very good question. And you know, we maintain that, you know, their qualification with their module customers and the end cloud service provider has taken longer than we had expected. This is not surprising given that we are a new entrant to this market. And we feel that we're in a good place right now, where we should start generating revenue at the end of Q4. Having said that, given the stretched lead times and other factors, especially with the, you know, all these IP components, you have especially substrates and packages. So you would expect that we would have good visibility on orders for the lead times today; the company's lead times are extended several quarters. So we should expect good visibility that should generate revenue into 2022. The one caveat to keep in mind is that the likewise incumbents also have, you know, expectations on their lead times and their bookings. So we clearly will be only sharing the revenue streams as we move forward with our customers despite having, you know, good visibility on what the demand patterns are there for next year. So yes, in short, at the end of Q4, we should expect to see ramps in 2022 related to our 400 gig PAM4 product.

Right, thank you and congrats again.

Thanks.

Thank you. Our next question comes from Quinn Bolton with Needham & Company. Please proceed with your question.

Hey, guys congratulations on getting the margins over 60%. The strong outlook. The first one I start to, Kishore you mentioned the Keystone 800 gig DSP, wondering if you could give us any update on? Is that sampling now? And when do you think you might start to see that ramp to production? Could you see that going into production next year? Or is that a 2023 event just given the long qualification and ramp time?

So, Quinn. So first I want to say that, you know, we are beginning to sample the 800 gig PAM4 product; it's looking by all accounts very good. So we are seeing strong traction, but the next-generation platforms wherein you know, the input optical speeds are 8 by 100 gig and the output would also be you know, 8 by 100 and compare - or even compatible to the preceding generation of 50 gig PAM4. So I want to emphasize that it's all about 100 gig PAM4 both on electrical and optical links. So, and as we all know, the 400 gig PAM4 is yet to ramp in a meaningful way. And so you should expect the 800 gig PAM4 to come after that. But the great story about 800 gig PAM4 is almost all data centers are converging on this particular technology, which is basically 800 gig with 4, 8 lanes of 800 gig or 4 or 8 lanes of 100 gig in the electrical. So we expect this to be the biggest, you know, available opportunity on the data center for cloud interconnects. And we don't expect revenue therefore in the next year; I expect this to be, you know, a latter 2023 type of revenue ramp or, if you're lucky, earlier than that, but I would be more cautious and say it's a mid-2023 type of activity. Okay?

Got it, thank you. The second question is, you had previously announced your second generation 8 by 8 transceiver. I know that the first gen is ramping now, but could you give us any update on traction and progress you're making with the second gen 8 by 8?

So, obviously, we are garnering design wins even for our second-generation, you know, 8 by 8 radio transceiver, you know. However, the slowdowns in the ramps of the infrastructure in China and, in general, you know, this is not ramping as fast as we had hoped. But the design win traction continues and combined with our really high-performance digital predistortion technology for high power PAs and so on that we have acquired through NanoSemi acquisition, we are getting very strong momentum towards that. Right on the development activities, that clearly there are two prongs to this. This is proprietary Tier 1 radio transceivers for the 5G market and also is a big momentum towards next-generation platforms on the Open RAN platform. You have seen our announcement of a partnership with Facebook on the Open RAN platform, and we are part of the certification platforms when our Open RAN solution is available. So we feel that we're in a very well-placed with the success of generation products as well. So yes, the 16 by 8, the 8 by 8 5G RF transceiver, the design win momentum continues, but the ramps are going to be a little bit later than earlier. Okay?

Got it. And then just a quick one for Steve. Steve, you had mentioned some supply constraints in the broadband business. I think you, some of those products are manufactured by Intel, some are manufactured by third-party foundries just wondering if you're seeing the constraints from one supplier or another; you know, meaning, is Intel kind of made these manufacturing commitments or are you seeing just tightness in the overall foundry space? Just wondering if you could provide any color on that - those broadband supply constraints.

Yeah, Quinn. I mean, I would just say that we see tightness across the board, right with all of our suppliers on the wafer side, be it Intel or others as well as, you know, on the back end side as we - as we've mentioned before, so really across the board.

Okay, thank you.

Thank you. Our next question comes from Gary Mobley with Wells Fargo. Please proceed with your question.

Hey guys, congrats on a strong quarter, strong outlook. Thanks for taking my question. I want to ask about how you guys are managing this volatile supply chain environment that we're in or tight supply chain, probably a better way of saying it. And, you know, you mentioned you got booked, you know, some bookings out through next year, lead-times are stretched. Presumably some customers are trying to jockey for pole position to get adequate supply, maybe some double ordering, but maybe not double fulfillment. So I'm wondering, you know what you guys are doing to make sure that demand is firm? Are you implementing sort of cancellation penalties, extending your cancellation flexibility, et cetera?

Hey, Gary, yeah, it's good to talk with you. So clearly these supply chain challenges continue, we are doing everything we can within our power to kind of work with our suppliers. We're also looking to bring on new suppliers to recall our product; you know, much like many of our peers, I mean, wafers, substrate, you know, test capacity, wire bonders have all been challenging. And I think we've done a great job. I mean, the team has been working non-stop trying to mitigate some of these risks that are out there. And I think we're making good progress. But still I wouldn't say it's enough. I mean, I think, but I - but at the same time, I think we'll see nice improvements throughout the second half of the year. I think they will - I think you're still going to see them next year definitely in the first half. But hopefully, you know, we'll start to see them subside anyway. Yeah, I mean, with regard to, you know, the overall industry and whether there is double ordering or bringing on more inventory, I don't think there's any doubt about that. I think everyone has seen that. I mean we like many others, I mean, these are non-cancelable orders for the most part and so we mitigate that to some degree. But, you know, as far as the overall industry, I mean, we'll do our best to manage through this time.

So Gary, one more thing to add there is that, you know, we - you know that the greatest challenge we have, and the most important job we have is to make sure that our customers are happy, right. And in this constrained environment, happiness is a relative term. Having said that, we do very diligent work to understand the end demand for our customers, we work with our customers to figure out their true demand and while we all would like to have more products; our customers would like to have more products, they're also very sensitive to the fact that to make sure that they can fulfill their customers' demands. So we really work in a very collaborative environment. And for us, all customers are important. So we just try to make sure that we, you know, at some point in time over a certain period, we have a healthy understanding as to who gets fulfilled at what time, so that we don't leave any revenue, you know, that's perishable out there. Secondly, regarding managing our suppliers, it's really not managing our suppliers, they're really in a very good position, right. It's having strategic relationships and partnerships, and our suppliers are super excited even though they're also constrained on how to support us, they're very excited that we are a growing company, they see us as one of the only mixed-signal companies that has a chance to have a very outsized growth in front of it. And so they're also very motivated to make sure that we are successful. You know, and I think to that extent I would like to thank our suppliers right now, and I think together we are doing wonderful things together. And that's why you're seeing the help you're getting from our suppliers as well. So I think that will be the essence of the story. It's a very collaborative process. Nobody's managing anybody; we're all working together to make sure that we all, you know, capture the full value in the supply chain to the - all the way to the end consumer. Okay?

Appreciate the color, guys. And I just had a follow-up question about your Wi-Fi sales. I think to your expectation was for your Wi-Fi sales to perhaps double this year, is that something you're still comfortable with? And maybe if you can just give us some feeling of how Wi-Fi 6 is going to impact, you know, that revenue this year and looking out to the future?

Yeah, we're absolutely on track. Very excited. We're getting great traction, attachment is you know, continue to be very good. We've been working through, I mean, this is another area where we had supply chain constraints in Q1. We saw that mitigated a little bit in Q2, but we definitely have further to go. And I think you'll continue to see nice growth throughout the year. A lot of that in our connectivity bucket, but driven by Wi-Fi. I mean, Wi-Fi 6 is a big opportunity for us. And frankly, Wi-Fi, in general, I think is something that we're very excited about. It's something that we see growing demand for. It's one of the big drivers in this content increase that we're seeing in our gateways today, right, we've talked about, you know, doubling, tripling of content within these gateways. And a lot of that is driven by Wi-Fi. And so you're seeing Wi-Fi ASPs going from $5 to $7. And you're seeing going up to $15 and $20 in the future. So this is exciting. It's also a very demanding environment; we've got, you know, our engineering teams working diligently to support customers through this time, not just on the operations side, but really on next-generation product as well.

Yeah, and I want to really sort of, you know, highlight our Wi-Fi here, right. It's not just any Wi-Fi; it's the top three Wi-Fi access platforms in the world with the latest generation. And so it is a premium platform and the top of the breed here. So I think the traction sort of speaks for the value of the Wi-Fi that we are giving our customers here. And I think frankly there's a lot more opportunity we could be chasing that we are chasing, however there's a little bit of caution here to ensure that we supply our customers with the existing ones as we bring on more and more suppliers, a greater and more customers and procure more supply capacity from our own suppliers.

But as far as seeing that double this year, I mean frankly, I think we're even more confident that we'll see that happen again next year.

Yeah.

Thanks, guys.

Thank you. Our next question comes from Ananda Baruah with Loop Capital Markets. Please proceed with your question.

Hi, good afternoon, guys. Thanks for taking the questions. I really appreciate it. Yeah, just wanted a quick follow-up if I could, on the demand pickup, really nice demand pickup and the guidance for the September quarter. Any sense how much of that would be from some of these demand dynamics really starting to amplify and pick up versus the supply constraints beginning to mitigate a little bit?

So, you know, how would I answer that question? Obviously, all our demand is coming from share gains, right and on the broadband platform, when we talk with the broadband business, and is really being amplified by, you know, operators spending a lot more money on premium platforms. And so we look at the demand, the totality over several quarters, not a particular quarter. So I think this is a trend that's going to be there for a while due to heavy CapEx investment from our operators. And so I don't look at it as relating to anything to do with supply other than supply not keeping track to what we could do in a particular period of time, but it's not a recovery because we didn't ship enough in Q1, for example. So you can imagine this entire demand really there with us and because of having share gains and content increase, and we are trying to catch up with the demand rather than really having a face demand and falling down because we couldn't supply and then we're catching up in Q2, there is nothing of that sort here. It is really an amplification of the larger spend by the operators.

That's really helpful for sure. And I guess, you know, if I do some quick math, I know you're not getting December quarter and seasonality historically is kind of, you know, it's been, you know, kind of both up and down. But if I do some quick math, it suggests you could grow anywhere, year-over-year, you know, 10% to 20%. I guess really the question is for the December quarter and I guess when you start to go apples-to-apples with Intel. And I guess the question is, is it appropriate, given your - what you guys are seeing just to think of you guys as a consistent 10% plus revenue growth company? Is that really who the company is, you know, going forward for the foreseeable future? Thanks.

So it's a good try to get me to try to guide Q4. But in all seriousness, look we -

Only stock - you guys have said a bunch of only stock and there's no headwinds literally in any of your remarks that far by the way.

Good to hear, good to hear that, that's consistent with our intent. So look, I feel very confident that we're continuing to see very strong demand. I mean, to Kishore's points earlier, I mean this does very much feel like kind of this multiyear cycle. It's not a, you know, kind of a one-time thing, we're seeing strong demand, we're continuing to see more shared gains, the content growth that we were just speaking of on the Wi-Fi side, I mean you're going to continue to see really strong growth of businesses that we've never had before. And that's on top of very strong market growth as well. So Q4 feels very good and 2022 looks like it's going to be a really strong growth year. So look, our intentions absolutely are going to be to grow double-digits over the next several years. And I think that's consistent with what the outlook is with this broadband infrastructure build that we're expecting to see.

And there's not just broadband, right. If you look forward into 2022, I mean, infrastructure will come in more and more into the highlight. And, you know, if you really recall, this is a business that is now on track to exceed $100 million which has only been three years old, right. And it's been slower than what we expect, especially on the optical side. And, you know, however, we have built it, and we are - and there's a lot of growth ahead in front of us in the infrastructure as well. So, I really think there's a lot of organic growth engine drivers. And one of the things that most investors don't seem to really or completely familiar, we have the premier fiber PON platform for, you know, 10G XGS-PON solution in the world. And, you know, that has been adopted by a premier North America carrier, and it's like the - it is a showcase platform for the rest of the world. And we're getting a lot of adoption of that. And if you think about our penetration in the PON markets, with the carrier market, that the more - as we start deploying more fixed wireless access and fiber outlays, you know, huge limit, because the huge upside because our share is very, very tiny in that market. And those platforms tend to be pretty robust high content platforms as well. So I think, you know, I never like to quote a particular number as the sustainable growth percentage of 10%. However, I think the vectors or several vectors in blade, broadband, connectivity, and infrastructure. And even our industrial multimarket analog products are coming to life, because last few years they've been investing in it. And then now the growth is coming with the new launch of new products as well. So I think the opportunity is right in front of us and you can tell that we're very excited about all these good vectors for the company.

Sure, and that's really, really helpful, guys. I really appreciate it. Thanks a lot.

Thank you.

Thank you. Our next question comes from Ross Seymore with Deutsche Bank. Please proceed with your question.

Hi, guys, this is Melissa Weathers on behalf of Ross. Thank you for letting us ask a question. I have a couple more nearer-term questions. First question on the industrial multimarket business, it looks like that grew 10% sequentially and last quarter you guided for it to be flat to down sequentially. So any other color you can provide as why that upside of your expectations in the last 90 days? And do you spend at a little more incrementally positive on that market. So just what is your outlook on the IMM space?

Yeah. Hey, Melissa, yeah absolutely, we are excited about the industrial multimarket. We are seeing some nice improvements, frankly, with regard to the guidance. And we mentioned this in last quarters' call. I mean, with the supply constraints, it's very difficult to call a lot of our end markets exactly, you know, perfectly kind of given some of those supply constraints. So there's a little bit of movement there as we try to navigate our supply chains. But going forward, I think we do feel good. We've talked about this market growing it, you know, kind of GDP plus and I think we're seeing that plus right now, right now we just can't keep up with demand. And so we're working very hard to meet those customer demand with, you know, lower inventory levels, but we're working very hard to make that up as fast as we can.

And the demand itself - while it's growing, we're also gaining share, because we've done several things to bring, you know our parts in line to be very competent relative to the competition. And those are also gaining a lot of solid design win pipelines so which are beginning to yield results now. And we especially focus on the distribution channel and while we are launching new products so that our salespeople can go and get more market share right now. So that also is playing in our favor.

Got it. Okay, thank you. And then another more nearer-term question that you guys upsided your expectations on the gross margin line as well. And you're now in like the 60% range. So between 2Q and 3Q and then going forward, is there anything structurally that you think has raised the floor for your gross margins? And any color on why those were so strong?

Yeah. So this is something that we're excited about, we've seen some really nice improvements going into the acquisition or post-acquisition, rather, that number did come down a little bit. And so we've been working diligently to kind of get our operational efficiencies back in order. This has been particularly challenging as we've seen price increases from a lot of our suppliers. And so we're doing our best to navigate that. And as you can tell, we're ahead of plan here. But it doesn't end here, I guess is the way that I would put it, given the continued constraints that we see in the industry, we're going to continue to see price increases. And so we're going to have to work hard to manage that. I mean, mix will continue to be an issue as well as we look out into next year. And we're always looking to manage that as you know, when we brought on the Intel assets, they were definitely running significantly below our numbers. But again, with a lot of work, we're going to continue to make those improvements but it's a multiyear improvement that will take in order to get back up into those mid-60s which we aspire to be.

So the other thing is that, I mean Steve referred to mix, we're also have a lot of new products ramping, and you know, the new products, timing of the cost improvements that are within our control, and not based on suppliers or any of those factors. We've gotten a better handle of it earlier than we had expected. That's a big factor as well. So I just want to be careful here saying that, while our costs are increasing, a lot of our improvements have come ahead of schedule based on all the new products that are ramping and that we are cleaning up internally and a big part of it is testing, yield improvements and so on and so forth. Right. So and as our new products keep ramping, we have greater and greater opportunity to fine-tune the cost line, if you will, and that should improve our gross margins on a go-forward basis.

Okay, thank you guys and congrats.

Thank you. Our next question comes from Tim Savageaux with Northland Capital Markets. Please proceed with your question.

Hey, good afternoon and I'll add my congratulations. Wanted to focus on the broadband business along a couple of lines here. First, I don't know if you can, you know, quantify, you know, what you might have kind of left on the table from a supply standpoint in Q2 in broadband? And, you know, any color on, you know, booking and backlog metrics as a result of that would be welcome. And then, you know, should we think of, you know, catching up on that with your strong Q3 guide, you know, through the second half of the year is kind of recouping some of that or is there a better way to think about it? And I have a kind of a longer-term follow-up.

Yeah, Tim. I mean it's difficult to quantify exactly what was quote, left on the table in Q2; we continue to make good progress. We're pleased with that. We're definitely not keeping up with demand as we said earlier, but we are making really good progress. We're going to have to continue to make good progress. What I mean by that is that, as we win new business, we, you know, Kishore spoke earlier about some of the newer programs that we have ramping and so we've got to be able to get more supply in order to meet those demands. And, you know, we're making good progress and we'll continue to focus on that.

Okay. And that kind of leads into my next question, which is that the comment about the new platforms that Kishore mentioned ramping in '22. I think on the last call in the Q kind of increased baseline growth expectations for the broadband business kind of into the, I guess mid to high single digits. I wonder if you still see it that way? And you know, given commentary around increasing content, the new platforms you mentioned, you know with that type of market growth and your plans to outgrow, would it be fair to expect double-digit growth in broadband next year as a result of all those factors and maybe you can, you know, throw market share in there, I don't know if there's been any comments on that about your thoughts on your direction of market shares in broadband is another potential driving factor.

So, Tim I'll start and I'm sure Kishore would love to speak to the longer-term view here. But look, I think our outlook is very consistent with what we shared last quarter; we continue to see the market continue to expand and we continue to see a lot of our customers and I guess I'll say operators and carriers starting to really put a lot of CapEx dollars to work over the next, you know, three to five years as I know you've pointed out several times. So we see the market growing. We're penetrating new markets with new offerings that we haven't had historically, we're in a unique position with some of our products just from a pure performance standpoint, whether that be on their gateway SoCs or Wi-Fi or even Ethernet for that matter. So I'm really optimistic and we're really more than comfortable with that outlook that we had just the last quarter and really excited about our future here.

Okay, thanks very much.

Thank you. Our next question is from Richard Shannon with Craig-Hallum. Please proceed with your question.

Hi, guys. Thanks for taking my question. Let me just follow-up on the last one here regarding the broadband business. I look to get a sense of when you start to see benefits from some of these new technologies that you haven't been in before like PON and fiber and I think you even mentioned the fixed wireless. I don't remember hearing that one from before from you. So when do we start to see that? And how do we think about the context of contribution relative to the broadband markets that you're already in?

I mean, we're seeing it, we're seeing revenues this year. As we pointed out previously, I mean, it's relatively small, but it is a very, you know, it's a growing portion of our business that's probably growing well in excess of twice the rates that are more what we're known for in the cable area. But it's absolutely growing fast. It's a big market, it's something that we're underpenetrated for sure, which, you know, with respect to share anyway, so I do expect to see us improving with our market share there. But it's going to - I mean, this is something that we see playing out over the next two to three years. But I just - we're not waiting on anything. We're selling these products today, but the real growth is probably over the next two to three years.

Okay, and that's helpful. And just my last question probably has something to do with this topic here. But let me get from a different perspective and that being the Broadcom FTC investigation. Wondering if you're seeing any changes in behaviors either from your competitor here or customers in the weeks that this has come out and whether you expect any real changes in the market that can be even more beneficial for you?

So Richard, you know, I was kind of expecting somebody to ask the question, and this is our position, right. You know, what we control is what we do, you know, so and what we have to do is be the strongest best supplier to our customers where they want to buy product from us, I think we have always worked hard on that, we have tried that in the past week, this is a beam that we have end up at full platform complement with us. And so competitor - competitors have done what they have done, but now in the - now the industry is where we have consolidated. We have a full platform menu of solutions, and our competitor does too. So I think it's fair game and game on. And regarding what the FTC does really is not in our control, right and how it affects the behavior of our competitors and our customers. You know, it's really hard to fathom and project on that. But at this point, I think we've got as powerful portfolios as our competitor. And I think we feel very good about our opportunity to really win in the marketplace legitimately on the strength of our products.

Okay, great. That's all the questions for me guys. Appreciate the thoughts.

Thank you. Our next question comes from Christopher Rolland with Susquehanna Financial Group. Please proceed with your question.

Hi, good afternoon. This is Duksan Jang on for Chris and thanks for taking the question. I just had a follow-up question to your earlier China slowdown commentary. It seems like China has offered a few more tenders by now. And also in the US, it seems like 5G build-out is accelerating. How we should expect this to be any term of any sort of a near-term driver for infrastructure?

So, Duksan I - so I think that's consistent. I mean, what we had mentioned before that we were behind 8 by 8 frankly, we were really expecting to see most of that ramp happen in '22 to begin with. And so most of that revenue that was planned for this year is coming by the 4 by 4 market. I think I know you guys have commented on this. I mean, I think it's consistent to say that 5G is definitely pushed out in China and that's had an impact. It is exciting to see what's going on in North America with these mid-band auctions now complete, I think we can definitely see some things pick up on that front. And we're very excited, you know, kind of going into next year to see those revenues start to grow from here.

Great, thank you. Also, some of our PC companies just reported that Wi-Fi chips are under a short supply. Have you heard this as well? And would you say there are opportunities for you guys to serve this market at all?

Well, we're definitely familiar with being short of Wi-Fi chips. But I think you're probably referring to more client-side products. I mean, we've definitely struggled as far as getting enough product ourselves. And we've seen shortages across the industry. I don't know that we can call this out specifically. But as far as our products and then the gateways and the like, I mean, we're seeing those challenges as well. Yes.

Okay, thank you. And then just a last quick one. It's great to hear that Wi-Fi is kind of doubled this year and perhaps also next year. But coming back to the September guide, you said infrastructure, I mean, connectivity is going to be solidly up, if you could give us a bit more color on that commentary. And any more details on MoCA or Ethernet would also be helpful. Thank you.

Yeah, yeah, no problem. Look, we're very excited. I mean, connectivity is a strong growing market, we're going to see very significant, I mean very significant growth this year, a lot of that's driven by Wi-Fi and Ethernet. But our MoCA and G.hn has performed increasingly well, I think well beyond what the expectations were say, you know a year or so ago. And we expect to see that continue throughout the rest of this year and into next year on all of those fronts. So I mean, there's going to be strong double-digit growth this year as well as next year for sure. And we're very excited about that.

Thank you. Our next question comes from Suji Desilva with ROTH. Please proceed with your question.

Hi, Kishore. Hi, Steve, congratulations on the progress. A couple of questions on the broadband Intel acquisition. So, Steve you described kind of the cost efficiencies and margin improvement there is kind of ongoing, but would you kind of - would you want to say at this point in a couple of quarters into the acquisition, you know, what inning you are in sort of kind of the plan you had when you acquired it, just to understand how far along you are there? Or if that's already kind of you've not moved on from that? Or if there's still sort of opportunity here?

Yeah, well, I mean, I - hey, Suji, it is going very well. I mean, we're ahead of plan here. And we're pleased about that. But I mean, frankly, this has been up against headwinds and the market where it's been very difficult to bring on new suppliers or, you know, make some of the negotiated cost reductions that we would have liked to have seen, right, going into the acquisition. That being said, I think we've done a really good job. I don't know that I can give you an exact inning, but I would mention that very much part of our plan all along would be our next-generation products that we're, you know, very confident that we will continue to see margin improvements over the next two to three years, right. So as we have new products that will come to market, that, you know, we are participating and collaborating on designing some of these parts with a broader set of a supplier base with often a different architecture. So you know, we've talked a little bit about multichip modules going into monolithic chips; I mean, these are things that we can do to improve yields on a go-forward basis. And so I do feel like it's very much early days with regard to gross margins and so well I feel like it's early days, I think over the next couple of three years, you're going to continue to see improvements on the CHD business. In the short term, you know, we still have to navigate some of the supply chain challenges, right and the pricing environment that we're in, but very pleased with the progress.

Yeah, appreciate the challenges there. And then my follow-up question is on the product set for the combined connected home business. I mean, the Wi-Fi incremental content add has been very, very clear to us watching you guys. But as you maybe have a couple of quarters now and you can work on this consolidated product and design products going forward. Is - are there incremental areas of content gain that you could highlight that might be coming along with what you're already targeting today that may help you with the growth here?

Obviously, some of this information is quite confidential, right, we have to be careful about that. I would say that the general guideline for you would be, if we look at any broadband platform, you want to examine all the content of the platform. And, you know, the power is an area that we are increasingly investing. And that should complement what we're doing already, and you're not seeing enough of that growth BOM on the platform for power, right. And then you also have other componentry on the platform that, you know that we are taking a very aggressive look at and that could become part of a roadmap. At this point, that's all I would like to share and the rest I will leave to your imagination.

Great, thanks.

Suji, I'm just going to add one point that I think is sometimes overlooked. I mean, we've talked about Wi-Fi attach as an additional, you know, a content increase on that gateway. But you know, I think often it's underappreciated about the increase in Wi-Fi content, you know, going from Wi-Fi 5 to Wi-Fi 6 and Triband and even moving into Wi-Fi 7, and so you're seeing easily a doubling of that Wi-Fi ASP dollar anyway in a gateway.

So it's very interesting, right even in such powerful platforms like 10G PON or, you know, the Cable DOCSIS 3.1 moving to 4.0. When it does, that total BOM provided by swarms the BOM content of the non-Wi-Fi, right which is a very strange paradigm; you know, what was supposed to be a peripheral to the main processor and front-end now that becomes a small piece in the bigger puzzle of the Wi-Fi, right. However, you need that processor and the modem, you need to have full control of that in order to sell your Wi-Fi. So it's not unlike, you know, the Asterix and Obelix comics you know Asterix holding the world even with the smallest the tip of the whole thing you know, okay, this is maybe for non-Americans, okay.

Well, I definitely want to ask how the FTC charges might further open my imagination. I'll leave that alone as well. Thanks, guys.

Thank you, Suji.

Thank you. With that I would say thank you, operator, and we will be participating at the following up conferences during Q3. Oppenheimer's 24th Annual Technology Internet and Communications Conference on August 11th, BMO Technology Summit on August 25th, Jefferies Semiconductor, IT Hardware & Communications Infrastructure Summit between August 31st and September 1st, and Deutsche Bank's Technology Conference on September 9th. I want to thank you all for joining us today and I look forward reporting on our progress to you next quarter. Thank you very much. Bye.

Ladies and gentlemen, this concludes today's conference. You may now disconnect your lines at this time. Thank you for your participation and have a great day.