IBEX Technologies Q3 2024 Earnings Call Transcript

Quartr
Provided by Quartr
October 23, 2024

There are 12 speakers on the call.

Operator

Greetings, and welcome to the MaxLinear Third Quarter 20 24 Earnings Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. It is now my pleasure to introduce Leslie Green.

Operator

Thank you. You may begin.

Speaker 1

Thank you, Julian, and good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's Q3 2024 Financial Results. Today's call is being hosted by Doctor. Kishore Sundripu, 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 Q4 of 2024, including revenue, GAAP and non GAAP gross margin, GAAP and non GAAP operating expenses, GAAP and non GAAP interest and other expense, and GAAP and non GAAP diluted share count.

Speaker 1

In addition, we will make forward looking statements relating to trends, opportunities, execution of our business plan and potential growth and uncertainties in various product and geographic markets, including without limitation, statements concerning future financial and operating results opportunities for revenue and market share across our target markets new products, including the timing of production and launches of such products demand for and adoption of certain technologies and our total addressable market. These forward looking statements involve substantial risks and uncertainties, including risks outlined in our Risk Factors section of our recent SEC filings, including our Form 10 Q for the quarter ended September 30, 2024, 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 Q3 2024 earnings release is available in the Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including but not limited to gross margin, operating margin, operating expenses and interest and other expense on both GAAP and non GAAP basis.

Speaker 1

We encourage investors to review detailed reconciliation of our GAAP and non GAAP presentations and 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 changes, including stock based compensation and its related tax effects, as well as potential impairments. Non GAAP financial measures are discussed today are not meant to be considered in isolation or as a substitute for comparable GAAP financial measures. We are providing this information because management believes it is useful to investors as it reflects how management measures our business. Lastly, this call is also being webcast and replay will be available on our website for 2 weeks.

Speaker 1

And now let me turn the call over to Doctor. Kishore Sundripout, CEO of MaxLinear. Kishore?

Speaker 2

Thank you, Leslie, and good afternoon, everyone. Our Q3 results were slightly above the midpoint of our guidance at $81,100,000 in revenue and non GAAP gross margin was 58.7%. We have seen meaningful improvements in our customer order rates for several quarters along with expedites and orders placed within lead times. These are early signs of recovery and combined with new product traction, we are feeling confident that we can achieve sequential improvement in our revenues in the coming quarters. Q3 was also a very active quarter for us as we demonstrated new technology and products at several industry events.

Speaker 2

In July, at the Flash Memory Summit, we showcased our partnership with AMD for Panther 3, our hardware accelerated storage compression and encryption product targeting enterprise storage and compute server applications. At ECOC, along with ONET, we demonstrated industry's by far lowest power 800 gigabit DR8 optical transceiver solution, consuming less than 12 watts for data center applications. And recently, at NetworkX Summit, we announced Max AI, a use case aware native machine language technology framework integrated into our any WAN broadband access and connectivity platform solution for service providers. Additionally, in the quarter, we were delighted to receive Best Emerging Supplier of the Year award from Cisco. Looking at our key markets in infrastructure, the exponential growth in AI workloads continues to drive massive design activity and on high speed optical data center connectivity.

Speaker 2

We are excited that our product shipment volume run rate is now greater than 1,000,000 units per year across several direct customers, including our Q3 ramp at a U. S. Data center player. We are seeing continued progress on initial qualification testing for 800 gigabit transceivers and active electrical cables at several large data center customers. More broadly, across the industry, 800 gigabit PAM4 Ethernet adoption is starting to ramp even as 400 gigabit demand continues to accelerate.

Speaker 2

The superior power and performance of our Keystone high speed optical PAM4 products strongly position us for current opportunities, And we are highly competitive with our differentiated Rushmore family of 200 gigabit per lane, PAM4 DSPs for early market adapters moving to 1.6 Terabit interconnections. Moving to 5 gs wireless infrastructure, we are making significant customer inroads with our millimeter and microwave backhaul modem and RF transceiver products as the only full system merchant multiband radio solution in the world. With increasing mobile usage and new functionality such as AI, our hybrid microwave and millimeter wave backhaul technologies are required to support increasing transport data rates. We believe we are positioned strongly for content growth and revenue expansion as service provider CapEx spend is expected to improve in 2025 and 5 gs access network upgrades pick up pace globally. Also within our infrastructure revenues, our Panther 3 series hardware storage accelerators are providing exciting incremental growth opportunities.

Speaker 2

The need for AI at the edge as well as growing security considerations are resulting in a shift towards enterprise storage with all flash array and hybrid storage enterprise application systems. Panther is also gaining traction in compute subsystems for usage across servers as well as data center storage customers. Our Panther product is strongly positioned for this macro 10, and we have multiple design wins and enterprise OEM customers and various across major geographies. In Ethernet connectivity, MaxLinear has one of the broadest and most competitive portfolios of 2.5 gigabit Ethernet switch and PHY products for the enterprise and small and medium business switch markets, where we offer a strong value proposition for the upgrade from 1 gigabit per second legacy data rates to 2.5 gigabits per second using existing CAT 5 cabling. Our Tier 1 North American enterprise OEM customer is expected to ramp to production in 2025 and contribute to significant Ethernet revenue growth over the coming years.

Speaker 2

In addition, we are seeing widespread interest from next generation broadband gateways and routers. In total, we believe we could reach $100,000,000 run rate over the next 24 months. Moving to broadband and Wi Fi connectivity, we are focused on PON for new broadband TAM growth in addition to our existing cable MSO data offering, including the latest DOCSIS 4.0 solution. We are excited by the design win traction for our PON platform based on our single chip integrated Fiber PON and 10 gigabit processor gateway SoC and tri band Wi Fi 7 single chip solution. We have seen continued momentum with design wins and promising ongoing engagements, including traction in the 2nd Tier 1 North American carrier, which we believe can become a major opportunity for 20252026.

Speaker 2

As mentioned before, at NetworkX, we were pleased to announce Max AI, a use case aware native machine learning technology framework integrated into our any event solutions. Max AI is designed to enhance network performance, security, issue triage and diagnostics as well as improving the user connectivity experience in multi user applications like ARVR, video conferencing and multiplayer gaming. We believe Max AI further strengthens our competitive position in this market. In conclusion, multiple factors give us confidence that we are well positioned to resume growth in Q4 and 2025. Following 3 years of innovative product development, we are gaining traction with new products in high value markets, including optical data center interconnect, enterprise Ethernet and storage accelerators, 5 gs wireless infrastructure, multi gigabit PON broadband access and Wi Fi connectivity.

Speaker 2

These products not only open significant new target addressable market, but are poised to drive a sustained cycle of revenue growth over the next several years, creating enhanced value for our customers and shareholders. With that, let me turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer. Steve?

Speaker 3

Thanks, Kishore. Total revenue for the Q3 was 81,100,000 down 12% from $92,000,000 in the previous quarter. Broadband revenue for the 3rd quarter was $32,000,000 Connectivity revenue was $13,000,000 Infrastructure revenue was $23,000,000 and Industrial Multimarket revenue was $13,000,000 GAAP and non GAAP gross margin for the 3rd quarter were approximately 54.4% 58.7% of revenue. The delta between GAAP and non GAAP gross margin in the 3rd quarter was primarily driven by 3 point $5,000,000 of acquisition related intangible asset amortization. 3rd quarter GAAP operating expenses were $110,800,000 and non GAAP operating expenses were 72,800,000 The delta between the GAAP and non GAAP operating expenses was primarily due to restructuring cost of $26,800,000 related to the workforce reduction initiated in Q2 and stock based compensation and performance based equity accruals of $11,500,000 combined.

Speaker 3

GAAP and non GAAP loss from operations for Q3 2024 was 82% and 31% of net revenue. GAAP and non GAAP interest and other expense during the quarter was $15,800,000 $4,000,000 respectively, which did include some currency fluctuation in the quarter. The delta between the GAAP and non GAAP interest and other expense was primarily impairment of an investment in a privately held company of $11,800,000 In the Q3 cash flow used in operating activities was approximately $31,000,000 We exited Q3 of 2024 with approximately $149,000,000 in cash, cash equivalents and restricted cash. Our days sales outstanding was down meaningfully in the Q3 to approximately 54 days. Our gross inventory was also down versus previous quarter as we continue to make improvements with inventory turns slightly less than 1.

Speaker 3

This concludes the discussion of our Q3 financial results. With that, let's turn to our guidance for Q4 of 2024. We currently expect in the Q4 of 2024 to be between $80,000,000 $100,000,000 in revenue. Looking at Q4 by end market, we expect broadband to be slightly down and infrastructure, connectivity and industrial multi market to be up. We expect 4th quarter GAAP gross margin to be approximately 54% to 57% and non GAAP gross margin to be in the range of 57.5% 60.5% of revenue.

Speaker 3

We expect Q4 2024 GAAP operating expenses to be in the range of $88,000,000 to $94,000,000 We expect Q4 2024 non GAAP operating expenses to be in the range of $58,000,000 to 64,000,000 dollars We expect our Q4 GAAP and non GAAP interest and other expense each to be in the range of approximately $1,000,000 to $2,500,000 We expect our Q4 GAAP and non GAAP diluted share count to be approximately 84,500,000 each. In closing, following a prolonged market correction, we are now seeing a positive turning point in our business. We're excited that our innovation and investment in strategic applications such as optical high speed interconnects, wireless infrastructure, storage, Ethernet, Wi Fi and fiber broadband access gateways are creating transformative opportunities for long term growth. In addition, our strong focus on operating efficiency and physical discipline are opening up near term leverage in our business model as we enter our next stage of growth and expansion. With that, I'd like to open up the call for questions.

Speaker 3

Julian?

Operator

Thank you. We will now be conducting a question and answer session. And our first question comes from Tore Svanberg, Stifel. Please proceed with your question.

Speaker 4

Yes, thank you and congratulations on the turnaround here. Kishore, I was hoping you could elaborate a little bit more on your $1,000,000 optical transceiver comment. Could you give us a sense for the mix between 4 100 gig 800 gig? And I assume that's what you've shipped so far. And basically what I'm trying to get to here of course is, is this sort of a run rate now that we should think about into calendar 'twenty five, meaning that you could potentially do more than 1,000,000 for the whole year next year?

Speaker 2

Thank you, Tore. Yes, our prepared remarks did point to a 1,000,000 unit per year run rate as we exit the year. But coincidentally, if you accumulate all the units that we are now forecasting to ship through the end of 2024, we'll be pretty much in a 1,000,000 units or more slightly. So yes, we are excited about the progress we have made. And these 1,000,000 units run rate is actually being primarily driven by optical transceiver revenues related to both 800 gigabit and 400 gigabit, but 800 gigabit being the larger fraction relative to 400 gigabit transceivers.

Speaker 2

We do expect many more designs to come through finish. We have a huge number of design wins that are in place with OEMs, but they're all gated by sort of delays or prolonged data center calls that are happening. So we are very optimistic that we'll exceed this run rate through 2025. And I just want to point out that as we entered the year, we were hoping for a range of $0 to $30,000,000 of revenue. We are well in excess of that based on the volume I've just indicated.

Speaker 4

Yes. No, that's very helpful. And as a follow-up, I was hoping you could give us an update on the broadband business. It's great to see the other three segments growing sequentially in Q4. Obviously, broadband is still going to be down.

Speaker 4

Just help us understand where we sit on inventory levels. I know there's been some delays with Doxins 4.0. Is that starting to clear out? So, yeah, any visibility and especially sort of a comment on how you expect that broadband business to do in 2025?

Speaker 2

So, Tore, obviously, from where we are, we expect the broadband business to grow in 2025. However, as we sort of straddling the bottom here, the order rates have picked up. And as you know, it's a full platform solution. They tend to come in a chunky manner. And as the market is gearing up, I think of the character in the Flintstones, revolving legs.

Speaker 2

So I think we will start picking up orders, but so I won't read much into Q4 dip. It's just the cadence of the POs and you're seeing still a lagging effect of customer deliveries. I do want to point out that the pickup in the bookings are really primarily related to broadband, it's a very good sign. And so outside of our infrastructure in the optical, these have been the 2 drivers of our engine for orders right now. So I'm very happy about that.

Speaker 2

So getting back to the cable side of the business, cable business right now is still DOCSIS 3.2, 3.1 business. 4.2 is really, really pilot quantities. And even so, I believe and I know that when the Cable Recovery Act happens, it will still be dominated by 3.1 and Ultradox is 3.1 and 4.0 will remain a small fraction of the revenues in 2025 and probably grow steadily from there in 26. So put it another way, since our design incumbency prevails in 3.03.1, as the market wakes up, we start we should start seeing some recovery, steady recovery as we head into the next end of next year.

Speaker 4

Okay? Sounds good. I'll go back in line and I love the Flintstone analogy. Thanks.

Speaker 2

Thank you. It's still the Sony, you know. Sorry.

Operator

No worries. Our next question comes from Ross Seymore, Deutsche Bank.

Speaker 3

Hi, guys. Can you hear me? Yes.

Speaker 5

Okay, great. Also congratulations. I love the Flintstone thing too. Just a near term question then a little bit of a longer term question. Steve, when you talked about the guidance for the Q4, a little bit down in broadband, everything else up, it seems like everything else has to go up by about 20% sequentially.

Speaker 5

Can you just give us an idea of like where that's coming from? Is it just shipping closer to demand? Is it the secular growth in the infrastructure side and kind of the optical transceivers? Just any color on that is my first question, please.

Speaker 3

Yes, I mean look, I think we're seeing improved demand in general, I mean really across the board, right. I mean the bookings have been across the board. Kishore mentioned the strength in broadband in particular, yes, definitely picked up, but that's also been the one that lagged the most, I think. I think we're doing well on the optical front. As you're aware, Ross, we were this year was going to be pretty back end loaded as 800 gig kind of adoption started.

Speaker 3

And so that will be a big contributor. As far as the other end markets, I mean, we do see some modest recovery happening in connectivity. Industrial multi market was down quite a bit. In Q3, there were China continues to be depressed, industrial continues to be depressed. But we'll start to see that improve in Q4 and then I and I think we'll see some modest improvements throughout 2025.

Speaker 3

Got it.

Speaker 5

Thanks for that color, Stephen. And then I guess, you guys talked about the OpEx cutting last quarter. Should we think about the linearity of that? I think you said year over year down 20% to 25%, if I recall right, for next year. Are we still on path for that?

Speaker 5

And kind of how do you get from the $61,000,000 you talked about before to it looks like you'd be slightly less than that at some point next year?

Speaker 3

Yes. No, glad you noticed that. That's been a lot of work throughout Q3 is kind of getting this cost structure down. Yes, we are on track to realize the 20% to 25% reduction next year. Some of the majority of those costs have been realized, but there will still be some residual kind of over the next quarter or 2.

Speaker 3

But we do feel like we're on track to hit that number. Great. Thank you.

Operator

Thank you. Our next question comes from Quinn Bolton, Needham and Company.

Speaker 2

Quinn? Maybe.

Speaker 6

Sorry, guys. Hey, thanks for taking the question. Wanted to start with bookings. You guys have talked about bookings improving now I think for several quarters. Are we now at a point where book to bill is back above 1?

Speaker 6

I mean, it looks like it likely is given that you guided higher for the December quarter, but just wanted to see if you could comment whether book to bill is back above 1?

Speaker 3

Yes. So I think you know we don't break out the bookings number. We feel very good. I mean we saw a really significant uptick in bookings in this past quarter. So that was very encouraging and we're seeing follow through now even and so backlogs building nicely for Q4 and Q1 already and so we're running at higher levels than we were in previous quarters.

Speaker 3

So another encouraging sign. And then I think the last one that I would mention is probably sell through. Sell through has been very good. So feels like that in demand continues. So all of those are encouraging signs.

Speaker 2

So we are kind of feeling optimistic that the gap between the sell in and the sell through, so to speak, closes within the next couple of quarters and both will be at equal dynamic, so to speak, on a rate basis.

Speaker 6

Got it. Any comment on how much higher sell out is right now than sell in? That's not my second question.

Speaker 7

I like

Speaker 6

to ask

Speaker 2

it. That's a good try. We are still in the Flintstone era at QN, so just want to be clear.

Speaker 6

The second question, the optical business obviously sounds like it's on very, very good pace. You talked about exceeding $30,000,000 If you guys are going to do close to $1,000,000 optical DSPs this year, My guess is ASP in the DSP space is definitely over $30 And so I wouldn't be surprised and I won't ask you to comment, but if optical DSP might be closer to $40 or $50 and if that's the case, total infrastructure revenue looks like it's going to be on pace to be about $115,000,000 to maybe $120,000,000 And so if I back out optical, everything else is probably only $70,000,000 or $80,000,000 where it was probably $177,000,000 last year. And so I understand optical is good, but you've talked about Panther, you've talked about the microwave backhaul and everything you say sounds very encouraging, but like the revenue is still very, very depressed. And so can you give us outside of optical, when do you think the rest of the business really starts to get back because it feels like it's pretty depressed. I assume a lot of its inventory depletion rather than end market demand destruction, but wondering if you could comment on the infrastructure ex optical?

Speaker 3

Yes, no problem, Quinn. Yes, absolutely. I mean, we had mentioned this, we talked through it last quarter as well. So as expected, wireless infrastructure is definitely a drag. Telecom spending is down.

Speaker 3

Was it 12 plus months ago now? Wireless infrastructure was really humming and that's really dialed back consistent with all the telecom CapEx and the information that's out there. So I think those revenues really follow that. There is some analog product as you're aware that sells into the infrastructure market that's soft, some of that's enterprise related. As far as the real growth drivers, I mean, we talked sort of kind of talked through the optical side, but Panther also is another encouraging one as far as we are seeing good traction.

Speaker 3

We do really have positive developments on the customer front with that and we think we're really well positioned. So outlook is very good as we get through inventory with some of the telecom spend. We'll start to see that recover. I mean next year, I think we'll see 30% plus increases in our infrastructure business. So I think that's really exciting.

Speaker 6

Excellent. Thank you.

Operator

Thank you. Our next question comes from Christopher Rolland, Susquehanna International Group.

Speaker 8

Hey, guys. Thanks for the question. And congrats on what looks like the bottom here. And as we have more confidence in this bottom, do you guys have a better view on kind of what more normalized revenue would look like either quarterly or annually for broadband, I guess, number 1 and then connectivity, number 2. Just in a completely normalized environment, where you think those revenues go to now?

Speaker 3

Yes. I think we are getting through the inventory challenges that we've been through over the last 2 years, frankly. So that's encouraging. You kind of saw that last quarter. You'll see some follow through over the next couple of quarters, which is good.

Speaker 3

I think of it a little bit more, Chris, I don't

Operator

know that

Speaker 3

we're completely out of the woods yet, but I do feel like we're kind of getting back to that other level. And so I mean, I do expect to see kind of broadband connectivity growing double digits next year. So I think we're on the right track there. Is there more to be made up? Yes.

Speaker 3

But I think all the signs are there, the bookings are there. The new wins, I mean, I think this is really important, right? The PON business that we're winning is really encouraging. And for that matter, even the cable improvements that we're seeing is also good. You continue to see upgrades.

Speaker 3

I think as we look into next year, you're going to start to see some of the bead money rollout. And so there's a handful of drivers that will see a recovery in the market beyond just inventory situation. There's new products, there's new wins, there's share gains, there's pawn transition, there's Wi Fi 7 transition as well, which is something else. There's been a bit of a low in the market as that adoption takes place.

Speaker 8

Thank you for that, Steve. And then my second question is on optical. Kishore, you talked about the huge number of design wins. I was wondering if you could kind of bucket these into customers for us, particularly those that you expect to ship in big volumes. So like what percent do you think are going to be like general transceiver providers versus, let's say, hyperscalers versus systems vendors?

Speaker 8

And can you speak to qualifications, particularly at the systems guys and then at hyperscalers?

Speaker 2

So I would say that I would step back and say that we have many designs going on with all the top module makers in the world now. I can safely claim that. I would probably claim that later, but right now safely claim that. And these guys are targeting all the major data centers. All the tear in shipments, optical transceiver has really been InfiniBand driven NVIDIA products in the last one and a half years.

Speaker 2

And I just want to point out as far as the data center guys go on the Ethernet side of the thing, actually the adoption has been very slow. And that is just beginning to move and in fact, if anything 400 gigabit are accelerating. So some of these module vendors are fully qualified in system vendors, if it is systems level solutions. And some of these module vendors are directly in the interop process with many data centers. And I just and I want to point out is that, that China is going to hit a massive AI boom in the next deployment boom in the next starting in the next in 'twenty five.

Speaker 2

So there are many, many data centers if you combine both the U. S. And China where and the data is raised from the big guys like to what we call Tier 2, but they're gigantic as well. I think it's in Tier 2 data centers. We are through the calls.

Speaker 2

At Tier 1s, we're in the process of the calls, but there is build out going on in preparation for that. There's a lot of optimism in the industry about MaxLinus products. Maybe it's a part of a rite of passage that they want to put through. It's like hazing in a fraternity. So you can see all my analogies are pretty interesting right now.

Speaker 2

But I feel good. I feel really good that we can deliver. We are delivering and feel pretty excited about it. So I will leave it there and let the results speak for themselves as we move forward because that's what it's been for us and that's how we want to be measured as well.

Speaker 8

Thank you, Kishore.

Speaker 3

Thanks, Chris.

Operator

Thank you. Our next question comes from David Williams, Benchmark Company.

Speaker 9

Hey, good afternoon, gentlemen. Thanks for taking the question. And let me also give my congrats on the turn here.

Speaker 3

Thanks, David.

Speaker 9

I guess, maybe the first question is just around and you talked a little bit about this earlier, Kitchor, but Swan Creek and just that transition of 2.5 gs, it sounds like you've got some really nice traction there. Can you talk maybe about what your expectation is over maybe 25 and what that contribution could look like? And how is that I guess is the adoption coming in at expectations? Or do you think it's slower or maybe even faster than

Speaker 2

you would have anticipated? David, this is one case I would say the adoption has been excellent. It's moving faster than we can support. And so having said that, adoption is 2 parts to it. 1 is the rate at which they can sell at the end market.

Speaker 2

So there are 2 parts to it. 1 is enterprise type businesses. Other one is kind of consumer ish type of businesses. So on the we were very surprised with the amount of traction is getting on the sort of the consumer ish retail type markets, whereas the small business and medium business and major enterprise business are going to pace as expected with no hiccup. So we're very, very pleased with it.

Speaker 2

In fact, if anything, it's emboldened in our view about our future roadmap on Ethernet switch product lines and the various configurations of 2.5 gigabit and the number of ports associated with this. And I did talk about Max AI from MaxLinear. And Max AI is not just a machine learning AI framework for various use case scenarios and performance optimizations just for the broadband platforms. It's a general concept and capability that we are building on that will proliferate all our product lines, including our 5 switch products, our Panther Accelerate products and so on. So we're really trying to drive the company now to be very, very AI being a necessary tool in terms of showing our competitive superiority in the product.

Speaker 2

So looking forward to the next year is 2025, and I can't give you about 2025, but I can only tell you about how big the Switch Swan Creek product can be. I look at the Switch Swan Creek product to be anywhere between a $50,000,000 to $100,000,000 potential on an annualized run rate basis over a 3 year window.

Speaker 9

Okay. Perfect. Thanks so much. And maybe talking about the Max AI, can you maybe how do you think about that in terms of value and driving? Is that something you can monetize or is it more of a value add?

Speaker 9

How do you think maybe just how what's that go to market look like with Max AI?

Speaker 2

So there are 2 parts to it. 1 is right, there are parts of it that we imagine we'll be offering as default because it's stable stakes and competitive differentiation. The other parts of it that will be very customized to develop further various customers. And these days, right, as company, we ship to very large customers, customer bases have dramatically consolidated. So there'll be some customization.

Speaker 2

So I think there's what you call pay to play model and there is if we don't play, we won't win, so to speak, right. So those are the 2 buckets. So I think it will be a hybrid model. But the latter model of pay to play will take some time because the industry is in a very infant phase in terms of utilizing AI for delivering real performance, for improving efficiency on the networking, communication side and use case scenarios. And I think that will play out as time develops.

Speaker 9

Great. Thanks so much for the time and the question, gentlemen.

Speaker 2

Thank you, David.

Operator

Thank you. Our next question comes from Suji Desilva, ROTH Capital.

Speaker 10

Hi, Kishore. Hi, Steve. Congrats on the progress here. Kishore, I hadn't heard other optical guys mentioning the China hyperscaler opportunity. Maybe it's just they say there's a larger bucket, but are you guys differentiated in your position in China relative to others who may be competitors who may be more focused on the U.

Speaker 10

S. Opportunity or is it similar across the landscape?

Speaker 2

I would say the differentiation is universal. It's not it's neither Chinese nor American, right? Low power, low power, low power. And if you really go back to our history, we are all we were made to deliver low power to all the products and communications that we ever offered. And I think that's what is beginning to come through.

Speaker 2

And we'll continue to do so that with not just a Keystone product, of course, there will be no to the lowest power there. But if you look forward to our Rushmore product and the offering of BOM around Rushmore, it will by far be the lowest part anybody will bring out in the next 12 months for sure.

Speaker 10

Okay. Sure, helpful. And then maybe perhaps for Steve, on the Wi Fi, the connectivity revenue versus the broadband revenue, Steve, should I think of those as more couple than not or are there specific drivers for each one as you go through the next few quarters?

Speaker 3

I think there's definitely some overlap, right? So Wi Fi and Ethernet, there's a lot of attach that has happened historically as you're well aware. But we keep them separate because we continue to see more traction kind of winning Wi Fi outside of a standard gateway business as well as kind of winning more Ethernet business. And that was really you've heard us talk a lot about some of the traction we're getting with our Ethernet product in the industrial markets, in the enterprise markets. That's one of the places that we've really leveraged that 2 point 5 gig solution and penetrating with our sales force kind of getting more opportunities out there.

Speaker 3

And so going forward, you're going to continue to see more growth out of that connectivity enabled by these new markets.

Speaker 10

Okay. Thanks, Steve. Thanks, guys.

Speaker 3

Sure. Thanks, Suji.

Operator

Thank you. Our next question comes from Ananda Baruah, Loop Capital Markets LLC.

Speaker 7

Hey, guys. Yes, thanks for taking the question. Yes, a couple if I could. Really the first 2 are probably clarification. Kishore, in the prepared remarks, actually I think it may be beginning of Q and A, you talked about run rate, this is DSP run rate exiting optical DSP run rate exiting this year 24%.

Speaker 7

And did I hear you accurately that you were saying right now the run rate is 1,000,000 but exiting 24,000,000 you may have shipped 1,000,000 which would put you 4,000,000 revenue heading into 25, just looking for a clarification there and then I have a couple of other ones.

Speaker 2

Thanks. So Ananda, just for clarity, the exiting run rate is 1,000,000 unit per year. So it's not a quarterly run rate, right. So the question that I believe Tore asked is that and which I responded that we obviously expect to do much better than that and will be in excess of the 1,000,000 unit per year run rate. Now Ford would be fantastic, but let's stick to being greater than 1,000,000 unit per year for now.

Speaker 7

Thank you. Thank you for that. And then another clarification around Suji's question. Are you also working with and actually just sort of clarification on your remarks also, Are you when you say you're working with all the leading module makers, does that include the Chinese module makers?

Speaker 2

Everyone.

Speaker 7

Everyone. Got it. Okay, cool. That's it for me. I appreciate it.

Speaker 7

Thanks. Thanks.

Operator

Thank you. Next question comes from Karl Ackerman, BNP Paribas.

Speaker 11

Yes, thank you. I have one clarification question and a follow-up. Just another clarification question. Steve, I think you're mentioning China restrictions being a headwind to your September quarter and December quarter guide. Were those restrictions more or less than your prior view?

Speaker 11

Or I was just hoping you could clarify the commentary for December?

Speaker 3

Yes. Well, we said that it would probably $5,000,000 to $10,000,000 in the back half of the year would be the impact And we're definitely feeling that. You can kind of see that in our industrial multi market numbers. And so, yes, I mean, I think the good thing here is that, that's behind us. We don't see problems going ahead.

Speaker 3

And so excited about looking forward into next year.

Speaker 11

Got it. Okay. Thanks for that. And then I think within broadband, you indicated PON remains strong longer term opportunity, particularly with your Tri Band single chip solution at a 2nd Tier 1 U. S.

Speaker 11

Carrier. I know you're talking about how broadband is still down for December, but I guess as you look into 2025, are you seeing orders for PON being pulled in earlier than you previously envisioned at the second carrier and or is a recovery upon more of a back half 'twenty five and hit a 2026 view? Thank you.

Speaker 2

So Steve, I'll just take it for a second. The general trend, there's a lot of activity on the telco players to start rolling out fiber. So they have taken their sort of dusted up their plans and whether they're doing fixed wireless access or not, they realize that they really need a PON fiber network. And anything they're considering right now is how do we lay out what do you call start laying more fiber, right? You've seen that in the AT and T commitment and that's like their big thing.

Speaker 2

And you see that Verizon, you're seeing that their communication related to acquisition discussions, right, that have been in the newspapers. So there's a general trend for everybody to start visiting their fiber rollout plans very seriously now. As the real backbone to the bounty they have been getting on the fixed wireless access. Okay. So we are seeing momentum there.

Speaker 2

They're discussing RFPs, RFQs and stuff. So while are ahead, some are later, but in terms of the revenue momentum on solutions for gateways and so on and so forth, I really look at it happening in the latter half of twenty twenty five, slowly coming more and more revenues coming into the run rate basis and the follow on continuing through 20262027. So there's not going to be any jump starts like suddenly they turn on the switch because you got to keep in mind that our revenue in fiber to start with is a very small share And last year was about $50,000,000 to $100,000,000 range. And now we hope to and the telecom spend has been down, but that has not shown up in the fiber numbers, because it's been a growth venue for us. But the momentum should start moving forward with brand new fiber designs picking up some velocity.

Speaker 11

Understood. Thank you.

Speaker 3

Thanks, Karl.

Operator

Our next question comes from Richard Shannon, Craig Hallum.

Speaker 11

Hey, good guys. Thanks for taking my question. Maybe to hit on the product segment that hasn't been asked about here in wireless infrastructure. I think you gave Kysore some pretty positive comments about the go forward from here. Maybe you can just give us a sense of visibility here in terms of bookings and when we might start to see some sort of pickup and get back to prior highs?

Speaker 2

It's a very, very good question, Richard. And look, everybody is like wireless infrastructure, blah, blah, blah, it's all looking boring and stuff. But I just look at it as a last man's tiny game, have the right technology. And in a couple of years, it will turn around and then it's going to be beautiful revenue that's really, really long term revenue. And we have the right investment in technology, right?

Speaker 2

Now we're going to start seeing some recovery in telecom spend and the first focus would be in Southeast Asia, Latin America, India, all the expansion in terms of starting to upgrade their networks to 5 gs and their wireless transport is the single biggest mechanism. And they're really, really hungry for expanded bandwidth data rate for transport because fiber is not an option, right? So we are very, very well positioned there. And then you come back to the fact how is the recovery looking like, oh my gosh, I mean, last quarter, I think Quinn pointed out, like he said, like outside of optical things was very down. Yes, they are very down.

Speaker 2

In fact, they're horribly down on the wireless side last quarter. And now we have all indications that there's going to be a steady improvement in bookings. And we have bookings that actually reflect those. So Varden is going to recover fairly throughout the entire year next year and beyond 25, it's going to really pick up even more strongly. So things are beginning to look positively up on wireless infrastructure and seem to be pretty steadily recovery potential.

Speaker 2

Okay.

Speaker 11

Okay. Great. Appreciate that summary there. Maybe touching on another topic that hasn't been hit on much today here in storage. I think you made one brief comment about some progress there at Clash Memory Summit.

Speaker 11

I think you've been quoted publicly in an investor conference talking about a revenue bogey of that category of $50,000,000 to $75,000,000 I think that was applied to the account year 'twenty 6. Wondering if you're progressing well towards that generic goal or above or below that just kind of general thoughts there? Thank you.

Speaker 2

So I still hold the bogey over the next 3 year window, but things are a little bit slow in terms of that timeline right now, because as expected, as I told you, much of the design traction was enterprise storage applications. And those guys have delayed their rollout plans due to a lot of inventory on their side as well. And so that's really the bogey number may shift out of it, but there's no reason to change our view on how big the Panther storage business can be. And so yes, that's really right what you've said. But what we're trying to do right now is proliferate Panther beyond just storage applications, deep to optimize.

Speaker 2

There are like compute server subsystems and expand the scope beyond that. And so expand the scope beyond that. And so it's getting a lot of traction right now in what we call customer evaluations and proofs of concepts within the customer itself. So to help that process, we also rolled out a software defined storage that mimics Panther, so that customers can prepare their solutions well ahead of using the hardware to be ready. Okay?

Speaker 11

Okay, great. Thanks for the comments, Kishore. That's all for me.

Speaker 3

Thanks, Richard.

Operator

And our final question comes from Tore Svanberg, Stifel.

Speaker 4

Yes, thanks. I just had a follow-up. Kishore, I know you've been sampling the Rushmore 200 gig plane since OFC this year. I was just wondering as far as timing of revenue there and where would that revenue come initially between regular optical margins versus LRO or AEC?

Speaker 2

So that's a very good question, Tore. I think now we can all I think this ECOG, the flavor was just give me the same old DSPs, but much, much, much lower power, right. And LROs are being considered. We have been the champions of LROs. But this Ecoag was about just give me those darn DSPs with like a fraction of the power, right.

Speaker 2

That's because the motor. That tells you how complex and difficult these PAM4 modulation system is as you start increasing the bandwidth. And then the problem gets even more challenging in the copper side, active electrical cable, you will. So this is really a big boy game in terms of technology. And as it heads towards us, we feel very good.

Speaker 2

So with regarding the 200 gig, really the only one who's really looking at 200 gig is really the AI type systems and it's really driven by NVIDIA right now. All the other data center folks are sort of the Ethernet types are that is got some lot more time for this to happen. Having said that, you're not real in this market unless you have everything the world wants. So we're gearing up to that and we hope to showcase our Rushmore product in a full blown way with multiple vendors in the OFC that's just going to come about in a couple of months. Okay, it's 3 months away.

Speaker 2

But yes, that's the goal here. And really there's no real customer for 200 gig in any way other than NVIDIA trying to get ahead. And we have told this before NVIDIA is developing its own DSP solutions. That will be their first preference, number 1. And then hopefully, they expand the scope to other multiple vendors to secure their supplies in the future.

Speaker 4

Very helpful. Thank you.

Speaker 2

Yes. Thank you, everyone. With that being the last question, I want to thank you all. This quarter, we'll be presenting a number of financial conferences in person and in virtual events. And we'll post the details of the calendar on our Investor Relations page.

Speaker 2

So and we look forward to speaking with you again soon. Thank you very much.

Operator

Thank you. This does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

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Earnings Conference Call
IBEX Technologies Q3 2024
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