Maxlinear, Inc Q3 FY2022 Earnings Call

Thank you, Victoria. Good afternoon everyone and thank you for joining us on today's conference call to discuss MaxLinear's third quarter 2022 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 the fourth quarter of 2022, revenue, revenue growth expectations in our principal target markets, and GAAP and non-GAAP gross margin, operating expenses, effective tax rate, and interest and other expenses. 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 broadband, infrastructure, connectivity, and industrial markets and opportunities for improved revenue across our target markets. Additionally, we may make forward-looking statements relating to the completion of the pending Silicon Motion transaction and its anticipated timing. These forward-looking statements involve substantial risks and uncertainties including risks arising from the current geopolitical concerns, competition, supply constraints facing the semiconductor industry, global trade and export restrictions, the impact of the COVID-19 pandemic, dependency on a limited number of customers, average selling price trends, and the 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-Q for the quarter ended September 30, 2022, 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 2022 earnings release is available on the Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenue, gross margins, operating expense, income from operations, interest and other expense, income taxes, net income, and net income 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 benefits. 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 a replay will be available on our website for two weeks. And now, let me turn the call over to Dr. Kishore Seendripu, CEO of MaxLinear. Kishore?

Thank you, Leslie and good afternoon everyone. Our Q3 revenue was $285.7 million, up 2% sequentially and 24% year-on-year. Non-GAAP gross margin was 62% and non-GAAP operating margin was 33.9% with cash flows from operating activities of $61.8 million. We continue to see exciting near and long-term growth drivers in fiber access, gateway Wi-Fi connectivity, wireless and optical infrastructure, and industrial applications, which will allow us to outperform our end markets via share gains and increased silicon content in customer platforms. Turning to the business highlights, our Wi-Fi connectivity business grew robustly in Q3 with revenues more than tripling year-over-year. Based on our revenue run rate, we believe we are well on our way to doubling our Wi-Fi revenues in 2022 versus 2021 and on target to deliver $200 million or more in sales in financial year 2023. Our strong Wi-Fi 6 and 6E offerings are expanding our customer platform attach rates and also driving a strong pipeline of new customer design wins. Also as we continue to strongly ramp products into third-party stand-alone routers, we are expanding and diversifying our Wi-Fi revenues beyond service provider gateway applications. Last week we announced our WAV700 product family, which is the industry's first Wi-Fi 7 standard tri-band single-chip system-on-chip solution targeting access points and broadband gateways. It delivers 12 spatial streams simultaneously over 2.5 gigahertz, 5 gigahertz, and 6 gigahertz Wi-Fi spectrum bands. The WAV700 family is currently sampling and we expect to see WAV700-enabled customer products starting in 2023. Wi-Fi 6E, 6, and 7 standard-based products represent an unprecedented multiyear growth driver for Wi-Fi by enabling in-home connectivity speeds close to 20 gigabits per second. With each new generation of Wi-Fi, we are increasing our differentiation, gaining market share, and driving higher platform attach rates and average selling prices. Moving to broadband fiber, multiple customers in North America are currently ramping our products including a large Tier 1 operator we mentioned before. In 2022, our fiber access revenues are expected to increase more than four times versus 2021 with continuing momentum into 2023. Our latest generation of AnyWAN Broadband SoCs, which we recently announced, support multiple access technologies in a single solution including fiber, copper, coaxial cable of cable fixed wireless access, and Ethernet. It will enable operators and OEMs to cost-effectively upgrade their networks and rapidly roll out new high-performance multi-gigabit solutions to customers. Fiber broadband represents a very large multiyear revenue growth opportunity for us. So we're excited by first, the market traction for our industry-leading integrated PON and 10-gigabit fiber processor gateway SOC solution; second, our significant growing fiber platform below material content; and third, our proliferating design wins beyond North America. Additionally, ongoing CapEx commitments from carriers and governmental incentives where fiber upgrades provide a strong growth catalyst for our broadband revenues. Moving to infrastructure, in 5G wireless infrastructure revenues grew despite tight back-end package substrate supply constraints. In Q1 2023, with increases in substrate capacity anticipated, we'll be better able to address a strong backlog of continuing customer demand for wireless access and backhaul solutions. We are especially benefiting from the expanding rollout of multiband millimeter wave and microwave backhaul platform solutions as part of new 5G network rollout across several geographies such as in India. These multiband platforms more than double our content per platform and grow our addressable units. As 5G networks proliferate, we expect our revenues will grow in the near to medium term, owing to our industry-leading full-system silicon solutions for wireless backhaul and our 5G access RF transceivers. Moving to the rapidly growing high-speed optical data center interconnect market, we have a leading strategic position with our Keystone family of products, which is the industry's only 5-nanometer CMOS, 400-gigabit, and 800-gigabit PAM4 production-ready silicon. Based on the anticipated trajectory of growth in hyperscale cloud data and processing requirements and our ongoing success with product qualifications at multiple OEMs, we feel confident in our ability to strongly grow our data center revenues in the next upgrade cycle. During Q3, we also announced the availability of Panther III, the latest in our Panther series of storage accelerators. We showcased this product at the Flash Memory Summit in Santa Clara, California, where it won Best of Show for the Flash Memory Enterprise Business Application category. Panther III opens up new opportunities for us within the enterprise storage market including all-flash array and non-volatile memory express systems. With that, let me turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.

Thanks, Kishore. Total revenue for the third quarter was $285.7 million, up 2% versus Q2 and up 24% year-on-year. Broadband revenue was $120 million, down 14% versus Q2 and down 5% year-on-year and was in line with our expectations entering the quarter. Our connectivity and end market had strong growth sequentially in Q3, as a result of solid demand and an easing of Wi-Fi supply constraints. Connectivity revenue in the quarter was $83 million, up 46% sequentially and 118% year-on-year. Our infrastructure end market had revenue of $36 million, flat versus the prior quarter and up 22% year-on-year. Infrastructure performance was slightly better than we expected in the quarter and was driven by strength in high-performance analog mostly offset by ongoing supply constraints in substrates. Lastly, our industrial and multi-market revenue was $47 million in Q3, a 3% decrease and an increase of 30%, year-on-year. GAAP and non-GAAP gross margin for the third quarter were approximately 58.6% and 62% of revenue. The delta between GAAP and non-GAAP gross margin in the third quarter was primarily driven by $9.3 million of acquisition-related intangible asset amortization. Third quarter GAAP operating expenses were $115.5 million, including stock-based compensation and performance-based equity accruals of $30.7 million combined acquisition and integration costs of $1.3 million and amortization of purchased intangible assets of $1.5 million. Non-GAAP operating expenses were $80.4 million, down $3.9 million versus Q2. Non-GAAP operating margin for Q2 2022 was 33.9%. GAAP interest and other expense during the quarter was $7.4 million and non-GAAP interest and other expense was $7.3 million. In Q3, cash flow generated from operating activities was $61.8 million and cash flow generation year-to-date has more than doubled, compared with the same period in 2022. During Q3, we made a $75 million prepayment against our long-term debt position and we have subsequently found an additional $25 million so far in October. We exited Q3 of 2022 with slightly over $200 million in cash, cash equivalents, restricted cash, and short-term investments. Our days sales outstanding for the third quarter was approximately 57 days, up from 45 days in Q2, largely driven by shipment linearity due to supply constraints for our Wi-Fi products. Our gross inventory turns were 2.8 times which were essentially flat from the previous quarter. This concludes the discussion of our Q3 financial results. Before we go to guidance, I want to give you an update on the status of our pending acquisition of Silicon Motion. On August 31st Silicon Motion shareholders approved the acquisition. In addition during Q3, we converted to filing under the normal procedure with SAMR. We are progressing through the process and believe we remain on track for a mid-2023 close. We have fully committed financing for this transaction and are actively working to optimize the debt structure to lower our expected cost of capital. We are excited about the opportunities for our combined business and look forward to bringing our two technology-focused cultures together soon. With that, let's turn to our guidance for Q4. We currently expect revenue in the third quarter of 2022 to be between $285 million and $295 million up approximately 2% at the midpoint of the range versus the previous quarter and up approximately 17% versus Q4 of the prior year. Looking at Q4 by end-market we expect broadband revenue to be down quarter-over-quarter. Connectivity is expected to be up versus 3% driven by continued strength in Wi-Fi. In infrastructure we are expecting revenue to be slightly down compared with Q3, as substrate supply issues continue to persist. Lastly, we expect our industrial multi-market revenue to be approximately flat quarter-over-quarter. We expect fourth quarter GAAP gross profit margin to be approximately 55.5% to 58.5% and non-GAAP gross profit margin to be in the range of 59% and 62% of revenue. The sequential decline in gross margin is being driven by the combination of near-term product customer and end-market mix headwinds, in addition to recent supply risk from our lower-cost manufacturing partners in Asia. We expect Q4 2022 GAAP operating expenses to be in the range of $114 million to $120 million. We expect Q4 2022 non-GAAP operating expenses to be in the range of $77 million to $83 million. We expect our GAAP tax rate to be approximately 30% and non-GAAP tax rate to be roughly 6%. We expect GAAP and non-GAAP interest and other expense to be roughly $5 million. In closing, our solid execution and innovative product offerings are enabling us to perform well in a dynamic environment. We believe that we can continue to expand our presence in strategic markets such as Wi-Fi, fiber broadband access gateways, and wireless infrastructure where our growth drivers are less dependent on macro conditions. We're excited by these developing opportunities to unlock additional business value for our shareholders. With that, I'll open up the call for questions.

Thank you. We will now begin the question-and-answer session. Our first question comes from Quinn Bolton with Needham & Co. Please, go ahead.

Hi, guys. Thanks for taking my question. I guess, Steve and Kishore, I'm surprised a little bit of the volatility between sort of weakness in broadband and strength in connectivity. And, I guess, maybe can you provide a little bit more color with what's behind the recent weakness in the broadband segment of the market? And the second question is, the Wi-Fi seems to be up very strongly here in Q3 and up again in Q4. How sustainable is that? Do you think there's some catch-up revenue as Wi-Fi constraints ease, do you think there's any inventory building taking place in those Wi-Fi components given some of the past capacity constraints? I guess, how comfortable are you with that, the sustainability of the Wi-Fi business at the second half 2022 levels?

Hey, Quinn, I'll start out anyway. So first of all, so the Wi-Fi is kind of in line with what we had expected. Last quarter we were short on Wi-Fi, a lot of that driven by supply constraints. So there was a bit of catch-up in the current Q3 quarter. That being said, we see continued growth as we continue to take more market share. We've talked about the ASP increases as well. And so, that's showing more progress. And then lastly, the third-party routers. We mentioned that third-party routers would kind of just get going in the second half of the year as supply comes on. And that's exactly the way it's playing out. We'll start to see that third-party router business start to ramp in Q4 and continuing into the first half of the year.

And then just, any comments on the broadband, the fiber and the cable business?

Yes. Well, I mean, we highlighted the progress that we're making on the business. On the broadband side, broadband had been running ahead, I would say, a little bit, particularly in the last quarter in Q2 it was growing well north of 20%. We had anticipated that moderating a little bit this quarter and that's exactly what happened. So comfortable with the progress on the cable operator side. Fiber is something we're really excited about. We highlighted this in our prepared remarks. It's a business that's doing well. We're underpenetrated in the market today. We have a lot of new products. We have some new customers that are ramping in the second half of this year. It's still relatively small in the whole scheme of things, but we do see a lot of growth, especially going into 2023, where we think we have the potential to double the fiber revenues or fiber-related revenues next year over 2022.

Great. And then, just one follow-up on the margins. Obviously, it sounds like the mix towards Wi-Fi in Q4 is behind the kind of lower gross margin. As you look out to next year with Wi-Fi expected to be $200 million or more, do you think that 59% to 62%, is that more where you would expect gross margin to trend next year, or do you see strength in infrastructure or other products perhaps coming back next year that they could walk you back up toward the 62% you've been running at more recently?

Yes, that's a good question. Our long-term outlook on gross margins hasn't changed. We're experiencing some challenges with our mix. As you mentioned, the ramp-up in Wi-Fi in Q4 and into next year is negatively impacting us. Additionally, our infrastructure revenue is not as strong as we initially anticipated. We've discussed the substrate shortages we've encountered, but as those shortages improve, we expect infrastructure revenue to rise in Q1 and Q2 of next year. We'll see gross margins recover, but it will take some time to get back to our long-term targets.

Next question comes from Tore Svanberg with Stifel. Please go ahead.

Yes. Congratulations on the results. I had a follow-up on the fiber gateway. I think you've called out having a design win pipeline of more than $300 million. I'm sure, you're not going to give us an exact number, but where are we sort of in converting that pipeline at this point?

Regarding fiber, we have discussed multiple customers increasing their usage this year, and we anticipate that it will double next year. We remain confident in that outlook, though we recognize it is still early in the process. We've emphasized that this represents a multiyear trend as more telecom companies transition to fiber. This presents an exciting growth opportunity for us in the market, especially with the numerous new products we've introduced, as Kishore mentioned. We believe we are still underrepresented in this market, and our customers are seeking alternatives.

Very good. And Kishore, you really called out your wireless infrastructure business should be able to see some strong growth in Q1, as some of these supply constraints ease. I was just hoping if you could elaborate a little bit more on that. I mean, this is obviously, a backlog that you already have. Is it pretty diversified geographically? Perhaps you can add some color on that.

Hi, Tore. We are experiencing strong and continuous demand, which is evident in our robust backlog for the coming year. This backlog has been building up consistently rather than being accumulated early in the year. Our growth is currently limited by issues related to the special ABF substrate capacity, but we have secured dedicated capacity that is expected to become available in Q1. Therefore, next year should prove to be a significant year for wireless infrastructure. Regarding gross margin, it has been impacted by our shipping constraints. In terms of geographic diversity, we are present wherever major telecom OEMs are deploying wireless 5G networks. As a full system solution vendor for microwave backhaul and millimeter wave modems, you can expect our chips to be involved in millimeter wave deployments. With the rollout of 5G, various types of backhaul and fronthaul are gaining importance, including the implementation of multi-band rollouts. Currently, we are seeing a doubling of the total addressable market in this area. Geographically, we are present everywhere that microwave and millimeter wave technology is being deployed, though we must adhere to U.S. regulatory restrictions on export controls. In the U.S. market, we have a strong presence, and we are also seeing other emerging markets in South Asia that are just beginning to develop.

Great. Just one clarification question for Steve. Steve, you called out risks associated with lower-cost Asian suppliers. I think that's the first time I've sort of heard that as a risk for gross margin. Can you just clarify, what you meant by that?

We are currently evaluating how the recent export control restrictions impact us. We are addressing the situation with our customers, but it also affects our suppliers. Some of our current and potential suppliers need to be managed, which could lead to a long-term reduction in gross margins, as we’ve previously discussed.

Helpful. Thank you.

Next question comes from Gary Mobley with Wells Fargo Securities. Please go ahead.

Hi, good afternoon. Thank you for taking my question. I wanted to mention a few things from your 10-Q, and I believe you just addressed one of them. I noticed that there is a significant concentration with one specific customer, which accounts for 31%. I think that's the highest concentration you've ever reported. Is that figure directly from the customer, or does it involve a distributor? If it's through distribution, what is driving that level of concentration? Additionally, I've observed that your supply footprint seems to be becoming more diverse. Is there something relevant to note in that change?

We have a couple of large customers, and one in particular did show growth this past quarter as we caught up on our Wi-Fi shipments. However, I wouldn't say this marks a significant shift from our historical performance. We work with various gateway suppliers and aim to strengthen all of those relationships alongside the operators. Ultimately, it's the operators who make the key decisions on rollouts and upgrades globally, which is where we are focusing most of our efforts. Regarding our supplier situation, while there was some diversification last quarter, there wasn't much to glean from that. Over the past year, the supply situation has varied a bit due to constraints, and we've had to secure products as they become available, which led to a slight increase in our inventory last quarter as we prepared more work in progress for future growth.

I wanted to ask about your bookings trends and backlog trends, considering the hypersensitivity surrounding the semiconductor cycle. Given the shifting dynamics in demand and supply, where do you currently stand with respect to backlog, backlog coverage, and your book-to-bill ratio for the quarter?

So I think what we found in Q3 was pretty consistent with what our expectations were. And I think I even spoke to this last quarter as lead times have started to shorten we've seen bookings come down. No real surprises there. I think as we look out into 2023 probably, well not probably this is the highest level of backlog that the company has ever had. So that's really encouraging. That being said customers are starting to move around on shipment dates I mentioned this last quarter as well. So I think here too not a big surprise. We're watching it closely. I think where we're excited we've got several growth drivers that we've highlighted fiber infrastructure some of the backhaul things that Kishore was speaking about earlier. Those businesses are growing nicely and they should be countered to any industry slowdown that inevitably we'll see in 2023.

Thanks for the color Steve. Appreciate.

The next question comes from Alessandra Vecchi with William Blair. Please go ahead.

Congratulations on a great quarter in a tough environment. Steve, just one for you as a housekeeping question on OpEx. You delivered OpEx below the low end of this quarter and are, kind of, holding it flat even with revenues up in Q4. How do we think about that as supply constraints ease next year counter to inflation, et cetera?

Yes, that's a good question. We're closely monitoring our operating expenses, especially given the current market turbulence and volatility. We aim to maintain discipline in this area, as we have in the past. There are also some non-recurring engineering dollars that are helping offset our operating expenses, which should provide some flexibility. Looking ahead to next year, we anticipate the usual beginning-of-year taxes and merit increases to rise. In terms of inflation, we continue to see wage inflation and other inflationary pressures affecting various parts of our business, with wages being the most significant factor. This trend is likely to continue for a while, as it is typically a lagging indicator.

Exactly. And then not to beat a dead horse but just on the substrate easing as we move through Q4 into next year. I think, you had mentioned in the past diversifying substrate suppliers just in line with your commentary for risks around Asian suppliers do you see any potential hiccups there as you move through the year?

Hey, Alessandra, this is Kishore. We've been working on increasing our substrate supply capacity since the first half of the year. Qualifying high-performance substrates for high-frequency applications takes considerable time, and there are very few vendors globally that can meet the necessary substrate capacity from the product design aspect. We expect this capacity to come online in Q1. It's important to note that this situation does not affect all other Asian suppliers, so we are not impacted in that regard. Meanwhile, we are securing dedicated capacity for our high-performance substrates and are enabling a few additional substrate vendors who might be able to provide us with more supply. There are no risks concerning export regulatory issues with these substrate suppliers from what I consider friendly countries. So, that's our current status.

Perfect. That was very helpful. Thank you, Kishore. With that I will move on.

Thanks, Alessandra.

Next question comes from David Williams with Benchmark. Please go ahead.

Hey. Good afternoon. Thanks a lot for letting me ask questions and congrats on the performance in this environment.

Thanks, David.

Hey, Steve. So maybe first with you just kind of thinking about the scalability of the business. Now with you've got revenue that's north of $1 billion now significant growth over the last couple of years. But you've got the Wi-Fi seven platform and the AnyWAN gateway processors in the pipeline and a lot of really nice growth drivers here. And of course the PAM4 that kicks in perhaps next year. But how do you think about the scalability of the business going forward in terms of when you, kind of, couple all of this together what does the growth trend look like if you're thinking 18, 24, 36 months out?

Yes, David. We have several product lines that we are very excited about and have been investing in. As I consider the long-term growth drivers over the next few years, infrastructure stands out as an area where we are investing, whether it's in data centers or wireless infrastructure. This represents a sustainable long-term growth opportunity with large total addressable markets. It's still early days for us in the Wi-Fi and Ethernet segments, which are markets worth well over a couple of billion dollars. We are just beginning to develop our portfolio in these areas. You will likely see even more products derived from our existing offerings. Given the market size, growth, and average selling prices, the silicon complexity of our parts is increasing, which will be beneficial. Additionally, we are very focused on the fiber segment and the gateways associated with it. Fiber is being extensively rolled out globally as the demand increases, and there are many government subsidies prompting fiber deployments. We are committing significant resources to this area as well.

Thanks so much. And then here's one that I'm not sure that you'll be able to answer. But just kind of thinking about the SIMO acquisition and maybe some of the recent restrictions that have gone into place it seems like that could be a potential headwind for the SIMO business. How do you think about that? Is there anything that's changed I guess from your valuation or just kind of how you're thinking about that transaction? And anything meaningful there that you could share?

I don't think I can answer this question satisfactorily. However, we believe that the acquisition of Silicon Motion is incredibly strategic for us. It significantly enhances our business scale and establishes our presence in one of the biggest total addressable markets for silicon, particularly in the storage sector. While Silicon Motion has a strong position in consumer markets, our goal is to expand into enterprise, especially in the United States. Coupling this acquisition with the Panther product we discussed, along with our 800-gig PAM4 and 400-gig PAM4, positions us well in the cloud data center markets. We're excited about the strategic opportunities this presents, beyond the scale benefits from suppliers. We remain optimistic and are eagerly awaiting updates on the transaction closing while being cautious about the timelines. Our view on the value of this deal hasn't changed, and we would not have pursued it if we were not convinced of its worth. We only engage in transactions where we have strong conviction. We're excited, and their business appears to be performing in line with our expectations, considering we were aware of some market headwinds during the acquisition process, which are typical in the storage and consumer product cycles. Therefore, we feel comfortable with the current situation.

Very well. Thanks so much. Certainly appreciate the color and best of luck on the quarter guys.

Next question comes from Christopher Rolland with Susquehanna Financial Group. Please go ahead.

Thanks for the question guys. I wanted to go back to broadband again there. I didn't quite understand why we were seeing weakness there. We were a little bit weaker than we have expected for September. And then we'd actually estimated some growth in December as well. Is this just a mismatch between fiber ramping and weakness in cable, or are there some supply issues here as well? And then would we expect some sort of re-acceleration in 2023? And would that be as early as March, or how are you guys kind of looking for a re-acceleration in that business? Thanks.

Yes, Chris. Let me clarify what I mentioned earlier. We definitely observed some challenges in the business. We ship several different products into these gateways, which often leads to mismatches, and we certainly experienced that in Q2 and Q3. We're starting to move past that. I believe the essence of your question pertains to the long-term outlook for the broadband business overall. As we look into 2023, we've had a very strong 2022. We're seeing the same market conditions as you have noticed. Therefore, it's reasonable to anticipate some moderation in broadband next year. However, we have a significant amount of new business that should counterbalance any potential slowdowns, including some fiber initiatives that are just beginning to ramp up. We have new customers and new products that are all new to us, which is exciting. While it's still early, I believe this business, although not yet very substantial, can bring in tens of millions of dollars in incremental revenue next year.

Should we expect broadband to grow next year, or is that a little too optimistic?

So as I just stated, I mean, I don't think it would be surprising, if it moderate or come down a little bit next year.

Okay. Fair enough. And I'll give you an easy one Steve and then Kishore more of a technical question. So Steve yours is around accounts receivable that was up. Does that speak to linearity or something else? And then Kishore considering you have PAM4 products, have you thought about entering the active electrical cable market? Thanks.

So the short answer on the receivables yeah, it was linearity. I mentioned that in the prepared remarks, the shortages that we saw kind of late Q2 rolled over into Q3 so definitely the linearity in the quarter was the reason for the receivables being up.

Chris, absolutely, I think we just had this conference where one of the vendors we're showing active optical cables with our PAM4 solution, and there's a lot of demand for utilizing our low-power chips in active electrical cables. So from our perspective is just one-end applications and as the speeds increase active electrical cables will become more and more important for the whole side of the interconnect. So yes we are in it and we have a fantastic solution and there's a lot of demand for that. So, yes, I think that's the short answer.

Thank you, guys.

Next question comes from Ananda Baruah with Loop Capital. Please go ahead.

Yeah. Good afternoon, guys. Thanks for taking the question. Yeah, a couple for me. Steve you mentioned and Kishore this could be for you as well. Do you believe you're yet seeing any legitimate impact from macro? I think you mentioned you expect to see it in 2023. I think you used the term inevitably. But what do you think you're seeing anything yet?

So look, I mean, it's very – it's one of those things where you worry that everybody is talking about it so it must be true, right? And then we try other than the behavior of some of our customers who are trying to reschedule deliveries against a very strong backlog and a developing backlog, it's very hard for us to predict the future next year. And so the assumption is that, things are not going to be as euphoric as they were last year, and even this year though we have continued to guide a good quarter again into Q4, right? So we are just like everybody saying things are going to be bad. So we should also be prepared, if things are bad. So I can't give you any more intelligence than that, right? So, we're very cautious but we are focusing on our investments on the strategic TAM expanding products, whether it is in the optical side, whether it is in wireless, whether it is in fiber gateways and Wi-Fi, right? We talked of all of those products. And so the way I look at the thing is that, longer term can we go organically from where we are today at whatever this, let's go with the Street number is $1-plus billion for 2021, 2022 and can we get to $2 billion in five years from now or something? And based on the product portfolio and the customer traction and the sort of what I call the evolved garden, if you feel nature of our product offerings, there is no reason why we don't have a pathway to that. So next year is just another year since we started the company where we have negotiated downturns, but it has never scared us. We have always come out very strong with very strong product portfolio offering. And I see no reason to change course in mentality on that one. So I hope that answers your question on that.

Yeah. Good. That's good context. Kishore I appreciate it. And I guess, as a quick follow-up to that one building on that. What are the businesses or the areas, I guess that you guys see as being most constrained currently? And what would you consider to be your strongest underlying areas?

When I consider constraints, I think about supply capacity, but we expect to relieve those supply constraints in wireless by the end of the year. Wireless also shows strong demand fundamentals, and we anticipate significant growth in that area. Next, Wi-Fi has a robust growth trajectory ahead of it. The fiber ramp will also begin in earnest, contributing to our growth. Cable broadband is expected to moderate somewhat, as Steve mentioned. I believe that optical has strong momentum potential once it takes off. We are well-positioned with our offerings in 800-gig PAM4 and 400-gig PAM4 five nanometer technologies. We are entering a positive product cycle for MaxLinear, with new revenue opportunities that should counteract any negative trends from our existing substantial revenues.

Helpful, Kishore. Thanks so much, guys.

Thanks, Ananda.

Next question comes from Suji DeSilva with ROTH Capital. Please go ahead.

Hi, Kishore and Steve. Nice job on the margins and the cash generation here in a tough environment. So, on optical, the ramp of 400, 800-gig at the data centers, what's the timing of that roughly? And are you seeing customer push-out to the macro or the hyperscale and data center guys on schedule as far as you can tell?

Over the last two years, we faced challenges related to the gains incumbency due to supply constraints on 50-gigabit per lambda electrical and 100-gig per lambda optical, as well as 400-gig solutions. However, we believe that those issues are now behind us, and we are entering a new upgrade cycle focused on 100-gig per lambda for both electrical and optical. Assuming everything goes according to plan with the availability of silicon production, we anticipate that our customers will start ramping up product in the second half of next year, leading to an increase in revenue during that time. While there might be some delays during the product ramping process, we are currently working to understand the data center customers' capital expenditures and spending for next year, which isn't as up-to-date as we would prefer. Nevertheless, they are actively designing with our products, though we cannot predict the overall purchase levels from the data centers at this point.

You mentioned your previous involvement in the satellite business, and there is currently a lot of interest in satellite broadband direct to consumer. I'm wondering if this market presents a potential opportunity for MaxLinear, both in terms of content and any prospects for your company moving forward.

So Suji, what can I say? I would just mention that we clearly have the technology for products that could enable satellite broadband into homes. However, the ability for satellite to compete in the mass market for home broadband access is quite lacking. It's primarily suited for rural areas or possibly conflict zones. In terms of generating revenue from home access, I believe satellite is really far behind. It's becoming more efficient and gaining some attention for reasons I don't fully understand, but I don't think it can compare to fiber or even fixed wireless access.

Next question comes from Tore Svanberg with Stifel. Please go ahead.

Yes. Thanks. I just had two quick follow-ups. The first topic Kishore is enterprise. And you talked about the Panther III for storage acceleration. I'm just wondering is that one of those sort of inflection points to give you better traction in enterprise? And are you starting to also get some follow through on your Ethernet IP there as well?

Very good question. The answer to your question is, yes and yes. Okay. So if you have an inflection point in growth in enterprise the storage accelerators really happens towards the end of next year, right? But we're already getting leading demand for Panther products and with one of the largest enterprise application storage guys, and we hope to proliferate other sockets moving forward. On the Ethernet side, absolutely, we're getting good traction now on the enterprise side, but we are not yet ramping into that socket yet.

Very good. And my other follow-up was on the third-party router business. Is that primarily a North American market, or is that more of a global market at this point?

I would say it's a global market rather than just North America. North American standalone routers tend to be quite consumer-focused, while the model can be different elsewhere. Even though it's a standalone router market, there is a connection with operator-class deployments for Wi-Fi distribution in homes.

Got it. But this is still a completely new opportunity for you, right? You didn't have any exposure there before?

Yes. And in fact the revenue growth that we are talking about where I think whether it's Quinn or you pointed out whatever disconnect between the broadband revenue and the Wi-Fi revenue in terms of the numbers in Wi-Fi is exactly due to that. We're ramping very strongly into third-party router Wi-Fis and we're having very good success. In fact we would have had even bigger success had we had sufficient capacity over the last two quarters. And now with the general schizophrenia in the market we are a little bit careful that demand that exists is going to be sticky enough through a potential downturn.

That's great color. Thank you.

Thank you, operator. I want to inform everyone on the call that we will be participating in several upcoming conferences. The first is the Stifel Conference in Chicago on November 10, followed by the ROTH Conference in New York on November 16, the Credit Suisse Conference in Scottsdale on November 29, the Wells Fargo Conference in Las Vegas on November 30, the Susquehanna Virtual Conference on December 14, and the Needham Growth Conference in New York on January 10. Thank you all for joining us today, and we look forward to updating you on our progress in the next quarter. Thank you, and goodbye.

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.