Greetings, and welcome to the MaxLinear Inc. Third Quarter 2020 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Brian Nugent. Please go ahead.

Thank you, operator. Good afternoon, everyone and thank you for joining us on today’s conference call to discuss MaxLinear’s third quarter 2020 financial results. Today’s call is being hosted by Dr. Kishore Seendripu, CEO and Steve Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer. After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our guidance for fourth quarter 2020 revenue, fourth quarter revenue growth expectations in our principal target markets GAAP and non-GAAP gross margin, GAAP and non-GAAP operating expenses, tax expenses and effective tax rate and interest and other expense. In addition, we will make forward-looking statements relating to trends, opportunities and uncertainties in various product and geographic markets, including, without limitation, statements concerning opportunities arising from our recently completed acquisitions of Intel’s Home Gateway business and of NanoSemi, growth opportunities for our wireless infrastructure and connectivity markets and opportunities for improved revenues across our target markets. These forward-looking statements involve substantial risks and uncertainties, including integration and employee retention risks related to the acquisitions as well as risks arising more generally in our business from competition, global trade and export restrictions, potential supply constraints, the impact of COVID-19 pandemic, our dependence on a limited number of customers, average selling price trends and risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect. More information on these and other risks is outlined in the Risk Factors section of our recent SEC filings, including our Form 10-K for the year ended December 31, 2019 and our third quarter 2020 Form 10-Q, which was filed today. Any forward-looking statements are made as of today, and MaxLinear has no obligation to update or revise any forward-looking statements. The third quarter 2020 earnings release is available in the Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenues, gross margins, operating expenses, income or loss from operations, income taxes, net income or loss and net income or loss per share on both a GAAP and non-GAAP basis. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in the press release available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock-based compensation and its associated tax effects. Non-GAAP financial measures discussed today do not replace the presentation of MaxLinear’s GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management’s analysis of our business. Lastly, this call is being webcast, and a replay will be available on our website for 2 weeks. And now, let me turn the call over to Kishore Seendripu, CEO of MaxLinear.

Thank you, Brian and good afternoon everyone. Our strong Q3 financial results were ahead of our guidance on an organic basis, and also include partial quarter contributions from our acquisitions of Intel’s broadband and Wi-Fi assets and NanoSemi Corporation. In Q3, revenue was a record high at $156.6 million, up 140% sequentially, representing strong double-digit organic growth and an overall healthy non-GAAP gross gross margin of 58%. Our Connected Home business stood at 24%; infrastructure at 14%; industrial multi market at 10%; and Intel’s broadband Wi-Fi Ethernet asset acquisitions were at 52% of overall revenues. The stronger-than-expected broadband revenues were driven both by increase in demand as well as market share gains across multiple product lines. Our Wireless Infrastructure business also improved significantly, recovering from a weak macro backdrop in the first half of 2020. Before turning to the business highlights, I’m excited to welcome our NanoSemi Corporation IP and design team. We expect this acquisition will prove to be a game-changer for our 5G business. NanoSemi brings existing Tier 1 OEM licenses as it is the only proven open-market solution for digital previous organ technology, which is especially suited for high-power GaN P power amplifiers and is also essential for high performance, wide band, 5G, macro and massive MIMO applications. NanoSemi’s IP licensing business also expands our customer base across 5G baseband, test equipment and other wireless applications. Simultaneously, we are working aggressively to integrate these IPs into our RF transceiver infrastructure products, greatly enhancing our value proposition in 5G massive MIMO systems for both open RAN and proprietary 5G solutions. With the addition of NanoSemi, we have significantly bolstered our 5G wireless infrastructure competitive positioning and offerings in this large and rapidly growing 5G market. Now, turning to some of the Q3 business highlights, in broadband access, our…

Thanks, Kishore. I will first review our Q3 2020 results and then further discuss our outlook for Q4 2020. On revenue of $156.6 million, we saw our connected home business up 30% sequentially, well above guidance, led by strong demand for cable products owing to the work from home dynamic and share gains. Our infrastructure business grew 12% sequentially, driven by wireless backhaul and access, partly offset by weakness in our high-performance analog business. Our industrial multi-market business was down 11% sequentially due to end market softness in Asia and inventory reductions. Our broadband and Wi-Fi business acquired through the Intel acquisition accounted for $82.3 million during the quarter, well above our prior estimates. GAAP and non-GAAP gross margins for the third quarter were approximately 42.3% and 58% of revenue, respectively. This compares to GAAP gross margin guidance of 51.5% to 52.5%, and non-GAAP gross margin guidance of 63.5% to 64.4%, which excluded the impact of the 2 acquisitions we made during the quarter. The delta between GAAP and non-GAAP gross margins in the third quarter reflects the amortization of $14.4 million of inventory step-up, and $9.9 million of acquisition-related intangible assets as well as $0.3 million of stock-based compensation and accruals related to our 2020 bonus plan. Third quarter GAAP operating expenses were approximately $100.8 million, which was up quarter-over-quarter due to the acquisitions and acquisition-related charges. GAAP operating expenses included stock-based compensation and stock-based bonus accruals of $22.6 million combined, amortization of purchased intangible assets of $6.1 million, acquisition costs of $7.8 million and restructuring cost of $3.3 million. Non-GAAP operating expenses were $61.1 million, up $28.5 million sequentially, due primarily to the impact of 2 acquisitions that closed during the quarter. Moving to the balance sheet and cash flow statement, our cash flow used in operating activities…

Thank you. [Operator Instructions] Your first question comes from the line of Gary Mobley with Wells Fargo. Please proceed with your question.

Hey, guys. Thanks for taking my question. Wanted to focus on sort of the baseline on gross margin and operating expense from the fourth quarter level once you fully integrate your acquisitions. And so thinking about that 57.5% gross margin guidance and the $76 million in OpEx, how do you see any sort of improvement as you further integrate your 2 recent acquisitions and start to run, I guess, more favorably priced wafers from the Intel business, for example, and then as well some OpEx synergies?

Yes, Gary, thanks for joining us. So I can comment a little bit. I mean I think – I don’t think we’ve found anything different than we initially expected, from a kind of a gross margin and the potential that we have on that front. So I do expect next year, we’ve talked about seeing the overall business able to exit the year somewhere in the 60% range. So I do see some nice improvements. I expect a pretty good step-up in the first half of the year and then just kind of trending towards that 60%. I think on the OpEx side, as you’re aware and we’ve talked about, that there are some transitional services that come with the deal, and it’s about 6 months’ worth of services. So I do expect to see that come down kind of in late in Q1. And so we’ll see some nice – well, I mean, improvements just as that additional expense comes off. And but overall, I mean, just synergies-wise and the cost, I think we’re very pleased with the progress that we’ve been making on that front and improving the overall profitability of the business.

Thanks, Steve. So as a follow-up, I wanted to focus on the cable data side of the business. It’s no wonder you guys are doing well. You can see it, the strong gross sub additions in some of your bigger cable MSO partners. And you can see some strong trends within your largest cable gateway customers. And so I was wondering if you can put in rank order what is driving that business? Is it just general market uptick in the stay-at-home demand? Is it increased bill materials? Is it market share gains, whether it be for you or your cable gateway customers?

Gary, hi, it’s all of those reasons, really. One of – everybody is upgrading their – the quality and tier of their bandwidth, not just what they access, but what they distribute around the home. So it’s driving a lot of upgrade in the boxes that are being deployed. So we are now pretty strongly trending towards full DOCSIS 3.1 rollout in most of the major operators in North America. For us, specifically, we did not – we had lost market share earlier on at a major cable operator in North America, and now that’s in full recovery mode. And – but the good news is that even so our – the below materials we are supplying to these operators has increased quite a bit, owing to the deployment of Wi-Fi 6 solutions and they’re the best-in-class today that are there. And so we’re getting BOM expansion as well. And I think in addition, it’s very clear that the cable MSOs are gaining net subscriber go beyond just upgrade in the bandwidth and so on, so forth. I would say there’s some component of a pandemic driven work from home market dynamic has reinforced the need for more bandwidth as well as viewing habits have now changed dramatically, and a lot of people are at home now, right? So I think we’re benefiting from all of those factors.

Thanks guys.

Your next question comes from the line of Alessandra Vecchi with William Blair. Please proceed with your question.

Hi, congratulations on the great results. If we can just touch base a little bit on the infrastructure segment and some of the puts and takes with what I’m assuming is – if you can help us sort out the impact of sort of the China band as well as maybe the timing of the large hyperscale ramp and how we should be thinking about that?

Okay. Hey, Alex, this is Steve. So I’ll kind of give you a little bit of highlight as far as kind of quarter-to-quarter impact and then maybe if Kishore wants to jump in on some of the PAM4 stuff. But just from a China standpoint, well, so first of all, I mean, wireless infrastructure did extremely well in Q3. It was a nice recovery that we had anticipated seeing and thought we’d see it in Q2, but definitely happened in Q3. We see some of that kind of fall back a little bit in Q4. Some of it is definitely driven by China. We have talked about that, the Huawei impact specifically. While it’s not a huge number for us, we definitely see that come down as we take that out of our numbers completely.

On the optical side, I think we all now know that the PAM4 rollout in general has delayed the 200-gig PAM4 or 400-gig PAM4. So I think that as a result of that, our own expectation per revenue from the PAM4 market has pushed out as well, but having said that we have a select number of optical module customers, who are getting ready for a potential ramp in the middle of 2021. And we are going through the qualification process, which is a little bit slower than we had expected with the major hyperscale data center customer. That’s on the 400-gig PAM4 side. On the 100-gig PAM4, it’s a more secular profile. It’s not specific to any particular data center. So the goal of 100-gig PAM4 has now become hard to reduce – how to replace 100-gig CWDM4 because it really drives the cost down quite dramatically, the cost of the optics. So a lot of customers and companies are preparing for potentially replacing all 100-gig CWDM4 with 100-gig single lambda PAM4, be it in enterprise markets or data center markets. So I think that’s going to be an exciting cycle. Once again, that’s also going to be in the mid-2021 onwards. So, I would say, the delays are disappointing. But on the other hand, if you’ve seen the latest light counting report, it reaffirms that the growth profile of the PAM4 opportunities for data center, whether it’s 100-gig PAM4 or 400-gig PAM4, the single lambda technologies, is a pretty – very, very strong future outlook. And with our investments in 800-gig PAM4 as well with our latest generation – with a 5-nanometer investment that we hope to sample in the middle of next year, we’ll be in a leadership position in terms of really enjoying as a participant in the future growth of this market opportunity.

And then just as a follow-up on the PAM4 discussion. Obviously, recently, there was the big announcement that Marvell is acquiring Inphi. Can you walk us through how you potentially think about the competitive dynamic there? And if it gives you any opportunity to potentially grab a little bit additional share?

Look, right now, in the PAM4 world, there are three players, right? And we are among them. Marvell was not a participant in the data center market. And I don’t see how they bring any additional competitive positioning to the combined Marvell-Inphi offering. For us, it’s quite exciting because we’ll stand out as a pretty exciting, young, agile company that is investing to grow. And with our acquisition of Intel’s Home Gateway assets, we also will have the scale to fund 5-nanometer technology nodes because the SoC products are pretty big silicon hogs. And you always want to be in the latest technology node if you look at Wi-Fi as well. So I think we will be able to amortize and spread the development costs on 5-nanometer across all these platforms. So I feel that we’re actually in a very, very strong position. I think the infrastructure is a long game. And I think we should – I think we have repeatedly proven wrong, where we think that things happen instantaneously, but then we also have been proven right, like in our wireless backhaul, where revenues really, really take time to come. But when they come, they are yours for a long time. So that’s how I would sum it up.

That’s really helpful. I will take myself back in queue. Thank you.

Thanks, Alex.

Your next question comes from the line of Quinn Bolton with Needham & Company. Please proceed with you question.

Hey, guys. I wanted to follow-up on Alex’s question. I guess, can you give us some sense what do you think the holdup has been on the PAM4 qualification, Inphi has been shipping, I think, into that late hyperscaler now for over a year. So it doesn’t feel like it’s a market demand issue. Can you walk us through firmware interoperability testing? I mean are you running into some issues or what’s really behind the delay?

Actually, what you say is the surprise news for me that a competitor was shipping for one full year. In fact, the real delays are, I don’t know how much is pandemic related, but they are – and then there are China trade-related issues with the import tax issues, whatever qualified vendors are there, the import issues with importation of China has been one blocker. And then there has been emphasis put on the data center to qualify non China-based module makers, and they have been a little bit slower on that with the module companies trying to get ready to get to the qualification. So as far as I know, both in 200-gig PAM4 and 400-gig PAM4, barely a few tens of thousands of quantities of PAM4 modules have shipped actually. So in fact, even I’ve been told that there have been more 400-gig PAM4 quantity shipped, which would still be the statement that had 200-gig PAM4. So I’m still struggling to understand how a full year of shipments have happened as far as sell-through goes. I cannot speak for sell-in, let’s put it that way.

Okay. And the second question, Steve, you gave us some insight, I think, into the 3 traditional buckets of core MaxLinear. I might have missed it, but I don’t think you gave us an outlook for the acquired Intel business. I assume that’s up because you get a full quarter of that business. But any comments you could say about the Intel business would be helpful. And then I guess where I’m driving at is, I’m a little surprised with the gross margins stepping down in the quarter, especially given some of the strength at the core MaxLinear cable data business. So just trying to think through the margin puts and takes into the fourth quarter. Is it just you’re getting a lot more contribution from the Intel business and that’s what’s causing the pressure quarter-over-quarter?

Yes. Sure, Quinn. Yes. No, you’re exactly right as you’re thinking through that. So we definitely have a whole lot more contribution in the quarter. So we – so to answer the first part of your question, we do see that continuing to improve, much like our own broadband business, broadband and Wi-Fi from Intel is going extremely well. And so we do expect that to grow in Q4. And yes, there’s just a bigger contribution from, frankly, a lower-margin product portfolio, right? And so that is bringing gross margins down slightly. As I mentioned a little bit earlier, I am confident that we see this recover in the first half of next year. So it does come up. It was down a little bit more just – not just – some of it is mix related, but then also you’ve got infrastructure coming down slightly off of a very strong Q3. So that combination kind of brings it down a little, and then you’ll see it move right backup in Q1 and Q2.

And then last for me, just on the 5G cellular transceiver. Can you give us any updated thoughts on when you think that starts a meaningful ramp? Is that also kind of mid-2021? Do we need to wait for the second-generation 8-channel before that revenue stream becomes meaningful. Just how should we be thinking about 5G? Thank you.

Yes. Yes. So on the 5G side, interesting, right, we’ve talked a lot that we would see a small amount of revenues in the second half of this year, on track to see that. But they’re really more meaningful ramp is next year. And it’s interesting now with the dynamics with the trade dynamics in China, it’s definitely kind of had some impact. I think overall, 5G has slowed slightly. I don’t know that it changes our outlook that much from an overall revenue expectation in ‘21. But – so I think that does definitely start in earnest. I’d mentioned in the prepared remarks about – those ramps starting happening in the mid part of the year. So we are on track to see that.

Thank you.

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

Yes, thank you and congratulations on the strength here. First question, I looked at your 10-Q, and I saw a new sort of revenue breakdown there. Is that how the new revenue breakdown will look like going forward? And can you maybe elaborate on what’s the difference between connected home versus broadband/Wi-Fi just trying to get everything straight there?

Yes. No, sure, Tore. Sorry, we were hoping to actually make that clear in our prepared remarks, but so we did – so the way we broke out the earnings, so we wanted to be just kind of transparent, and we broke out in the Q3 results based on our previous 3 end markets. And then we had effectively 1 bucket that was for the broadband and Wi-Fi assets from the Intel acquisition, so that it’s very clear. Going forward, as we’ve stated, we intend to change those end markets. And so you’ll see that on next quarter’s earnings call as we break that out separately. So the answer to your question is, what – the Intel piece is the broadband and Wi-Fi assets that’s broken out in the Q.

Okay. That’s great. And as my follow-up, you talked about some share gains there that you benefited from? And obviously, all the content growth, but are those share gains mainly on the Wi-Fi side or have you seen some other products that you’ve gained some share with?

So Tore, no, no, it’s not just Wi-Fi, right. It’s a combination. Let’s start with the first one, right? In cable, this large MSO, we had lost share, and so we’re getting the full platform. What does that platform include? It includes MaxLinear front end. It includes the Intel DOCSIS 3.0 SoC and the Gateway Processor. It has now the Wi-Fi. It has got the 2.5-gigabit Ethernet. And that’s the – and even MOCA, of course, right? So it’s got all the combination there. So that’s pure volume unit growth by share growth. And there are other carriers who are – this has been public, for example, CenturyLink is – if you go back to Intel press release from the past, CenturyLink is now ramping a new platform – various flavors of platforms where Wi-Fi is an add in the market. Additionally, the – we have gotten some share gains versus our competition because there are severe supply shortages. And we have gained some market share because supply shortages at our customers’ end. And so that’s – so you get the full volume impact of growth, right, and the BOM increased as well simultaneously. Additionally, there have been some component growth at a large U.S. North American telco operator for our MOCA solutions. So if you say it’s a mix of everything that is – that is nicely recovering on the broadband. It’s what we call the Connected Home and the Intel assets that we acquired. Okay?

Okay, great, great. Just one last one, the 5-nanometer, that’s going to be at your largest foundry today, right?

Excuse me?

5-nanometer.

Is it going to be what? Sorry.

It’s going to be – your partnering with your largest foundry there, right, 5-nanometer process technology? Yes.

Got it. Got it. Got it. Okay. We don’t disclose which foundry, but I think it’s it’s old news now to – there are only 2 foundries in the world that are 5-nanometer capable, Samsung and TSMC. So we would like to – we are in one of them. That’s correct.

Great. Thank you.

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

Hey, guys. Congrats on the strong results and guide. I just wanted to dive a little bit into the fourth quarter. I know you’re switching the segments up, but just to split it maybe at a higher level. Organic versus inorganic, it seems like you’re going to have 50% more time owning the Intel Home Gateway business. And then I don’t know how much NanoSemi contributes, if any. But out of the $190 million midpoint versus the $156 million, how much of that is organic versus inorganic, please?

Yes. So Ross, I mean, I guess – so we didn’t break it out. I mean what we talked about was, I mean, Connected Home is up in the quarter, infrastructure is down, industrial will be down slightly and the Intel business will be up. So I mean all-in, not – the way I would position it is, not a whole lot has changed with regard to our expectations on infrastructure. There’s probably only 1 slight difference. I mean the mix is a little bit different, right? So the organic growth that we’re seeing is really on track with what our original expectations were. But the mix is slightly different, definitely stronger on the Connected Home side and then a little lighter on infrastructure given the Huawei dynamic.

So my follow-up, I want to get into kind of seasonality/sustainability. The big debate on a lot of this broadband business, even amongst your competitors and obviously, investors is just how sustainable is it going to be? Is it a bunch of pull forward because work from home or does this have legs? And without getting into the persistence of COVID and all that side of the equation, maybe you could just start off with – is there some seasonality to the combination of the Connected Home and the Intel Home Gateway? Is that the way we should think about from a revenue perspective as we enter next year? And are you concerned at all that some of this is a bit of a pull forward that will lead to a little bit more of a lull when we get into 2021?

Yes. I mean I think the way I would answer it – so we’re definitely seeing an exceptional level of demand kind of across the board. The supply constraints are probably adding to that as well. But I would probably start and kind of echo a little bit of what Kishore was sharing earlier. I mean there’s a real recovery, kind of an underspend that happened over the last two years. And so that kind of was on track. We had talked about it earlier in the year. So we’ve seen that. On top of that, I’m sure there’s a little bit of work from home demand as well. But the other piece of this is that we’re winning share back. Some of the supply constraints have hurt some of our competitors and so we’ve definitely been able to take advantage of that. But then this BoM increase, right, bringing more Wi-Fi, bringing more Ethernet. These are all – this is new dollars that we are bringing to the system, right, that we haven’t had historically. So those are pretty big dynamics that are very different. So is there a little bit of that kind of work from home that maybe doesn’t replicate? Yes, potentially. But this business, I mean, we’re very confident we’re running at a much, much higher level than what our original expectations were. And that’s really driven by share and the content that we have on these boxes.

And having said that, we see a lot of interest in our product offering and we are trying to carefully balance OpEx versus supporting new customers and so on. Because software is a huge component of an SoC gateway business, and we are trying to modulate the dynamic on profitability versus revenue growth as well. So we are – I hate to say we’re giving up any revenue, but I think there’s some truth to that, that we are dragging a little bit on the expense side so that we can modulate profitability correctly.

And I guess the last thing, Ross, I mean, just a further clarification and talk about that content increase because I think that’s part of your question as to where that’s coming from. I mean a big contributor as we look out into next year is Wi-Fi, right. So we have talked a lot about the size of that business. And so this year for MaxLinear, so maybe that’s in the $25 million range. I mean, next year, that’s expected to probably double or slightly above that. So there’s good contribution. So you talk about where does that upside come from next year? This is all new content that we haven’t had historically.

Great. And I guess one final one on kind of what Kishore was pointing to about modulating the OpEx side. Steve, you touched a little bit on it before. But on the gross margin side, you said you would kind of work your way back up to 60 exiting next year. And that’s helpful as kind of a band for us to think about modeling-wise. The OpEx side, we spent $76 million now in the quarter you are guiding to. I know you said it will drop a little bit late 1Q, it sounds like 2Q. Is there any sort of exit rate that we could think about akin to that 60% gross margin on the OpEx side of things for next year?

Well, I think what we have said on this, and I think we have been pretty consistent about it that – so there’s a lot of cost that we still have to pull out of the business, right? We have got transitional services, but we also get just efficiencies that have to be realized over the next 12 months. And so we have kind of talked about being in the low 20s exiting ‘21 and I think we are on track to do that. And I think that was even set out early in April when we initially talked about it. So I don’t see any problems getting there. And then I think the real exciting part is we look at the Intel business, in particular. This business can definitely run quite a bit higher than that. And so – we will continue to see those efficiencies realized and that profitability level hit kind of exiting the year and moving into the beginning of the following.

Okay thanks guys. Congrats.

Sure. Thanks.

Your next question comes from the line of Ananda Baruah with Loop Capital Markets. Please proceed with your question.

Hi, good afternoon guys. Congrats on the execution and navigating everything you have going on. A couple from me, if I could. Could you actually rank order, Steve, the sort of handful of influences for the broadband business for 2021 that you just went through? Which ones do you think – well, I guess, in what order do you think they will sort of be the most incremental at least anecdotally, that would be helpful? And then I have a quick follow-up.

Yes. I mean, I’m not sure that I can rank order them. There is a lot of dynamics going on right now. And it’s a little convoluted as these platforms roll out and how much you’re gaining on just pure – just the difference – I mean, Kishore spoke earlier about the share gains that we’re getting. We are getting share gains from competitors, but we’re also increasing content at the same time. So I don’t know that I can rank order it. All of them are having a really positive inflow. And I think you will see that continue throughout ‘21.

It sounds like you think the least significant is actually the at-home portion of it, of all the variants?

I think it’s a smaller portion. I mean, I think what people don’t realize kind of that it’s a step-up that we’re achieving through the share gains and the increased content. But around the edges, are we seeing exceptional broadband? Yes, of course. But I think a whole lot of this is a more structural change where we have taken more share and we have more content.

That’s very helpful. And then just a quick follow-up on the data center at CSPs, are you – I think last quarter you guys actually made mention, hey, listen, we are sort of just starting to lean into this. So maybe don’t use us as a proxy for overall spending. But I want to ask if you have a sense of what the spending environment is there because you actually made some comments a few months ago about 100G? And so do you feel more comfortable making a hyperscale CSP spending environment kind of statement? And if you do, like sort of what’s your – philosophically, how do you see things going on there right now?

I mean, I will take a stab at it – that question. I think you are referring to just kind of data center CapEx trends, right? We had commented on that last quarter.

Totally, yes and bandwidth specifically, obviously, but yes, whatever you have?

Yes, yes. It’s a little tougher because all this is a new market for us. So it’s all upside in our mind, right? So these are new programs. I think Kishore commented on the market outlook. I think what we’re hearing from our customers is really encouraging. Albeit – I don’t know that we have a – I mean since we don’t have a huge data center business today, I mean, again, it’s all upside to us. But I think it’s – I think we are really well positioned to take advantage of that both 100-gig and 400-gig markets.

I get it. It’s awesome. Thanks a lot guys. I appreciate it.

Yes, thank you.

Your next question comes from the line of Bill Peterson with JPMorgan. Please proceed with your question.

Yes hi. Thanks for taking my question. I see the upside coming from the Intel asset. I have a clarification then a few questions. You are referring to Huawei, I guess if you can help us understand what they accounted for in the third quarter? And I assume they basically go to 0 in the fourth quarter. Are you getting – are you applying for licenses? Do you – I assume you don’t have licenses, if you can clarify that?

Yes. Yes, Bill, good to chat with you. So we don’t break out exactly what Huawei contributes. We said it was slightly less than $10 million on an annual basis. And so I think you can probably – you can get a decent feel for that. And yes, we have pulled it out completely out of Q4.

Okay. Just industrial multi markets, I think you were calling for flat to slightly up. But what – I guess, what didn’t happen or what occurred where that ended up being down? And I guess, more importantly, as we think about a recovery back to kind of a historical $19 plus million, $20 plus million range, how should we think about that recovery into next year?

Yes, Bill. So that’s an interesting dynamic, right? It’s been quite a volatile year, really big declines in Q1. And then we saw really strong recovery in Q2. But yet, that didn’t continue in Q3. We thought it would be flat to slightly up. I mean it did okay in the quarter, but it seemed like they were still consuming a fair amount of inventory. We do think kind of given the trade dynamics, some of the parts that we’re participating in, we think some of these – this is Chinese customers that are moving to a domestic supplier. So some of that business, we think, probably goes away for good. And then we’ve seen another portion of it that is kind of some of these video cards that need to – you need to be in the home. And so that’s just taken a longer time to recovery. But we do expect that to continue or to continue to recover. I think our really long-term view of our industrial multi-market as well as just our analog business in general. We’ve got some new power management products as well as interface products. We’ve been talking about them. They are hitting kind of the around this time frame, first quarter of next year will be sampling. That’s the real meaningful stuff that we’ve been working on over the last, say, year, 1.5 years. And so as those hit the market, start to get some design win traction, that’s really the exciting part there. Now that doesn’t necessarily reflect on the short-term dynamics in the kind of industrial multi market, but I think that’s really where we’re positioned to come up with some newer products based on these customer inputs.

Okay. And then I guess the last one. Thanks for providing the disclosures about the broadband and Wi-Fi business, at least for now, helps us to try to frame the revenue opportunity. I guess I would calculate somewhere close to $110 million to $115 million in the fourth quarter. Hopefully, if you can confirm that’s kind of the right ZIP code to think about. But more importantly, I mean you have your – a lot of the Wi-Fi business, you size that this year, potentially next year. Hoping to understand the – based on your design win pipeline, where you are picking up maybe some new content in areas like fiber, PON and Ethernet? When does Wi-Fi 6E start happening? How we should think about the progression of that business as we move through 21?

Yes. I think that’s a large and long topic. I just want to assure you that it’s a very robust pipeline. And we hope to share more information on being the world’s more Premier 10G PON platform, which is sort of a meshes bands with all the Wi-Fi and all the MoCA the bells and whistles hopefully, the next call. So it’s a large topic to cover in this call.

But to answer your first question, I mean, you’re in the right ZIP code. I think that aligns with what I said earlier.

Okay, thanks and good luck.

Great. Thanks, Bill.

Your next question comes from the line of Suji Desilva with ROTH. Please proceed with your question.

Hi, Kishore. Hi, Steve. Congrats on the progress here. Maybe you could talk about if you have been acquisitive to some, what your thoughts are on further acquisitions, what kind of balance sheet leverage you might be willing to assume in any additional acquisitions?

Suji, yes. I mean, so clearly, and we had mentioned that we do intend to continue to look at acquisitions and I mean, your specific question about leverage and what we’re willing to take on. I mean, I think we are going to be prudent with our market leverage. I think very fortunate in the way we were able to negotiate the Intel acquisition where we really didn’t take on a lot of additional debt or leverage in that particular acquisition. And I think the cash flows are coming in probably a little faster than what we had originally anticipated. So that’s going very well. So look, I mean, we want – we have got two assets and we are right in the middle of integration. But I think it’s progressing well. I mean, it is an asset purchase. So a lot of our work was done really early in the process. So I think that positions us well to be able to do something maybe as early as the second half of the year. But I don’t know that there’s an exact number of leverage. I think a lot of that depends on the market environment as well as the asset itself.

Okay, great. And then I think this question was asked before, just maybe try to ask in a more general sense, with the new profile of businesses in the portfolio, what is the typical seasonality look like, I don’t know ‘21 is going to be a typically or not, but maybe you can just kind of give us some thumbnail for that?

Yes. I mean, the only comment I would make on seasonality is that the – our connected home business historically stronger in Q2 and Q3. So you would typically see a little bit of softness in Q1 and softness in Q4. But Q2 and Q3 is typically what we would see. And I these assets add to that. So that’s what you would expect to see. What happens in the coming year? Hard to say, right, because you are seeing a lot of strength, I mean, saw strength in the whole second half of the year that seems very strong heading into early next year as well. So yes, we will definitely watch that to kind of determine how that seasonality rolls out in ‘21.

Alright. Thanks Steve.

Your next question comes from the line of Christopher Rolland with Susquehanna. Please proceed with your question.

It’s David Haberle on behalf of Chris. Congrats on closing the deal and the success that you have had there so far, it certainly seems like it’s gone better than expected. If I could, on the deal, now that you have the asset under your control how are you thinking about long-term growth of the total business? Does this weigh on long-term growth at all or it sounds like you have a lot of tailwinds kind of near term helping this business grow into 2021. But longer term, how should we being about growth on just the aggregate MaxLinear business?

Yes. Sure, David. So I think we have been pretty consistent in the messaging – I mean the Intel asset itself, we’ve talked a lot about what does that growth profile look like? I think in the short term, it’s still – well, in the really short term, I mean, demand has been very good and the share gains are definitely contributing, the BOM increases are very meaningful. Overall, I think kind of that low single-digit growth rate is what our expectations are. I think as Ethernet and Wi-Fi really start to pick up. You can definitely start to see our ability to grow this at faster than that low single-digit number. But it’s still a little early, and those are fairly small product lines today. I think where we have been investing and really where we’re expecting a much bigger growth opportunities from the infrastructure business, Kishore, I mean he talked about it a little bit earlier, but our optical business, still very excited about that market. The market opportunity itself is extremely large. And our positioning with the technology and the products that we have today, I think, works out very well. And then the 5G side, again, is a big investment opportunity, and it’s one I think we’re positioned to take advantage of. So that’s really where you see that well over double-digit growth that you’ll expect to see over the next 12 to 24 months.

Got it, Steve. And then if I could, also for you, Steve. The gross margin range is a bit wider than normal. Is this just getting a feel for operating the new business and how that’s going to play out or is there any more uncertainty in this quarter than others in terms of your mix?

Yes, sure. Look, I mean, let’s be honest, right, we are doubling the size of our business with a very large acquisition that’s done in a carve-out. So there – look, there is some uncertainty, okay, so, a lot of moving parts here. So I think it would be prudent for us to just have a wider range. What I am confident about is as we move forward, and I mentioned this earlier, kind of going into next year, we get away from these transitional services. We own completely that supply chain. Things get a lot clearer, and we are a lot more confident and then you probably expect to see that range narrow again.

And you do want to take into account that Q4 will be the first quarter we even actually learned what the real expenses are in many categories, right? So Q3 was a partial quarter. And even in Q4, we have a lot of transitional service expenses. So we have to go well into – Q2 will be the first clean quarter, actually with no sort of DSA service costs. So I would say that at this point, this is – we are making, I would say, pretty good, steady progress. And I think our track record speaks for itself that we’re very good at at really managing our gross margins up. We do a good job of it. And we really have a similar confidence about the acquired assets that we should do better than what we are saying at this stage.

Yes. The last acquisition – I mean, to Kishore’s point, the last acquisition that we did, I mean, the business was doing kind of low 50% gross margin. We took it up over 10 points over the next kind of year, 1.5 years. So we really do have a good track record here. I mean we’re really benefiting by strong demand, right? And we have just gotten a hold of the business. So it’s going to take us a little bit of time to improve the gross margin. So while it’s a little bit lighter in Q4 as we get our hands on this, I mean you are going to see a nice progression on the gross margin going forward.

Thank you.

Ladies and gentlemen, we have reached the end of the question-and-answer session, and I would like to turn the call back to Kishore Seendripu for closing remarks.

Thank you, operator. I just want to let everyone know that we’ll be participating at the Roth Technology conference on November 11, the Stifel’s 2020 Virtual Midwest one-on-one growth conference on November 12, Needham Security Network and Communications conference on November 17, the Wells Fargo TMT Summit on December 2 and Barclays Global TMT Virtual conference on December 9 to 10. Just a reminder that all of these conferences are virtual and we hope to connect with many of you there. With that being said, thank you all for joining us today. Have a happy Thanksgiving if you don’t see you before then or talk to you and we look forward to reporting on our progress to you next quarter.

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