Maxlinear Inc (MXL) 2014 Q3 法說會逐字稿

Good day everyone and welcome to the MaxLinear Q3 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Nick Kormeluk. Please go ahead, sir.

Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's third quarter 2014 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO; and Adam Spice, CFO.

During the course of this conference call, we may make -- we will make projections or other statements regarding future conditions or events relating to our products and business. Among these statements, we will provide information relating to our current expectations for fourth quarter 2014 revenue, including expectations for revenue trends in our cable, terrestrial, satellite and other target markets; gross profit percentage and operating expenses, the potential impact of our pending acquisitions of Physpeed and our current views regarding trends in our markets, including our current views of the potential for growth in our cable, terrestrial and satellite markets.

These statements are forward-looking statements within the meaning of federal securities laws, and actual results may differ materially from results reflected in these forward-looking statements. We are subject to substantial risks and uncertainties that could adversely affect our future results. Our business and future operating results could be adversely affected if our current target markets, including the terrestrial, cable and satellite markets, do not grow, or if we are not successful in expanding our target addressable markets through the introduction of new products.

In addition, substantial competition in our industry, potential declines in average selling prices, risks relating to intellectual property protection and outstanding intellectual property litigation, integration risks associated with Physpeed and other acquisitions, if any, and cyclicality in the semiconductor industry could adversely affect future operating results. A more detailed discussion of these risk factors and other factors you should consider in evaluating MaxLinear and its prospects is included under the caption Risk Factors in our filings with the Securities and Exchange Commission, in particular, our most recently filed 10-K and subsequent 10-Qs as well as our soon to be filed 10-Q for the third quarter of 2014.

These forward-looking statements are made as of today, and MaxLinear does not currently intend and has no obligation to update or revise any forward-looking statements. The third quarter 2014 earnings release is available on the company website at maxlinear.com.

In addition, MaxLinear reports gross profit, income or loss from operations and net income or loss, and basic and diluted net income or loss per share in accordance with GAAP and, additionally, on a non-GAAP basis. Our non-GAAP presentations exclude the effect of stock-based compensation expense and its related tax effect, accruals under our equity settled performance-based bonus plan and expenses related to a prior patent litigation matter with Silicon Labs and outstanding patent litigation with Cresta Tech. Management believes that this non-GAAP information is useful because it can enhance the understanding of the Company's ongoing economic performance and MaxLinear therefore uses non-GAAP reporting internally to evaluate and manage the Company's operations.

MaxLinear has chosen to provide this information to investors, to enable them to perform comparisons of operating results in a manner similar to how the Company internally analyzes its operating results. A full reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued earlier today. The earnings release and our reconciliation is available on our website and we ask that you review them in conjunction with this call.

And now, let me turn the call over to Kishore Seendripu, CEO of MaxLinear.

Thank you, Nick, and good afternoon everyone. Thank you all for joining us today. Before jumping into the financial highlights, I would like to note that revenue in the third quarter of 2014 grew approximately 2% year-on-year. Strong growth in terrestrial offset the unanticipated decrease in demand for our cable gateway products, which resulted in an overall revenue decline of 9% sequentially for the quarter.

The unanticipated challenges in cable were largely related to decrease in demand for our higher data rate 16 and 24-channel gateway solutions at certain cable operators after a strong first half of 2014. We do not attribute this decrease to any observed loss in our competitive position. We continue to strengthen our competitive position in cable with the recent announcement of our industry-leading 32-channel cable front-end receiver addressing DOCSIS 3.0 cable gateways, which can support data speeds in excess of 1 gigabit per second. In terrestrial, we are encouraged by our over 18% sequential growth in the quarter, driven by strength in both hybrid TVs and a variety of retail and pay TV operator set-top boxes.

We are also excited about the progress we made in the quarter on longer term infrastructure growth initiatives. A few weeks ago, we announced our pending acquisition of Physpeed Corporation, a privately held developer of high-speed physical layer interconnect products, addressing enterprise data center and telecommunications infrastructure market applications. We expect the deal to close a little later in Q4 and look forward to talking more about our TAM expansion into infrastructure applications in the near future.

Moving to the financial specifics, net revenue in the third quarter of 2014 was $32.5 million, near the midpoint of our revised guidance of $32 million to $33 million. GAAP and non-GAAP gross margins in the third quarter were approximately 61.2% and 61.3% respectively, slightly above our revised guidance of 61%. GAAP net loss in the third quarter was $3.2 million or $0.09 per diluted share and non-GAAP net income for the third quarter was $1.7 million or $0.04 per diluted share.

I will now discuss trends in our business. In the third quarter of 2014, cable exhibited unanticipated weakness and stood at 59% of our total revenue versus 69% in the prior quarter. Cable declined approximately 21% sequentially. We've significantly exceeded our prior expectation of a sequential decline of 2% to 5%. Declines were led by DOCSIS 3.0 applications, in particular, in our newest 16 and 24-channel cable receivers, addressing up to 1 gigabit per second DOCSIS 3.0 cable modem applications.

We are also experienced and softness in demand for a products addressing high definition digital to analog converter cable video applications. We continue to outpace our competition in cable front-end technology. We recently announced our industry leading 32-channel full spectrum capture front-end receiver, addressing DOCSIS 3.0 cable gateways that can support data speeds in excess of 1 gigabit per second.

We continue to innovate in the cable DOCSIS market and are focused on expanding our existing cable platform footprint. Recently, at the Cable SCTE Trade Show in Denver, we announced the MxL231 cable upstream programmable gain amplifier or PGA for DOCSIS 3.0 applications.

We also announced the MxL235, which is the world's first upstream gain amplifier addressing the emerging multi-gigabit DOCSIS 3.1 standard gateway application. These cable products represent the industry's first and only standalone digital CMOS implementations, and are the lowest power solutions addressing the extremely demanding cable upstream amplification function. The MxL23x amplifier family not only complements our full spectrum capture receivers for 16, 24 and 32-channel DOCSIS 3.0 and DOCSIS 3.1 gateways, but also significantly reduced the number of costly external components and front-end power distribution requirements on the PCB.

Moving to the terrestrial and satellite TV markets, consistent with our prior guidance, revenues from the combination of terrestrial and satellite broadcast increased over 18% sequentially. We witnessed very strong growth attributable to the shipments of our TV tuners, addressing a broad range of hybrid TV and set-top box applications. We also saw particular strength in our ISDB-T tuner-demodulator SoCs shipping into Latin American pay-TV operators.

In the satellite TV market, in the fourth quarter, although we expect to realize sequential growth in revenue, we continue to experience product ramp delays with our full spectrum capture satellite receiver gateway applications into our initial operator deployments. We now expect a meaningful ramp of our satellite operator revenues to differ into 2015 and take confidence from our design win momentum and traction in satellite TV gateways and satellite outdoor units.

We expect these design wins to yield strong product cycle driven revenue growth in 2015. Similar to our platform footprint expansion strategy in cable, in satellite, we recently announced the MxL80x, which is the industry's first family of dual-polarity Ku-band satellite down-conversion ICs targeting universal digital and analog low-noise block or LNB down-converter applications. These devices integrate the complete dual-polarity Ku-band down-conversion functionality in digital CMOS process. We also significantly reduced the bill of material cost and expensive high frequency PCB footprint when compared to existing discrete solutions.

In conclusion, we delivered year-on-year growth off the back of strong terrestrial revenue contribution that offset the cable headwinds, which developed in the quarter. We remain confident that our growing designing pipeline in the satellite TV gateway and digital outdoor unit market will result in meaningful contribution and diversity to our overall revenue in 2015. We are also excited at our progress in target addressable market expansion and infrastructure initiatives with the proposed acquisition of Physpeed Corporation. We are also looking forward to sharing our technology roadmap and customer engagement details in infrastructure in the near future.

Now, let me turn the call over to Mr. Adam Spice, our Chief Financial Officer, for a review of the financials and our forward guidance.

Thank you, Kishore. I'll first review our results and then briefly discuss our outlook. In summary, our Q3 revenue was $32.5 million, consistent with our revised guidance and came in at slightly better than expected gross margin. As Kishore noted, we witnessed strong sequential growth in hybrid TV and set-top box receiver shipments, which offset significant unexpected weakness in higher channel count DOCSIS 3.0 cable data gateways and modems and HD DTA applications.

Now, moving to the rest of the income statement. GAAP and non-GAAP gross margin for the third quarter were approximately 61.2% and 61.3% of revenue respectively, above our revised guidance of 61% on both a GAAP and non-GAAP basis. This compares to GAAP and non-GAAP gross margin of 62.5% and 62.6% respectively in the second quarter of 2014 and GAAP and non-GAAP gross margin of 62.4% and 62.6% respectively in the year-ago quarter.

Our Q3 GAAP operating expenses increased $500,000 sequentially to $23.1 million, which includes $4 million of stock-based compensation, $900,000 net professional fees related to the Cresta Technology's patent litigation matter which was disclosed in our previously filed 10-K for the year ending December 31, 2013 and $100,000 for an accrual related to our performance based bonus equity plan for 2014.

Consistent with our 2013, payouts under our 2014 performance bonus plan are expected to be settled in shares of MaxLinear stock. Net of these items, operating expenses was $18.2 million, which was up $1.2 million sequentially, but $300,000 lower than our guidance of $18.5 million and up from $16.8 million in the year-ago quarter. Third quarter GAAP OpEx attributable to R&D was up approximately $1.1 million quarter-on-quarter and up $400,000 year-on-year to $15 million, which included stock based compensation of $2.6 million.

The sequential $1.1 million increase in R&D spending was driven almost entirely by recent tape-outs, including production versions of our 40-nanometer satellite digital outdoor unit products and an increase in stock-based compensation of $200,000, partially offset by the decrease in stock-based bonus accruals of approximately $700,000. Excluding stock-based compensation and stock-based bonus plan accruals, R&D was up approximately $1.5 million on a quarter-on-quarter basis and up $900,000 on a year-on-year basis to $12.4 million.

Third quarter GAAP OpEx attributable to SG&A decreased approximately $500,000 on a quarter-on-quarter basis and decreased $1.8 million on a year-on-year basis to $8.1 million, which include $1.4 million in stock-based compensation and $900,000 in net professional fees related to the previously mentioned Cresta Tech patent litigation.

Excluding stock-based compensation and the net professional fees related to the Cresta Tech patent litigation, SG&A was down $400,000 on a quarter-on-quarter basis and up $500,000 on a year-on-year basis to $5.8 million with sequential declines driven by lower payroll and reduced spending on IT filings and occupancy related items.

At the end of the third quarter of 2014, our headcount was 372 as compared to 362 at the end of the second quarter of 2014 and 326 in the year-ago quarter. We are moderate in hiring in light of current revenue softness and continue to look to drive operating leverage in R&D by appropriately balancing hiring across our R&D design centers in the US, India and China and Taiwan.

GAAP loss from operations was $3.2 million in Q3 compared to the loss from operations of $300,000 in the prior quarter and a loss of $4.7 million in Q3 of last year. Non-GAAP income from operations was $1.8 million in Q3 compared to income from operations of $5.3 million in the prior quarter and $3.1 million in Q3 of last year.

GAAP net loss per share in the third quarter was $0.09 on shares outstanding of 36.9 million. GAAP net loss per share included $4 million in stock-based compensation expense, $900,000 in net professional fees attributable to the Cresta Tech patent litigation and $100,000 for an accrual related to our 2014 stock-based performance bonus plan. This compares to GAAP net loss per share of $0.02 in the prior quarter and a net loss of $0.14 in Q3 of last year. Net of these items, our non-GAAP earnings per share in Q3 were $0.04 on fully diluted shares of 39.3 million, compared to $0.13 per share in Q2, 2014 and $0.08 per share in Q3 of last year.

Moving to the balance sheet and cash flow statement. Our cash, cash equivalents and investments balance increased $2.4 million sequentially to approximately $93.9 million and increased $10.9 million compared to the $83 million in Q3 of last year. Our cash generated from operations in the third quarter of 2014 was $6.4 million, approximately $1.2 million less than in the second quarter of 2014 and $3.3 million more than the year-ago quarter.

Our days sales outstanding for the third quarter were approximately 59 days or 7 days more than the previous quarter and approximately 6 days more than in the year-ago quarter. As a reminder, we only recognize revenue on a sell through basis and as such, we are not subject to revenue fluctuations caused by changes in distributor inventory levels. Our inventory turns were 5.2 times in the third quarter compared to 5.1 times in the first quarter and increased relative to the 5.0 turns in the year-ago quarter.

That leads me to our guidance; we expect revenue in the fourth quarter of 2014 to be in the range of $32 million to $33 million. Built into this range, we expect cable revenues to be flat, plus or minus 2% and the combined terrestrial and satellite revenues to be flat, plus or minus 2%. Within cable, we expect no material mix changes between the video and data applications and within terrestrial and satellite, we expect modest growth contributions from legacy terrestrial solutions combined with continued ramp of the satellite gateway shipments.

We expect GAAP and non-GAAP gross profit percentage to be approximately 60% in the fourth quarter. Our gross profit percentage forecast could vary plus or minus 2% depending on product mix and other factors, in particular, the relative contribution of cable, terrestrial and satellite applications. We continue to fund strategic development programs targeted at delivering attractive topline growth in 2015 and beyond. We're focused on increasing the operating leverage in the business.

Excluding any to-be-determined Physpeed acquisition-related charges, we expect Q4, 2014 GAAP operating expenses to increase approximately $400,000 relative to the Q3 2014 quarter to $23.4 million. This increase is driven primarily by an anticipated resumption of our performance-based bonus accrual in the quarter; the payroll impact of our incremental Q3, Q4 hires; the absorption of a partial quarter of Physpeed operating expenses; deal-related legal expenses from the proposed Physpeed acquisition; and a step-up in patent filing related expenses. These expense increases are largely offset by $1.5 million step-down in tape-out related expenses from the prior quarter.

We expect that Q4 2014 non-GAAP operating expenses will decline sequentially, approximately $500,000, to $17.7 million. With increases driven by the previously referred GAAP OpEx spending items, offset by the resumption of the stock-based bonus plan accrual quarter, which similar to stock based compensation, are excluded from our non-GAAP results. Absent Physpeed operations assumed in the fourth quarter, non-GAAP OpEx would have been approximately $17.5 million.

In closing, while we are disappointed with the weakness in cable demand, we are pleased to report Q3 results that generated significant positive cash flow from operations, driven by strong sequential growth in terrestrial. As we examine the progression of Q4, we are encouraged by the signs of stability returning to our cable business. We remain excited at our prospects in the satellite TV market based on a solid design win pipeline and proposed acquisition of Physpeed, which significantly accelerates MaxLinear's TAM expansion and infrastructure growth initiatives.

With that, I'd like to now open the call to questions. Operator?

And ladies and gentlemen, the question-and-answer session will be conducted electronically. (Operator Instructions) Quinn Bolton, Needham & Company.

Hi, guys. I just wanted to follow up on your last commentary about seeing signs of stability returning in the cable business. Can you give us a little bit more color what you're seeing through the supply chain, what the ODM partners are saying and your thoughts on inventory levels? And then I've got a couple of follow-ups. Thanks.

Yeah. I'll let Kishore talk a little more detail about some of the deeper items on that -- on your line of questioning. I would say that the one thing that does give us some comfort in a stabilizing cable environment for us is the fact that, at this point, going into where we are in the quarter, we basically have (inaudible) 100% of our forecast for the quarter in backlog were shipped at this point. So we feel like the amount of risk in the cable side of the business is relatively low now. We've also had in prior quarters where we've had backlog obviously that gets -- that's rescheduled the push-out, but we're not getting a sense of that at this point. I think, we're at a kind of a new lower level than we've been in the past quarters. So, I think that we're feeling relatively confident that based on the backlog and the shipments that we already had for the quarter that we're seeing some stability.

As far as visibility further up the food chain, typically we don't have great visibility that far up into the food chain for us, but I'd let Kishore to speak that more detail.

Hi, Quinn. To add to what Adam is saying about the supply chain or the food chain, I think we have some reasonable visibility, at our OEM levels, we get the shortage reports and such, but we don't have much visibility at the operator level because their procurement is distributed the world over and it's not centralized. So having said that, our general view right now is that talking to our customers is that the demand in the next several months is going to start moving more to the 16 and 24-channels in the mix. But as we see it right now, we are seeing a greater portion, let's say, a two-thirds -- around two-thirds being the 8-channel devices and then the one-thirds being our 16 to 24-channel devices.

So I mean that's the stability that Adam is referring to in terms of what we know, but we do not know if the timing for the resumption of growth in the cable units related to Q4 and Q3 is -- when that is going to come, we hope it comes in the first half of next year.

Okay. And then just as follow-up, it sounds like this is happened, but I think, back at the time of the pre-announcement, you said that you've seen sort of a shutdown in new order rates along with cancellations. Has purchasing activity started to come back to more normal levels -- may be not at the levels you saw in early Q3 or in Q2, but has that purchasing behavior started to come back to kind of weekly orders or however they're placed?

And then the second question just on the satellite business, I think -- may be I misheard you, but did you say that the satellite gateway ramp has been pushed out into 2015? And if so, can you give us a sense -- previously, you've talked about hoping to get closer to 10% of revenues for satellite gateways in the fourth quarter, if that's pushed out, can you give us a sense of maybe now what quarter would you think satellite could approach 10% of revenues? Thanks.

Sure. I'll take the first part of the purchasing question. I would say that, again, I think we are -- we're not seeing, I would say volatility in the forecast from the OEM customers. In fact, what we have seen which also gives us confidence is the fact that things are stabilizing to -- may be stabilizing to upward to the right, because we have had some pull-ins of some cable orders in the recent past.

So we're starting -- and those pull-ins are more for the higher channel count parts, not the 8-channel count. So again, I think as Kishore mentioned earlier, we're just seeing some signs of life that may be had been a little bit absent for the last month or so, that's become a little bit more evident. So that's really all we can say about procurement side of things. Right now, we typically go -- we've talked about this in prior similar times of the year and years past, where this becomes a relatively uncertain point of year for us with our cable OEM customers, because it's -- you're heading towards the end of the year, sometimes they're managing their balance sheet a little bit more aggressively.

And typically what happens is we get more visibility coming out of CES as to what the real appetites going to be for Q1, Q2 and so forth. So it's a little bit early to say whether or not we think, as Kishore said, there's going to be some kind of -- when we see the bounce back to stronger demand. But I think what we're saying right now is, we're certainly not seeing situations further deteriorate, we are seeing stability, we are seeing little signs of pull-ins here and there, which I think is good news and that's pretty much as much we can say at this point.

As far as the satellite contributions, when we did the earlier pre-announcement for the quarter, that of course was driven by cable, we also provided some indications that we won't getting backlog coverage to get us comfortable that we were going to be at our aspirational point of satellite mix for Q4 or looked very likely that we would not going to be able to reach that, because of not having that backlog coverage. Thus indeed kind of been the case as we now look at Q4.

So what's -- as Kishore mentioned, the design wins remained very solid. We [would have lost new] design wins, we are not aware of any programs, it would have been canceled, but we have yet to get clear visibility as to when the real volume ramp is going to be. We will see growth in satellite Q3 to Q4, that's significant on a percentage basis, but still doesn't get us anywhere near the 10% mix in the fourth quarter.

Okay. Thank you.

Anil Doradla, William Blair.

Hi, guys, couple of questions. The 8-channel versus 24-channel mix, little bit perplexing given that, we saw the pushback on 24-channel, but why -- when we step back in big picture, why is that there continues to be a preference for 8-channel versus 24-channel, given that the secular things are clearly in favor of solutions that would require 24-channels? And I have a couple of follow-ups.

Anil, I don't think that just because the transition to the 24-channel as not -- is lesser in Q3 than what we're forecasting in Q4, that the transition is not going to happen. In fact, all the discussions we're having with their OEMs and the end operators is all about -- they say next year is going to be the big move over to the 16 and 24-channels. So they are pretty gung ho about it. It's hard for us to say when that mix will actually transition over. In fact, my view is that -- based on these discussion, is that, someway in the middle of next year, we should be crossing over to the 16 and 24-channels. It just that this particular delay has delayed the transition to the 16 and 24-channel.

So I do not look at it in anyway reneging on the plans of where the transition is going to be. In fact, we announced a 32-channel product and there is a lot of buzz and discussions being clear in the 32-channel as well. So, I think, this is for real, it's going to happen, it's slower and those could be related to CapEx considerations and we should wait and see. In fact, the pull-in request we are getting and that I'm referred to are more related to 24-channel than related to 8-channels. So, I think that tailwind will be in the direction of transition to 16 and 24-channels.

Okay, good. And historically, we've seen Q4, Q1, we've had the offbeat behavior depending upon the inventories and the seasonality. Given what we've had with the pre-announcement flattish Q4, I know, you don't go out quarter away, but how should we be looking, at least qualitatively, Q1, I mean, in the sense that do we get over this inventory headwind or macro headwind and then we get back into Q1 with growth or do you think we're still not sure how Q1 set us after the Q4?

There is the -- if you look at the historical trends, whenever we saw a depressing Q4 in terms of the volumes, we have seen Q1 to stage a nice recovery towards the latter part of the quarter, where we get bookings in a hurry and that's where Adam and myself, when we meet you guys at CES, we'll give you a more upbeat report on what's happening. I mean that's what Adam is referring to about the CES being a good point, where we get visibility. I thing that's correct.

With regard to the inventory, I would be -- I think, I've told in my report, there were two factors to the reduction in cable revenues, obviously the data part, but we also said some softness in our HD DTA revenues. So I think, a recovery in Q1 -- if it happens, it will happen hopefully across the cable segment and we should be able to help you with that qualitative information around the CES period. So, these are most important thing, right, is that, right now we've got the competition beat on what we are offering, the design win momentum, we have expanded our cable footprint by designing new parts and cable on to the platform. I think, in all fronts, we are doing the right things. We just have to stomach this particular situation in Q4.

Alright, great. Thanks a lot, guys, and best of luck.

Thanks, Anil.

Tore Svanberg, Stifel.

Yeah, thanks. This is [Eric] calling in for Tore. Getting back to the cable discussion again, how much of that is really kind of this inventory and kind of selection of -- continuous selection of 8 versus 16, 24 versus what -- the industry consolidation in terms of causing a pause in activity there? Can you kind of comment on any of that?

I think that we -- we are kind of simplistic people. We think that the decisions on [CTs] are not that overly impacted by this mergers. There could be CapEx related halting on both part -- on the three parties involved the ecosystem now, right, the three operators, right? There are three big MSOs. So, we hope whatever that is, that's only a small impact, but we cannot prejudice the outcome of that.

On the other hand, the demand for 16 and 24-channel, the excess inventory, if you will, that we cannot be extremely sure about, but one thing we know that the demand has slowed down quite a bit, the contract manufacturers were sitting on a lot of 16 and 24-channel parts and now that sort of the things are stabilizing and then we're getting like a steady stream of bookings reflecting the renewed demand. So I would say that, but all the conversations so far, it's all about next year being 16 and 24-channels and we do not see any discussions, pricing related, volume related, where the pressure is on 8-channel pricing, much more the discussion is about the 16 and 24-channels. That alone is an indicator that there is some price elasticity there that will unlock the demand pretty nicely. Though we don't feel discourage at all that there is some 16, 24-channel versus 8-channel competition going on, it's just a natural sequence of things and that's playing out a little slower than we had anticipated.

Okay, thank you for that. Maybe, on the gross margin, guidance is a little lighter than we had expected, what's driving that, is that a bottoming, how do you see gross margins trending? Are we had a new norm at kind of the 60% range?

Long-term, we always guided our gross margins to be around 60%. Having said that, we need to address the sort of the step-down in the gross margin that we're guiding for this quarter. It's a really mix related, I mean, in the terrestrial product line, there is one kind of mix, the set-top box related ISDB-T tuner-demod SoC chips in competition for the mix against the hybrid TV tuners.

Inside the cable side, we have a mix that is related to 8-channel versus 16 and 24- channels. So, if you take both these mix in each of these categories, we are seeing some adverse impact and therefore, based on what we can see, we feel it's prudent to guide the margin down for Q4 around 60%. So, it's really mix related. As soon as we have resumption in the new higher ASP 16 and 24-channel products, that should bring us back to around a 61% norm hopefully and the same thing in terrestrial [TV], but at this stage, until we have more clarity about cable resuming its transition to 16 and 24-channel, it's kind of hard to handicap that question.

Okay, that's fair. Thanks. And maybe just one last one. On the -- so, it's looks like you're getting a good -- you're benefiting from strong hybrid TV, is that some share gains that you're assuming you're kind of quoting there or how is -- where is this strength coming from?

Absolutely. I think, either Adam or I mentioned in the script that, due to new design wins translating in mass production, we've got some benefits of hybrid TV growth. And our hybrid TV growth, like we've always said, is always being about a bigger share in the China market, we've got greater shares, we've been growing our business there.

On the terrestrial set-top box, it's come from DTA shipments that are being exceptionally strong due to Thailand converting over to digital broadcast from analog broadcast, where we have a bigger share of those shipment and but those shipments were in backlogs. They are like an auction process and our platform is the one that's gained more share and so we're benefiting from that. Yes, in the summation of it, we've gained share in both hybrid television and terrestrial TV products, that's helping us in getting a terrestrial revenues to be larger in proportion in Q3, Q4 timeframe.

Thank you very much.

Alex Gauna, JMP Securities.

Thank you. Kishore, your results obviously are a bit different than what your key rival Broadcom is reporting. I wonder if there's anything you could see in the market or can point to that would cause the divergence between what you have Broadcom are seeing. And then also STMicroelectronics, on their earnings call, seem to express some optimism over their potential to gain some share going forward in the DOCSIS space. I'm wondering if you would be attached to those initiatives and if you share their optimism. Thanks.

So firstly, Broadcom is not a rival, it's just a different world. And that enabled the cable market, and we benefit from our own platform, where we are present. So I'm glad to share with you guys that there is no share losses at all. This is my thesis, and I think the facts will fade out. So to the extent that people are seeing growth in the set-top box business, they're all coming in the video side of the set-top box business and maybe the infrastructure side and not from the data side, I think the data side, it's very clear to us that, it's a status quo and MaxLinear platform is doing very well, if anything with the launch of our 32-channel product in an even better position -- in the lead position there.

So I think they have a different dynamic. They have a bigger portfolio that involves infrastructure, video boxes that they are incredibly strong in and data whereas MaxLinear's revenues are primarily from the data side, that's the number one answer to your question, to your first question.

And the number two question related to calls with regarding ST gaining some market share in DOCSIS or wanting to position themselves better for DOCSIS share, we can't tell you where we are relating to how we work with them, but we have a great partnership with ST in the satellite video segment market and then we do collaborate with them throughout the world in the video market difference platforms be it cable or be it satellite.

So to the extent on the DOCSIS side today, we don't have any new revenues associated with an ST platform and we cannot speak for the future. So I think all in all, we believe that if ST get some positioning in cable, it will primarily after being DOCSIS 3.1 and that's ways off probably a 2016, 2017 scenario and we can't speak for that yet at this stage.

Okay. Thank you.

Gary Mobley, Benchmark.

Hi guys, thanks for taking my question. Can you hear me okay?

Yes.

Okay. I know part of your strategy to grow the cable related revenue is to roll out a series of Styrofoam chips to complement your (inaudible) season and that was evident in the release of the various gain amplifiers announced it was last month. Can you talk about what these gain amplifiers might mean for your bill of material and say a typical cable gateway? And when you might start to see the positive impact to the revenue growth as a result of these products? And then what other types of the Styrofoam chips we might see roll from MaxLinear?

So, Gary, I'll take the question. The gain amplifier is a very, very high performance part and it's typically so far been implemented by companies like Maxim and NXP in exotic technologies whether it's gas or silicon germanium by CMOS processes. These are the world's first family of upstream gain amplifiers that have been implemented in CMOS and they are done with lot more power efficiency than any of those products. What that means for the customer is that the bill of material for the power related thermals are reduced quite a bit, so they gain a lot from that. So that, instead using a cell phone -- a three-cell battery backup, they could contemplate a scenario with -- for example, they could maybe get away the two-cell battery backup. So that's -- at the edges that's what is (inaudible).

From our point of view, if you look at these parts, they're somewhere between sub $1 but much greater than $0.50. So if you take the total market of about 30 million to 40 million DOCSIS boxes for sure and some video servers. You could see that this pretty easily add another $40 million of addressable market size for us as the companionship and one of the nice things about this chip is, this chip is not relegated to be used only in MaxLinear Intel platform, it could be easily used in other platforms (inaudible) value power and the performance of the product. So I think in some -- these power amplifier products would represent about $40 million of addressable fab in the sales channel that we know very, very well. that's number one.

And what else could we do on this platform and there is a number of things but for example, yet natural product that they could chase is MoCA radio, for example, because we see lot of our back end partners, integrating MoCA baseband MAC into their main SoC. And then the MoCA radio front end partners and players, that could be a natural candidate. And how much bill of materials would that represent? If you assume the price points, some in the $2 range or so or more or slightly less and multiplied by the 40 million boxes. You could see another $70 million to $100 million of addressable fam. So it's a pretty reasonable substantial in size, they tend to be good margin product because of really high performance, the analog products. So we're quite excited by that. And if you want to talk that other products on the same platforms like you've got a lot of WiFi, you got PLC, all of these needs lot of external high-performance analog RF component [entry] and they would be natural candidates for us to chase. So that sort of the landscape of things that we can go after in these platforms. So I hope that answers your question, Gary.

It's very helpful. Thank you. Adam, you mentioned in your OpEx guide commentary that you expect some expenses associated with the Physpeed acquisition. I'm just wanting to know if that is just preclosure M&A type of expenses or whether or not your revenue and non-GAAP OpEx guide for Q4 includes any contribution -- partial contribution from Physpeed?

Yeah. So in the quarter, we -- again if some of the deal closes, we will see contribution from Physpeed on both our OpEx and revenue. Obviously when we announced that deal, we said it is a relatively early-stage company, they've got very nice design wins and they are in very early shipment mode with some key customers. But I would say that, the other revenue contribution in the quarter will be relatively minor. The OpEx contribution in the quarter basically we said, without the Physpeed acquisition we'd be about [17.5] on a non-GAAP basis and with it, it's a couple of hundred thousand dollars higher than that. So that's we can expect from a partial quarter contribution on the OpEx side.

As far as the deal-related expenses, again, we're expecting not relatively small deals, so we're not expecting a lot of incremental legal related deal cost, but that will also be reflected in the GAAP numbers.

Okay. All right. Thank you, guys.

Jay Srivatsa, Chardan Capital Markets.

Thanks for taking my question. Kishore, in terms of the satellite business, do you have a good handle on why these orders are getting pushed out? Do you sense that the service providers don't want to adopt to newer -- shift to newer boxes or is it there reluctance to switch from current solutions, what is that you think is contributing to the delays here?

Okay. Once again, you see, I cannot speak for specific operators, but if you just look at the world of major satellite TV operators, you have the AT&T DIRECTV situation, you have the BSkyB, Sky Italia, Sky Deutschland situation related to the M&A stuff. But to keep things a little bit simpler, these are pretty complex boxes. They will not be impacted to a large degree (inaudible) nice new boxes that are going to be deployed, but these are bigger M&A decisions, may be a little bit in the CapEx side, but when you're going zero to a finite number, these should not be impacted by M&A situation and that's what we're hearing from these end market players.

So what we're seeing is, it turns out, it's like they're still working out the change in the system, that are primarily related to software and then getting ready for the field trials and the pilot trials and then putting them in a mass way. So, it seems that we have hit some unanticipated delay in the ramp related to software fixes that they're doing to these boxes. And while some parts, some of these guys are on track, the other one that were supposed to take off right in Q4 are facing the softer hurdles. So there is not much we can do other than wait till they overcome these issues. And as it when they overcome, we should start seeing some lead time deals come in that we would be very comfortable to share with you.

And then like I shared with you earlier on, in the IDC, there are number of platforms and satellite that were demonstrated, all the new server gateway platforms on the satellite side, and I am really, really pleased to say that they all incorporate MaxLinear's satellite gateway front-end chips on any back-end that's there in any of these boxes. So for me, this has been pretty dejecting that this delay has happened. But we take, like I said, enormous confidence of the fact that we are in these boxes, they're quite near the finish line and the ramps will happen as they happened once they've gotten over the technology hurdles on the software.

Okay. In terms of timeline, I know you said 2015 and the timing still seems very uncertain. So I guess the question is, what level of visibility do you have in terms of when these boxes are going to get deployed and start to again make some meaningful contribution to your revenues here?

Okay. I think we are expecting steady growth in the revenues, not the 10% we talked in Q4 but I think we will be seeing some growth as we look forward to the next year in Q1 as well. And at this time, we are being a little once bitten twice shy kind of syndrome, we have been not wagering saying that it's going to be a certain percentage of our revenue in a certain quarter right now. We are just becoming a little shy right now, and not because of lacking confidence on where we stand in the ecosystem, much more because, we mean to be credible and when that does not happen, we want to be careful the next time.

Okay. Thank you. I appreciate it.

And at this time, I'd like turn the conference back over to management for any additional or concluding remarks.

Well, thank you everyone and thank you very much for attending this call. As a reminder, we will be attending the Stifel Nicolaus one-on-one conference at Chicago on November 13 and look forward to see many of you there. And also, we will be able to report you progress on the -- on Physpeed Corporation acquisition and any product level details and future roadmap related information regarding that exciting new acquisition that we're going through right now. Thank you very much.

And with that, ladies and gentlemen, that does conclude today's presentation. We do thank everyone for your participation.