MaxLinear, Inc. is a provider of communications systems-on-chip (SoCs) used in a wide range of applications, including broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications. The company faced challenges in recent quarters, with revenue declining from $432.4 million in the first half of 2023 to $187.3 million in the first half of 2024. However, MaxLinear remained focused on executing its long-term strategy and positioning itself for future growth.

Financials

For the full year 2023, MaxLinear reported annual revenue of $693.3 million and a net loss of $73.1 million. The company generated annual operating cash flow of $43.4 million and free cash flow of $23.6 million. These financial results reflected the broader macroeconomic headwinds and industry-wide inventory corrections that impacted MaxLinear's end markets.

In the second quarter of 2024, MaxLinear reported revenue of $92.0 million, down 50% from the prior-year period. The company's GAAP gross margin was 54.6%, while non-GAAP gross margin was 60.2%. GAAP operating expenses were $91.0 million, and non-GAAP operating expenses were $74.8 million. MaxLinear reported a GAAP net loss of $39.3 million and a non-GAAP net loss of $21.0 million for the quarter.

The decline in revenue was primarily driven by macroeconomic conditions impacting customer demand, including excess inventory in the channel following the supply shortages in 2022. Specifically, the company's broadband revenue decreased by $31.7 million, connectivity revenue decreased by $24.7 million, infrastructure revenue decreased by $17.5 million, and industrial and multi-market revenue decreased by $18.1 million.

Business Overview

Despite the near-term challenges, MaxLinear remained focused on its long-term growth strategy. The company made progress in its infrastructure business, particularly in high-speed optical interconnect, where it expected to exceed $30 million in revenue this year and deliver meaningful run rate growth in 2025. MaxLinear also saw strong momentum in its Ethernet connectivity business, which it believed could reach a $100 million run rate over the next 18 to 24 months.

In the company's broadband business, MaxLinear was excited about the design interactions for its platform based on its single-chip integrated fiber PON and 10-gigabit processor gateway SoC, coupled with its tri-band Wi-Fi 7 single-chip solution. The company believed it had multiple promising ongoing engagements, including with a second Tier I North American carrier, which it believed could become a major opportunity in 2025 and 2026.

MaxLinear also took actions to align its cost structure with the current environment, expecting to realize meaningful savings in operating expenses and achieve an approximately 20% to 25% reduction in operating expenses for fiscal 2025 over fiscal 2024. The company believed these cost reduction measures, combined with its focus on high-growth markets, would position it for an exciting future.

Geographical Revenue Distribution

Geographically, MaxLinear's revenue continued to be heavily weighted towards Asia, which accounted for 68% of net revenue in the first half of 2024. The company's products shipped to Hong Kong represented 31% of net revenue during this period. Europe and the United States accounted for 10% and 20% of net revenue, respectively, in the first half of 2024.

Liquidity

From a liquidity perspective, MaxLinear exited the second quarter of 2024 with approximately $186 million in cash, cash equivalents, and restricted cash. The company's day sales outstanding improved to 84 days, and its gross inventory decreased compared to the previous quarter as it continued to make improvements in inventory turns.

Outlook

Looking ahead, MaxLinear provided guidance for the third quarter of 2024, expecting revenue to be between $70 million and $90 million. The company expected GAAP gross margin to be approximately 52.5% to 55.5% and non-GAAP gross margin to be in the range of 57% to 60% of revenue. MaxLinear also expected GAAP operating expenses to be in the range of $102 million to $108 million and non-GAAP operating expenses to be in the range of $70 million to $76 million.

Conclusion

Despite the near-term challenges, MaxLinear remained optimistic about its long-term prospects. The company's investments in high-growth markets, such as optical data center interconnect, 5G wireless infrastructure, and fiber broadband access, were expected to drive future revenue growth and profitability. Additionally, the company's cost reduction initiatives should help improve its operational efficiency and financial performance.

Investors should closely monitor MaxLinear's progress in executing its strategic plan, as the company's ability to navigate the current industry headwinds and capitalize on emerging opportunities will be crucial to its long-term success. The company's strong product pipeline, diversified end markets, and focus on operational discipline position it well to weather the near-term challenges and emerge as a stronger competitor in the years to come.