ZW Data Action Technologies Q4 2024 Earnings Call Transcript

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January 29, 2025
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Operator

Greetings, and welcome to the MaxLinear Fourth Quarter twenty twenty four 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 your host, Leslie Green, Investor Relations.

Operator

Thank you, Leslie. You may begin.

Leslie Green
Leslie Green
Investor Relations at MaxLinear

Thank you, Alicia, and good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's fourth quarter twenty twenty four financial results. Today's call is being hosted by Doctor. Kishore Sundripoot, CEO and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take your questions. Our comments today include forward looking statements within the meaning of applicable securities laws, including statements relating to our guidance for the 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.

Leslie Green
Leslie Green
Investor Relations at MaxLinear

In addition, we will make forward looking statements relating to trends, opportunities, execution of our business plan and potential growth and uncertainties in various products and geographic markets, including without limitation, statements concerning future financial and operating results opportunities for revenue and market share across target markets new products, including the timing of production and launches of such products demand for the adoption of certain technologies and our total addressable market. These forward looking statements involve risks and uncertainties, including risks outlined in our Risk Factors section of our recent SEC filings, including our Form 10 K for the year ended Dec. 31, 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 earnings release is available in the Investor Relations section of our website at maxlinear.com.

Leslie Green
Leslie Green
Investor Relations at MaxLinear

In addition, we report certain historical financial metrics, including but not limited to gross margin, operating margin, operating expenses and interest and other expense of both GAAP and non GAAP basis. We encourage investors to review the detailed reconciliation of our GAAP and non GAAP presentations and the press release available on our website. We do not provide 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 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.

Leslie Green
Leslie Green
Investor Relations at MaxLinear

Lastly, this call is being webcast and the replay will be available on our website for two weeks. And now let me turn the call over to Doctor. Kishore Sundripoot, CEO of MaxLinear. Kishore?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Thank you, Leslie, and good afternoon, everyone. Our resales exceeded the midpoint of our guidance at $9,220,000,0.0 revenue, non GAAP gross margin of 59.1%, along with a significant reduction in operating expenses. We continue to see meaningful improvement in our customer order rates and backlog. The solid signs of recovery combined with new product traction in strategic growth areas such as high speed interconnect, PON, Wi Fi and Ethernet provide us confidence that we can achieve continued growth and improvement in our financial results throughout this year. Looking at our key markets, in infrastructure, the expansion of cloud computing is driving significant growth and design activity and on high speed optical data center connectivity.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

We made strong progress in with design win traction and product calls for our 5 nanometer Keystone PAM4 product. We exceeded our revenue targets in and are positioned for exciting growth in As of this month, we have shipped approximately 1000000 plus units total of Keystone product across multiple customers into high volume opportunities. Our initial design wins in transceivers, active optical cables and active electrical cables are ramping as expected. We anticipate additional qualification and rollout for 800 gigabit and 1.6 terabit data center applications throughout 2025 and into 2026. The superior power and performance advantages of Keystone continue to be the mainstay and focus for our differentiation even in our next generation Rushmore family of 200 gigabit per lane PAM4 TIA and DSPs for 1.6 terabit interconnections.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

In wireless infrastructure, our wireless 5 gs access O RAN single chip radio unit and our backhaul transceivers and modems are essential for supporting increasing mobile usage and data rates, as well as new functionality such as edge AI. We believe we are positioned strongly for content growth and share gains this year as service provider CapEx spend improves and as our continued design wins at Tier 1 customers beginning to ramp particularly in the Also within our infrastructure revenues, our Panther III series hardware storage accelerators are providing exciting incremental growth opportunities. At the twenty twenty four Supercomputing Conference in Nov. 0, we announced a new software defined storage solution in partnership with Quanta to address the needs of AI, high speed computing and other data intensive applications. This joint solution enables rapid access to massive datasets, while enhancing both performance and scalability.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

As we look ahead, our Panther product is strongly positioned within the data center, enterprise storage applications and at the edge of the network with multiple design wins with major customers and value added resellers across key geographies. In Ethernet connectivity, MaxLin has 1 of the broadest and most competitive portfolios of 200 gigabit Ethernet switch N5 products for the enterprise and small and medium business switch markets. Swan Creek, our single chip integrated 8.5 N switch is gaining traction across multiple enterprise customers looking to upgrade the networks to 200 gigabit Ethernet rates. 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. In addition, we are seeing widespread interest from next generation broadband gateways and routers.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Shifting to broadband and Wi Fi connectivity, our considerable focus and on PON to expand our broadband target addressable market in addition to a strong cable data offering of DOCSIS 3.1, Ultra DOCSIS and DOCSIS 4 solutions is bearing fruit. We have exciting design win traction for our single chip integrated fiber PON and 10 gigabit processor gateway SoC plus tri band Wi Fi 7 single chip platform solution. We have a promising engagement at another Tier 1 North America carrier, which we believe can become a major opportunity for us in and In conclusion, our strong product roadmap execution has begun to deliver meaningful traction and target addressable market expansion across several high value categories, including high speed interconnect for data center, enterprise Ethernet and storage accelerators, wireless infrastructure, multi gigabit PON broadband access and Wi Fi connectivity solutions. As we begin 2025, we're not only energized with the solid growth prospects in 2025, but we also feel confident achieving sustained revenue growth in the coming years. With that, let me now turn the call over to Steve Litchfield, our Chief Financial Officer and Chief Corporate Strategy Officer.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Thank you, Kishore. Total revenue for the was $9,220,000,0.0 up 14% from $8,110,000,0.0 in the previous quarter. Infrastructure revenue was $27,000,000 Broadband revenue for the was $29,000,000 Connectivity revenue was $20,000,000 and our industrial multi market revenue was $16,000,000 GAAP and non GAAP gross margins for the were approximately 55.659.1% of revenue. The delta between GAAP and non GAAP gross margin in the was primarily driven by $3,000,000 of acquisition related intangible asset amortization. GAAP operating expenses were $9,240,000,0.0 and non GAAP operating expenses were $6,130,000,0.0 The delta between GAAP and non GAAP operating expenses was primarily due to stock based compensation and performance based equity accruals of $2,040,000,0.0 combined, acquisition related costs of $730,000,0.0 and restructuring cost of $310,000,0.0 GAAP and non GAAP loss from operations for was 457% of net revenue.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

GAAP and non GAAP interest and other income during the quarter was $351,000 and $677,000 respectively. In cash flow used in operating activities was approximately $28,000,000 We exited with approximately $120,000,000 in cash, cash equivalents and restricted cash. Our day sales outstanding was up in the to approximately eighty five days. Our gross inventory was down versus previous quarter as we continue to make improvements with inventory turned slightly less than 1. This concludes the discussion of our financial results.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

With that, let's turn to our guidance for We currently expect revenue in the to be between $85,000,000 and $105,000,000 Looking at by end market, we expect broadband and infrastructure to be up, connectivity is expected to be approximately flat and industrial multi market is expected to be down. We expect GAAP gross margin to be approximately 54.5% to 57.5 and non GAAP gross margin to be in the range of 57.560.5% of revenue. We expect GAAP operating expenses to be in the range of $93,000,000 to $99,000,000 We expect non GAAP operating expenses to be in the range of $56,000,000 to $62,000,000 We expect our GAAP and non GAAP interest and other expense needs to be in the range of approximately $1,000,000 to $2,000,000 We expect $270,000,0.0 tax expense on a GAAP basis and non GAAP tax of $0 We expect our GAAP and non GAAP diluted share count to be approximately $8,550,000,0.0 each. In closing, another quarter of improvement in customer orders and continued new product traction give us confidence that we are entering our next stage of growth in 2025. 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 gateways are beginning to deliver tangible opportunities for near term and long term growth.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

In addition, our strong focus on operational efficiency in 2024 is positioning us for positive leverage in our business model and a return to profitability this year. With that, we'd like to open up the call for questions.

Operator

Thank you. We will now be conducting a question and answer session. Our first question comes from the line of Tore Svanberg with Stifel. Please proceed with your question.

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

Yes. Thank you. So my first question is, obviously, you're still relatively an entrant into the optical interconnect market, but you are the first one to report among your peer group. So I was just hoping both Kishore or Steve, could you just talk a little bit about the events of this week, especially from Monday? How do you view this whole topic as far as potentially impacting the optical interconnect market?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Well, Tory, we're pretty excited that we now have recorded a strong 2024. We exceeded our own internal targets and revenues. We have designed wins and shipments in various quantities and stages with all the top module makers in the world with their end customers spanning across both China and The U. S. So that's the exciting part.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

With regard to what happened this week, I'm afraid that that's a question that really only democratizes and really expands the real possibility for new entrants like us to really expand our share as the market grows. At the end of the day, we are a high speed interconnect, you know, 5 transport company. So no matter what happens in the compute, the links are going to be more and they're going to be faster and speedier. And we have the right technology for low power and high efficiency performance targets that these markets will require. So from my point of view, processing content is 1 thing, but the links are given and they're going to be really needed.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So and I think it really democratizes for people like us to really, really participate in a majorly what I call expanded and singularized market if that were to take hold.

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

Yes. That's great perspective. And as my follow-up, Steve, the DSOs have been all over the place this year. They came down very nicely in but now they came back up again in obviously still not as bad as right? But help us understand what's going on there and how should we think about DSOs here in 2025?

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Yes, I think they were probably understated a little bit in It was really product mix and just some of the sales that we had there. So they did come up a little bit, but I would argue that in this $80,000,000 to $85,000,000 range is probably where you'd likely see it the rest of the year.

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

Got it. But that explains why I think your cash balance came down, was it $30,000,000 was that the

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Yes, cash balance did come down, but that was already reflected. We talked about that last quarter. A lot of that was I mean there was some restructuring costs, but there was definitely kind of movement around the balance sheet, but certainly, that was as expected in

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

Got it. Thank you.

Operator

Thank you. Our next question comes from the line of Ross Seymore with Deutsche Bank. Please proceed.

Ross Seymore
Ross Seymore
Managing Director at Deutsche Bank

Hi, guys. I wanted to talk about the bookings in the backlog. It's I think the third quarter in a row you've seen those improve. So it's nice to see that corner being turned. Could you give a little bit of color on where you see that happening either by end market or geography?

Ross Seymore
Ross Seymore
Managing Director at Deutsche Bank

And perhaps even is it company specific or is it just kind of the cycle is finally turning? Any sort of color like that on those metrics would be great.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Sure, Ross. Yes, thanks for the question. I mean, yes, we're definitely continuing to see really nice improvement on the booking side, starting backlog, I mean, going into this quarter versus the previous two or three quarters is much higher. So we're feeling much more confident. Just visibility has certainly improved.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Customers are starting to understand lead times and recognize that they can't get product when they ask for tomorrow. So we're seeing some nice improvements as far as visibility and forecasting. I mean your question is it max linear versus everyone. It's I mean, look, we've kind of in the broadband market certainly been a lot worse over the last two years. And so I would say that that is starting to normalize a bit.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

I also Kishore in a lot of his statements talked about the new products. And I think as we look at 2025, I mean, certainly we've got a recovery. I think that will be a nice tailwind. But I think what we're most excited about is these new products that are coming and these new programs that we've won. So there's certainly market share gains that we're seeing and new products that are starting to ramp.

Ross Seymore
Ross Seymore
Managing Director at Deutsche Bank

Great. Thanks for that. And I guess, Steve, probably this one's for you as well. Just on the restructuring efforts, not the impact per se, but just wanted to make sure that there's no big change. And I think you guys talked about what $2.20,000,000 dollars plus or minus for the full year on the OpEx side.

Ross Seymore
Ross Seymore
Managing Director at Deutsche Bank

Just wanted to see the that that's still the right trajectory and if there's any sort of lumpiness to the path on that between and

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Yes. I mean, so the restructuring is certainly underway and the biggest portion of that was in and we had talked about kind of some residual that continues after that. But we're definitely seeing nice improvements in OpEx spending. I don't think the expectations have changed. I think it is I do expect it to be somewhere between two twenty and two twenty five for the year.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

And I would expect as kind of some of these final effects take place that you'll kind of see it move down throughout the year modestly. It's not a huge change there, but it will come down a little bit throughout the year.

Ross Seymore
Ross Seymore
Managing Director at Deutsche Bank

Thank you.

Operator

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

Tim Savageaux
MD & Senior Research Analyst at Northland Capital Markets

Hi, good afternoon. Question on the optical front, I guess, I think you've been talking throughout the year and you've increased this range to more than $30,000,000 in revenue for the year. I wonder if you could tell us kind of where that ended up coming in? And given your volume comments, seems like you must have had a pretty good Jan. 0, I guess.

Tim Savageaux
MD & Senior Research Analyst at Northland Capital Markets

So can we infer kind of a big step up there? I know you've guided infrastructure higher just looking at the million unit volume versus whatever your revenue may have been in 2024? And I'll follow-up from there.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Sure. Hey, Tim. Yes, I mean, I think I'd probably echo what was said in the previous statements. I mean, I think we're really pleased. We came in higher than what we had expected.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

We didn't we're not breaking out the exact number, but we started the year between ten and thirty. And I think we probably landed shy of the 40 number that we were stretching to, but certainly well above the high end of the range that we said originally. So we're pleased with the progress. I think as we've talked about, I mean a lot of our wins and future production revenues are really driven by 800 gig conversion and those are just now happening this year. So it's an exciting time and looking forward to talking more about that in the coming quarters.

Tim Savageaux
MD & Senior Research Analyst at Northland Capital Markets

Or perhaps on the next question, I wanted to see if you could if you would like to set a range for this year similar to what you not a similar range, numbers of course, but conceptually similar about what you think that optical business might be able to generate as you sit here in

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Yes, sure, Tim. Look, I don't think much has changed on this front. I think, I mean, we've talked about kind of the $60,000,000 to $70,000,000 number. I think that's a very reasonable number that you can target right here. Hopefully, these new data centers rollout as expected.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Some of that's out of our control, but certainly we're doing our part getting the wins and getting the qualifications completed. And so as soon as then we see our customer, I guess in this case our customers' customers roll out these programs.

Tim Savageaux
MD & Senior Research Analyst at Northland Capital Markets

Okay. Last 1 for me. So, a little while ago, we saw an agreement well, actually Amazon has been making a couple of agreements and announcements of late, but 1 with Jabil, who I think is a module partner of yours dating back to OFC where Amazon took a bunch of warrants and Jabil doesn't exactly indicate a 800 gig transceiver module relationship, but it seems like it could. I wonder if you have any comment on the potential impact of that agreement on MaxLinear?

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Well, look, I'm not going to comment on those agreements. I will confirm as I think many of you have seen, we did demonstrate and we've been working with those guys for some time. But we definitely I mean, we demonstrated this at OFC last year and they've been a good partner.

Tim Savageaux
MD & Senior Research Analyst at Northland Capital Markets

Thanks very much.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Good. Thanks, Tim.

Operator

Thank you. Our next question comes from the line of Quinn Bolton with Needham and Company. Please proceed.

Quinn Bolton
MD - Equity Research at Needham & Company

Hey guys. So Steve, I just wanted to follow sorry, ask a question to you sort of a follow-up on Tori's question. Cash down to about $120,000,000 guidance probably has yet a small few million, maybe mid single digit million net income, non GAAP net income loss in the March. Are there any major changes in working capital or any residual restructuring cash charges to hit you in the March? I just any sense where you think cash might what cash might do through the quarter?

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Yes. So good question, Quinn. I think as we've talked about cash, nothing's really changed on that front. We do expect inventory to continue to come down. So that's good.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Working capital, I'm sure from as revenues start to recover here and we burn down those inventories, we'll certainly have to replenish that. Out quarter revenues are certainly going to be above where they are today. So we'll have to start building on that and we're doing our best to manage it. Of course, we've talked about cash flow breakeven somewhere kind of mid year and it's probably likely is where I'd probably put it today, but we feel very comfortable with that, yes.

Quinn Bolton
MD - Equity Research at Needham & Company

Okay. Thanks for that, Steve. And then I guess maybe for KeySure, 2 questions. You talked about some design wins, a Tier 1 design win, I think in the wireless infrastructure market beginning to ramp in the Wasn't sure if that was for the Sierra product or if that was for the backhaul product. If you could provide any more detail there, that would be great.

Quinn Bolton
MD - Equity Research at Needham & Company

And then sort of similarly, I think you mentioned now a promising engagement with an additional North American Tier 1 on the pawn side. I think in the past you've already talked about working with 2 of the largest in North America. So wondering if that is a third Tier 1 in North America or maybe I misheard something. Thank you.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Well, first to answer your question of the ramp on the wireless infrastructure in the second half, there are 2 parts to it. There are they're both in the our wireless backhaul transport business and also on the access side. And so it's for both the product lines, the 1 for Sierra, all end product and as well as our backhaul products. And primarily this growth is coming through constant expansion of these customers in the backhaul side. And obviously, Sierra product is unique and is a leader.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And it's the beginning of what would be a whole industry trend for merchant silicon to support both macro 5 gs and massive mine hole revenues in the future. So that design is a little bit of a timing uncertainty hopefully at Mobile World Congress and you'll be able to catch a lot more glimpse of these products that would that I'm super excited about for sure. Regarding on the broadband side, a Tier 1 operator we refer to where we're in engagement, we expect that to be a major driver in 2026. But could you have a little bit of revenue in 2020? Sure.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Now, we talked about 2 major North America operators, but you must understand that we never talked about a gateway design per se in a Tier 1 operator. We talked about there are multiple product lines within these Tier 1 operators, but this will be a whole gateway design, I mean, at a Tier 1 operator.

Quinn Bolton
MD - Equity Research at Needham & Company

Is that PON and WiFi or just the PON chip?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Yes, it's both. When I refer to gateway, these days, it's de facto. It has WiFi. It's a full PON 10 gigabytes GS PON gateway with the processes that supports 10 gigabit speeds plus the world's first tri band single chip Wi Fi access point solution along with our own Ethernet quad core 2.5 gigabit Ethernet files.

Quinn Bolton
MD - Equity Research at Needham & Company

Perfect. Thank you, Kishore.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Thank you.

Operator

Thank you. Our next question comes from the line of Suggi Del Sylvia with Roth Capital Partners. Please proceed.

Suji Desilva
MD & Senior Research Analyst at Roth Capital Partners, LLC

Hi, Kishore. Hi, Steve. Just wanted to Steve, maybe double click down on the guidance. Appreciate the segment color, but I'm just trying to understand if infrastructure is likely growing and continue to ramp up here, where the offsets to that are? And what would have you be at the low end if you have a segment like infrastructure that's ramping strong?

Suji Desilva
MD & Senior Research Analyst at Roth Capital Partners, LLC

Just trying to understand some color as to the puts and takes there.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Yes. Look, I think we're excited and infrastructure is probably the biggest growth for the year and that's certainly the 1 that we've got a lot happening around. But I mean, we'll definitely see broadband grow as we stated in and likely be in the year at a much higher level. I mean the 1 that's been weak has been industrial. And I think we're still like many of our peers kind of working through that.

Steven Litchfield
Steven Litchfield
CFO & Chief Corporate Strategy Officer at MaxLinear

Demand is soft. There's a little bit of inventory out there, but I think it's really more about demand. And certainly connectivity is starting to recover as well as we talked about along with broadband.

Suji Desilva
MD & Senior Research Analyst at Roth Capital Partners, LLC

Okay. That's helpful, Steve. Thanks. And then maybe for KeyShore, I know Tori asked about the news this week, but maybe topically also CPOs being discussed, whether it's NVIDIA's in house solution or merchant vendors like Marvell. I'm just curious if you could update us on your thoughts on whether CPOs impact your opportunities orthogonal or whether it's a great opportunity or whether it's something of risk.

Suji Desilva
MD & Senior Research Analyst at Roth Capital Partners, LLC

Any color there would help as people are looking for that in 08/60?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Well, CPOs have now done the third incarnation in the discussion in the data center optical interconnect space, right? So but there is always other vendors with optics and CPO is a part of the discussion engagements we always constantly have. But our goal is a pure DSP, PAM4, TIA type vendor story, whether it's linear optical transceivers, if you will, or the next generation 400 gigabit per lambda, silicon for that, that supports it. I look at our presence and focus on data center is beyond optics. And that's why we call that high speed interconnects, right?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Because we're a silicon provider, it spans not just the interconnect connection, but any kind of high throughput interconnects within a computer or storage environment is target addressable market for us. So CPU is 1 element of it. For that, you have to have your own optics and or you partner with optics players to enable that. I just don't think that there's many, many years before CPOs, if ever become viable because of their various issues of quality, yield, power and the footprint. And then how they lock in a lot of ASP on the quality front that it goes to waste if it is not really properly actualized.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So I think these topics come and go in our industry. And every time people provide different solutions or venture into different ideas, we have to pursue all these directions. Okay?

Suji Desilva
MD & Senior Research Analyst at Roth Capital Partners, LLC

Yes. Great. Thank you, Tishor.

Operator

Our next question comes from the line of Karl Ackerman with BNP Paribas. Please proceed.

Sam Feldman
Equity Research Associate at BNP Paribas

This is Sam Feldman on for Karl Ackerman. So you indicated that your DSP business will ramp in 2025 given your engagements at hyperscalers. What gives you confidence it can double given Amazon indicated that 800 gig may not ramp till 2026? Does this mean the DSP will in accordance with 800 gig?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Look, there's a large, large opportunity that is 400 gig and 800 gig will again last for many, many years. I think that also answers Suji's question about CPOs honestly. So our revenues are a mix of both 400 gig and 800 gig. And as Tory pointed out, we are new entrants in this market space. So and the third player.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So we have a large revenues in the optical in tickets that we can grow and access. Regarding there are 2 markets here. We have always maintained that the line side is really delayed relative to what I call the compute side, which is the AI network and the very, very different markets. So the line side markets are indeed delayed not delayed, I would say they've always been sort of the 800 gig comes much later. And I think they're on track on the front.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And Amazon is not the only 1, right? There's Meta, there's Microsoft and everybody else. And our roadmap frankly followed the cadence of the line side markets. And we've always we have said that we are not a player in the media market in terms of as being what happened in the past. And so that is the reality of it.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So I think that you are sort of completing both the markets in very different markets in terms of the timeline, how they're evolving. And same will be true for 1.6 terabit, by the way. I would say that it will be a long while before 1.6 terabit or 200 gig per land that becomes a meaningful portion of the shipment of the revenues until after 400 gig and 800 gig have really, really run their course. Okay.

Sam Feldman
Equity Research Associate at BNP Paribas

Understood. Thank you.

Operator

Thank you. Our next question comes from the line of David Williams with Benoit Company. Please proceed.

David Williams
Analyst at Benoit Company

Hey, good afternoon, gentlemen. Thanks for taking my questions. I guess maybe first, and Kishore, I think you mentioned this in your script earlier and I may have missed it, but just wanted to specifically give us a little indication on the 2.5 gs Ethernet and 5 product Swan Creek there. And I know you've talked about design wins there and major Tier 1 enterprise OEM customers with multiple design wins. But how is that ramping?

David Williams
Analyst at Benoit Company

And maybe just any of the color around the feedback or demand trends that you're seeing for the Swan Creek product line? Thank you.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So I think Swan Creek as a product goes, probably 1 of the most successful products that we have ever designed and the kind of demand for the product, it's premier, it's highly differentiated, it has outflanked anybody's offering on the 2.5 gigabit multi port switch category. And we frankly ourselves were quite surprised with the amount of traction it has. And it's pretty much designed with all the major players on routers and gateways and even on the industrial side as well. It's a very unique product. It can do multiple ports all the way from 4 to 8.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And 2 of those switch ports can be compounded to do a 32 port solution as well. So it's got extremely good traction. And with this Tier 1 OEM, we were supposed to have actually ramped stronger towards the end of last year. That has not happened, but it's gotten delayed. And but the ramp continues in the sense that the plans remain intact.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

It's their major platforms and I believe that as we head towards the rest of the year, it will start ramping and in 2026, '20 '20 07/00, '20 '20 08/00, '20 '20 09/00, it will be in a pretty strong run rate position. And the overall product really, we believe can be $100,000,000 per year revenue product line for Ethernet over the next two to three years. And the mix would be single PHYs and multi port PHYs and switches in equal proportion are more tilted towards the multi port PHY and switch. Okay?

David Williams
Analyst at Benoit Company

Very good. Thanks for the color there. Maybe anything regionally that you're seeing that to speak of in terms of demand trends around maybe China or even North America, how are you seeing, I guess, geographically, how are the demand trends, Ben, anything you would point to there? Thank you.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Absolutely. Most of the almost all of these designs in these markets happen in Taiwan or China. And so that's where most of our activities, our support activities, sales activity as such. So I would say that while the end markets are quite varied, but primarily the end markets are U. S.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And China centric, which you should expect given they are the largest markets in the world, right? So, we are quite happy about it.

David Williams
Analyst at Benoit Company

Thank you.

Operator

Thank you. Our next question comes from the line of Alex Valero with Loop Capital Markets. Please proceed.

Alek Valero
Equity Research Associate at Loop Capital Markets LLC

Hey, guys. Thank you for taking my question. This is Alex on for Nanda. I have 2 quick questions. So my first question is, as we go from 800 gs to 3.2t, do you guys see yourself becoming do you guys see yourself as being more attractive to customers?

Alek Valero
Equity Research Associate at Loop Capital Markets LLC

If so, what do those dynamics look like?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Look, really, really speaking, there are you have the entrenched incumbents as 1 would duly give them credit for, which is both Marvell and Broadcom. They come at it very, very differently in terms of the competitive force, if you will. However, there is only 1 credible new entrant on the optical transceiver space by far. There is nobody even close to what we offer. And what we offer is extremely low power in the 800 gigabit solution and 100 gigabit solution for 100 gig per lane design, which is the latest which is the newest generation products that are ramping or will be ramping soon like 1 of the analysts brought about the Amazon delay, for example.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So the differentiation really comes from extremely low power and we all now know whether it's an AI network or any data center, power, power, power is the key and that's where we built our core competencies as a company. So I believe that and we also see shortages on DSPs and optical module solutions in the last few years as all data centers try to upgrade to new technologies. So there is a genuine demand for a third supplier. It is and it is where everybody wants a third supplier and we hope to first build our position as a third supplier and then build from there. And that's been our game plan from day 1.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And the fact that we went to $0 to $40,000,000 last year is proof of that. It's million units that's pretty substantial. And hopefully, we could do much, much better this year and leading up to next year. And I think we are very pleased with the progress. Now, this has entailed a lot of investment on our side.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

I know analysts, you always have OpEx questions, but I just want to be very, very clear that this is a strategic area of interest investment, a high growth market area, and we intend to continue to invest very, very strongly in this space to expand our portfolio beyond the optical space. Okay. I think that's where our strategic trust is right now in the infrastructure space.

Alek Valero
Equity Research Associate at Loop Capital Markets LLC

Got it. Thank you. Just for a quick follow-up. So with your guys' tech in the world of co packaged OpEx, do you guys believe that advantages you guys this disadvantages you guys or is it net neutral to you?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

I would say, it may be a net positive because ASR competitors are invested in optics and they try to do a fully integrated CPO. There are more optics producers in the world who are more who are competent and really, really excellent at that. And the market capacity will require that those optics players are part of the supply ecosystem. And therefore, they need a pure play silicon vendor and Maxine absolutely the pure play silicon player in this, no cables, no optics and that sort of a thing. So I think it's a net positive for us from a sort of creating a pool for what we provide and we would be the alternative that would attach the best optics along with our DSP.

Alek Valero
Equity Research Associate at Loop Capital Markets LLC

Got it. Thank you for that. Appreciate it, guys.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Thanks, Alex.

Operator

Our next question comes from Christopher Rolland with Susquehanna International Group.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

I guess around optical, maybe if you had a range of optical units that we might expect in 2025, like would there be a bull case to do 2000000 units or maybe even more or put another way maybe market share? And maybe tying into this, Kishore, you talked about low power. How should we think about low power as you move to 4 nanometers, but competitors move to 3, will you still have that advantage?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So I'll let Steve talk to you about some of the colors on the I just want to add these things that obviously competitive advantages and power and performance are incredibly important. We take that seriously. And we are absolutely confident we will come out this thing, right? And that's the secret sauce of our design and architectural capabilities. That's number 1.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And the other part is whole thing is like, last I checked the latest report that 20000000 units of transceiver modules are shipped. And we have told you that 1000000 units we have shipped. So I know it's not about 10% right now. I'm pretty proud of the 5% market share, right? That's the way I would give it.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

But beyond that, we don't provide color on these because there are various uncertainties on timing and that sort of a thing. But I would stand by the guidance that Steve earlier talked about $60,000,000 to $70,000,000 Yes, you should expect that. Can we do better? I desperately want us to do much better than that. So that much I promise you.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Okay. Great. And KeyShore, maybe just revisiting Tory's question and all this concern about DeepSeek this week. I mean, it had your stock off quite a bit itself, maybe not as much as others, but was still off. And I understand your comments about democratizing AI, but it seems like democratizing AI on open source hardware is not very networking intensive.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

And so I just kind of wanted to revisit this, how these more efficient architectures might affect either inference in your opinion or training in your opinion and mega clusters for example that seem to be very optically intensive. Just in terms of DSPs, units, transceiver volumes for you guys And if there was some sort of a reset in order rates, when would we know? It doesn't sound like you've seen anything over the past week in terms of a reset, but any thoughts on how this will play out or when we would know?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Well, this week is too short, number 1. Number 2 is that, what these dynamics are beyond my understanding. And all I know is that we make extremely good products, very low power, high performance. And the demand is huge enough even otherwise before the AI will happen, that's when we started on this roadmap, right? There was chat GPD before, right?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Nobody knew there was chat GPD and that would drive the markets. And likewise, I don't know what DeepSeek is going to do, but all I know is that even if there were no AI networks present, the market was very, very huge. So from my point of view, it's a fantastic market. There is no reaction from me in any direction. Stay the course.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

The market will be exciting for us for maximum year. And I really don't have thoughts about this, but I don't think we should be surprised of disruptive innovations. And that will make us more competitive. And we have a huge appetite as human beings, right, which is eat whatever comes how much of a cheap it is, right. So we'll just gobble more of it, but the TAM dollars I don't expect to reduce, okay.

Christopher Rolland
Christopher Rolland
Senior Equity Analyst at SIG Group

Great answer. Thanks, Kishore.

Operator

Thank you. Our next question comes from the line of Tore Svanberg with Stifel. Please proceed.

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

Yes. I just had a follow-up, Kishore, because there's a lot of talk about your optical DSP business, but you've also announced getting into AEC, ACC. There's obviously a discrete TIA market out there. So could you just talk a little bit about that when we think about that $60,000,000 to $70,000,000 is that all I mean is that predominantly optical DSP or are you also starting to see some contribution from AEC, ACC and discrete for TIA's? And 1 of your largest competitors just announced LPO here before the end of the year.

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

So I assume given your capabilities, you are now probably working on LPO as well, right?

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

Absolutely. I mean, LPO is just a derivative of what we do as a larger than ESP. So I don't know why people need such a big deal about LPO. Anybody can do this who has got a DSP PAM for that. That just means there are only 3 people, but that's still, right, number 1.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

On our revenues predominantly, they are 800 gig and some 400 gig and there will be some AC. Having said that, the AC market is still pretty small and we are and the market being small and 1 data until now trying to deploy ACs. It's still the verdict remains unclear whether it's going to be sort of across the board promulgation because there are dynamics with the corporate side that are quite different. So without getting into the details, our own revenues are going to be 800 gig, 400 gig and some AECs. We do have AECs that have already qualified.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

And so therefore, we expect revenues to start. How big? I am not I don't think it's still a big in a market where that would overwhelm any of the optical revenues that we will be generating. So regarding the appeals, I think I have answered that question. ACC is even more tiny and I think that verdict remains very questionable.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

AECs are questionable in terms of market size, ACCs propagation. But we have eyesight on all of these targets, right? And we're not pulling back. We are doing everything design ins and so on and so forth. But I'm just being an honest assessment of our own revenues where they are.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So the answer to your question is affirmative. On the TIA, right, clearly, we are 1 of the 3 DSP vendors on the optical side. And we work with partners on the TIAs, but it is foolhardy for us to think that we will be able to sell TIAs to our other 2 competitors of their platforms, right? So the expectation for our TAs is so much more predominantly controlling our own platform and destiny and being cost competitive and power competitive, not as much as trying to build a TIA business. So I'm just making sure you understand that TIA as a revenue stream is really attached to our DSPs and not I'm not aware of anything outside of that environment in terms of our go to market plan.

Tore Svanberg
Tore Svanberg
Analyst at Stifel Financial

Yes, that's exactly the color I was looking for. Thank you, Kishore. Yes.

Operator

Thank you. There are no further questions at this time. I'd like to pass the floor back over to Kishore for closing remarks.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

So thank you, operator. And I want to once again thank every one of you. Hey, it's Happy New Year. You all sounded muted. Just wake up.

Kishore Seendripu
Kishore Seendripu
CEO at MaxLinear

It's all exciting times moving forward. And I would wish you happy to hear once again. And this quarter, I will be presenting a number of financial conference and virtual events. With both the details on our Investor Relations page. Thank you very much and happy new year once again to all of you.

Operator

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

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Analysts
    • Leslie Green
      Investor Relations at MaxLinear
    • Kishore Seendripu
      CEO at MaxLinear
    • Steven Litchfield
      CFO & Chief Corporate Strategy Officer at MaxLinear
    • Tore Svanberg
      Analyst at Stifel Financial
    • Ross Seymore
      Managing Director at Deutsche Bank
    • Tim Savageaux
      MD & Senior Research Analyst at Northland Capital Markets
    • Quinn Bolton
      MD - Equity Research at Needham & Company
    • Suji Desilva
      MD & Senior Research Analyst at Roth Capital Partners, LLC
    • Sam Feldman
      Equity Research Associate at BNP Paribas
    • David Williams
      Analyst at Benoit Company
    • Alek Valero
      Equity Research Associate at Loop Capital Markets LLC
    • Christopher Rolland
      Senior Equity Analyst at SIG Group
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ZW Data Action Technologies Q4 2024
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