Brian Nugent - Finance and IR Manager Kishore Seendripu - Chief Executive Officer Adam Spice - Chief Financial Officer.

Anil Doradla - William Blair Gary Mobley - The Benchmark Company Alex Gauna - JMP Securities Ross Seymore - Deutsche Bank. Tore Svanberg - Stifel Quinn Bolton - Needham & Co. Krishna Shankar - ROTH Capital.

Good day, and welcome to the MXL Q3 Conference Call. Today’s conference is being recorded. At this time, I’d like to turn the conference over to Brian Nugent. 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 2015 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 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 the fourth quarter 2015 revenue, including expectations for revenue trends in our cable, terrestrial, satellite, high-speed interconnect and other target markets; gross profit percentage and operating expenses, the impact of our recently completed acquisition of Entropic Communications and Physpeed, and our current views regarding trends in our markets, including our current views of the potential for growth in each of our target markets.

These statements are forward-looking statements within the meaning of Federal Securities Laws, and actual results may differ materially from these - may differ materially from statements - 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, satellite, high speed interconnect and infrastructure markets do not grow as we currently expect, or if we are not successful in expanding our target addressable markets through the acquisition of new products.

In addition, substantial competition in our industry, potential declines in average selling prices, risks arising from consolidation in our industry and among broadband operators in our principal target markets, risks related to intellectual property protection and outstanding intellectual property litigation, integration risks associated with Entropic Communications 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 risk factors that 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 Form 10-K for the fiscal year ended December 31, 2014 and our subsequent forms 10-Q for the third quarter of 2015, which contains additional discussion of risks affecting MaxLinear’s business.

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 2015 earnings release is available on the company’s website at maxlinear.com.

In addition, MaxLinear reports gross profit, income and loss from operations and net income and loss, and basic and diluted net income and loss per share in accordance with GAAP and additionally on a non-GAAP basis.

Our non-GAAP presentation excludes the effect of stock-based compensation expense and its related tax effects, accruals under our equity settled performance-based bonus plan, outstanding patent litigation with Cresta Tech, deferred merger proceeds, change in fair value of contingent considerations, severance and restructuring charges, amortization of acquisition-related intangibles and purchased inventory step-up, non-recurring acquisition and integration-related expenses and production mask impairment.

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. The full reconciliation of the GAAP to non-GAAP financial data can be found in our earnings release issued earlier today.

The earnings release and 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, Brian, and good afternoon, everyone. Thank you all for joining us today. Before jumping into the details of the financial results, we are pleased to report third quarter revenues of $95.2 million, which reflect the first full quarter revenue contribution from the close of the Entropic acquisition on April 30, 2015.

In the third quarter of 2015, we witnessed broad-based revenue strength. Revenues increased, it was all of our end market focus areas of operator, infrastructure and other, and legacy video SoC.

In the third quarter, independent of the benefit to our sequential financials owing to an incremental amount of Entropic revenue contribution, we benefited from the strong demand for Entropic products as a whole.

Equally encouraging for us, core MaxLinear product revenues were also up sequentially owing to strength in demand for satellite digital outdoor units within our operator revenues and from terrestrial TV and set-top box solutions within infrastructure and other. Now moving to the specific business highlights for the third quarter of 2015.

The revenue in the third quarter of 2015 was $95.2 million, slightly above the revised guidance provided on September 16, up approximately 34% sequentially and 193% year-over-year. Within this increase, operator revenues recorded 28% sequential growth and accounted for 72% of total revenue.

Both local and analog and digital channel-stacking satellite products showed particular strength. In the quarter, cable data was softer than is expected as certain customers drew down the inventory levels. However we now anticipate de-stocking to reverse in the fourth quarter based on our backlog.

Combined with the continued transition from 8-channel modems and gateways to 24-channel solutions, we are projecting strong growth from cable data projects in the fourth quarter.

Within the quarter, consistent with our prior expectations, we demonstrated solid progress on our DOCSIS 3.1 initiatives which we currently expect to ramp in volume in the second half of 2016.

In September, we announced the availability of our DOCSIS 3.1 platform consisting of MxL278, which is a 28-nanometer CMOS full-spectrum capture receiver with integrated MoCA 2.1 RF transceiver and MxL236 which is a programmable gain amplifier or PGA.

In conjunction with our SoC partner, we are enabling multi-gigabit per second data bandwidth services on existing coaxial cable network infrastructure.

With our DOCSIS 3.1 platform, we can deliver multi-gigabit bandwidth capacity for both downstream and upstream applications with unique low-power high-performance small form-factor and ease of use advantageous. The companion MxL236 PGA drastically reduces power dissipation relative to competing solution.

It has unique network monitoring capabilities such as reporting network health and performance parameters on the upstream link. These network capabilities are extremely valuable for operators in terms of reducing network maintenance costs. It also illustrates our ability to expand our analog mixed signal content on existing platforms.

In conjunction with the platform launch, we also announced that our long-time customer, Hitron has selected our DOCSIS 3.1 platform for a new family of DOCSIS 3.1 CPE equipment. You can expect more DOCSIS 3.1 announcements as we approach the launch.

Within our satellite family of operator products, the revenue growth was driven by continued ramps in digital outdoor unit products at major European and North American operators, and by strong demand for analog channel-stacking in MoCA shipments. We are also building momentum on our satellite design wins.

For example, in September we announced that WNC would supply the Sky Italia with MaxLinear-based channel-stacking in Ku-band down converter solutions for its next-generation digital channel stacking deployments.

At IBC in September, MaxLinear and its partners demonstrated a scalable multi-channel Ultra HD set-top box for the media server reference design. Even though there is always uncertainty regarding new product launches and timing it to operators, MaxLinear’s unique engagements with major MSOs and OEMs in the satellite market.

As a result we are at the forefront of next-generation satellite deployment that deliver new flexibility, efficiency and content to satellite operators and their subscribers. Our MoCA technology and products obtained from an Entropic acquisition, span across operator infrastructure and other legacy video SoC platforms.

We're driving MoCA to be the pre-eminent backbone connectivity solution for the broadband connected to home. MoCA promise us to scale seamlessly to over a true multi-gig platform for quality of service, data and video distribution throughout the home. We expect to report further progress in ratcheting up the speeds of MoCA as we head into 2016.

Revenues from infrastructure and other, which consists of consumer terrestrial set-top box, hybrid TV and high speed optical interconnect solutions accountant for roughly 9% of total revenue. Growth in these revenues resulted from seasonal strength in hybrid TV and increased shipments of our consumer digital-to-analog converter set-top box products.

We also benefited from the continued ramp in shipments of Physpeed interconnect products, specifically long-haul 100-gigabit per second laser drivers into Chinese customers from our Physpeed acquisition. We continue to build up on the foundational technology obtained through our Physpeed acquisition in Q4 of 2015.

The combination of Physpeed technologies with MaxLinear’s engineering and operational execution has enhanced our customer credibility and is resulting in increasingly meaningful and active customer engagements.

Already this year, we have successful introduced an expanded family of high-performance trans-impedance amplifier or TIA amplifier and driver products addressing the emerging 100-gig and 400 gigabits per second fiber-optic data center, metro and long haul data networks.

We have previously indicated an expectation to achieve our first $1 million revenue contribution quarter in the second half of 2015. We remain on track to do that in the fourth quarter.

Additionally, we continue to make noteworthy progress in our organic infrastructure initiatives and wireless backhaul and cable fiber notes to support the migration to DOCSIS 3.1. We currently expect to sample solutions in 2016 that will contribute to our infrastructure revenues in 2017.

We are very excited about the technical innovation that we are bringing to our get target infrastructure markets, with not only leverage our leading analog mixed signal RF technology platform but also significantly expand our total addressable market. Finally, moving to legacy video SoC revenues derived from shipments of HD DTA and IPTV client SoC.

Revenues were about $18.7 million, increasing the mix to proximately 20% of overall revenue with approximately 18% in the prior quarter. The strong revenue growth resulted from increased shipments of cable HD DTAs and IP TV set-top box platform solutions.

We’re extremely pleased to have delivered a quarter of strong revenue growth, record operating cash flow generation and operating margin momentum. The financial benefits of our increased scale are a direct result of the significant progress we have made towards the integration of Entropic.

Together with Entropic, our expanded portfolio of market-leading broadband access and connectivity solutions make us a more strategic and relevant broadband platform solutions provider to operators globally.

In combination with the Entropic, we are in the strong position to address the key challenge faced by our operator partners, which is delivery of higher bandwidth into and distributing richer multimedia content throughout the home.

Our stated revenue diversification in DAC, TAM expansion efforts into wireless and wider infrastructure markets are also gaining significant moment driven by the broad applicability of our core analog RF and mixed signal technology platform for the communications market.

We look forward to sharing more information regarding the progress of our ongoing infrastructure initiatives and new developments in our core broadband focus markets. With that. 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 will first review our results, and then briefly discuss our outlook. As Kishore noted, our Q3 revenue was $95.2 million, slightly above our guidance provided September 16. Now moving to the rest of the income statement.

GAAP and non-GAAP gross margin for the third quarter were approximately 53.6% and 56.7% of revenue respectively, versus our prior guidance of 53% for GAAP and 57% for non-GAAP gross margin.

This compares to GAAP and non-GAAP gross margin of 38% and 58.4% respectively in the second quarter of 2015 and GAAP and non-GAAP gross margin of 61.2% and 61.3% respectively in the year ago quarter.

The delta between GAAP and non-GAAP gross margins in the quarter is primarily related to the amortization of $1.6 million of purchased intangibles and $958,000 of an inventory step-up, as well as approximately $400,000 related to stock-based compensation and stock-based bonus accruals and the impairment of a production mask in the quarter.

Q3 GAAP operating expenses were approximately $49.4 million, in line with prior guidance, which included $12.2 million for the amortization of purchased intangible assets acquired for Entropic, $400,000 in severance charges, $200,000 of restricted merger proceeds relate to our Physpeed acquisition and $400,000 of restructuring charges related to a former Entropic facility.

Accruals related to stock-based compensation and stock-based bonus plans were $4.9 million and $1.9 million respectively. And we had $100,000 of net professional fees related to the Cresta Technologies’ patent litigation.

Consistent with 2014, payouts under our 2015 performance bonus plan are expected to be settled primarily in shares from MaxLinear stock.

Net of these items, non-GAAP operating expenses was $29.1 million, $1.9 million below our prior guidance of $31 million and $200,000 lower than Q2 of 2015 and up approximately $10.9 million from the year ago quarter.

The underage relative to guidance resulted from an accelerated Entropic related headcount efficiencies, seasonal payroll tax step-downs, reduced project-related embedded IP purchases and the receipt of offsetting customer and our e-payments.

Third quarter GAAP operating expense attributable to R&D was down approximately $500,000 quarter-on-quarter and increased $8.5 million year-on-year at $23.5 million, which included stock-based compensation of $3.5 million.

$1.2 million related to the 2015 stock-based bonus plan, $200,000 in Physpeed deferred merger proceeds and $100,000 for the amortization of purchased intangible assets are acquired from Entropic. Excluding these items, third quarter non-GAAP R&D was down approximately $700,000 on a quarter-on-quarter basis to $18.5 million.

Within this R&D spending, tape-out related expenses declined approximately $900,000, partially offset by $300,000 increase in payroll-related spending. Third quarter GAAP operating expense attributable to SG&A was up approximately $1.8 million quarter-on-quarter and up $17.3 million from the year ago quarter to $25.5 million.

GAAP SG&A expense included $12.1 million for the amortization of Entropic intangible assets, $1.4 million of stock-based compensation, $800,000 in stock-based bonus plan accruals, $400,000 in severance charges and $100,000 in net professional fees related to the Cresta Technologies’ patent litigation.

Excluding these items, third quarter non-GAAP SG&A was up $400,000 on a quarter-on-quarter basis to $10.6 million, driven by an $800,000 increase in fees and expenses related to patent filings and accounting tax and audit partially offset by $400,000 decline in payroll spending.

At the end of the third quarter of 2015 our headcount was 505,m as compared to 531 at the end of the second quarter of 2015 and 372 at the end of the third quarter of 2014.

We continue to evaluate our staffing levels globally, particularly following the acquisition of Entropic, to strike a balance between driving near-term bottom line operating leverage and staffing key long-term growth initiatives.

We continue to look to derive operating leverage by appropriately balancing hiring across all locations in the U.S., India, China and Taiwan. GAAP income from operations was $1.6 million in Q3 compared to loss from operations of $30.6 million in the prior quarter and loss of $3.2 million in Q3 of last year.

GAAP net income per share in the third quarter was $0.03 on diluted shares outstanding of 63.2 million shares. This compares to GAAP net loss per share of $0.58 in the prior quarter and let loss of $0.09 in Q3 of last year.

Non-GAAP earnings per share in Q3 were $0.40 on fully diluted shares of 63.2 million compared to $0.21 per share in Q2 of 2015 and zero $0.4 per share in Q3 of last year. Moving to the balance sheet and cash flow statement.

Our cash, cash equivalents and investments balance increased $22.7 million at the end of the quarter from Q2 2015 to approximately $105 million and increased $10.9 million as compared to $93.9 million in Q3 of last year.

Our cash flow from operations in the third quarter 2015 was approximately $22 million versus cash flow of $4.6 million in the second quarter of 2015 and $6.4 million generated in the year ago quarter.

Our days sales outstanding for the third quarter was approximately 40 days or 14 days less than in the prior quarter and 13 days less 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 4.7 in the third quarter compared to 6.8 turns in the second quarter and 5.2 turns t in the year ago quarter. The second quarter turns metric was impacted by the addition of stepped-up Entropic inventory which is now worked us through to the system and we should be back to normalized turns levels.

That leads me to our guidance. We expect revenue in the fourth quarter of 2015 to be in the range of $95 million to $100 million. Built into this range, we expect operator revenues to increase in the mix and account for approximately 76% of revenue. Infrastructure and other to be approximately 8% and legacy video SoC to be approximately 16%.

More specifically within operator, we expect growth to be driven primarily by digital and analog channel-stacking outdoor units and cable data platform related shipments.

Within infrastructure and other, we expect seasonal declines in consumer trust for set-top box and hybrid TV to be largely offset by the continued early ramp in high-speed interconnect revenues derived from long-haul laser driver shipments supporting 100-gig deployments in China as discussed earlier.

We expect the legacy video SoC demand to moderate somewhat after strong shipments in Q2 and Q3 and expect growth in demand for these products to resume in the first quarter of 2016. We expect GAAP and non-GAAP gross profit percentage to be approximately 55% and 57.5% in the fourth quarter respectively.

Our gross profit percentage forecast could vary plus or minus 2% depending on product mix and other factors, in particular, the relative contribution of operator infrastructure and legacy video SoC applications.

We continue to fund strategic development programs targeted delivering attractive top line growth in 2015 and beyond with a particular focus on infrastructure initiatives and our goals of increasing the operating leverage of the business.

We expect Q4 2015 GAAP operating expenses to decrease approximately $8 million quarter-on-quarter to approximately $41 million, with the largest reductions coming from the roll-off of amortization of purchased intangibles of $7.3 million.

We also expect less significant spending reductions attributable to lower average headcount, lower occupancy costs, declines in tape-out and project-related spending on prototyping, design tools and outside services, all of which, will be partially offset with increases in embedded IP spending.

Rep and the commissions and lack of customer NRE dollars that were in the mix in Q3. We expect that Q4 2015 non-GAAP operating expenses will decrease $1 million sequentially to approximately $28.5 million driven by the earlier referenced items excluding amortization of intangibles.

In closing, we are pleased to report Q3 revenues that were well above the original guidance exiting Q2, which combined with continued expense reductions, drove strong operating cash flow generation.

In the midst of a choppy macro environment for semis a consolidation amongst operators and their OEMs, the diversification of our business and our product expansion have positioned us to continue to benefit from a secular bandwidth demand growth driver.

We were also pleased to report further penetration of new market opportunities in satellite applications and incremental progress made in confidence in our ability to execute on our strategic wired and wireless infrastructure initiatives. And with that I'd like to open the call to questions.

Operator?.

Thank you. Mr. Spice. [Operator Instructions] And we'll take our first question today from Anil Doradla with William Blair..

Hey guys. Congrats Kishore, Adam, and the whole team. Clearly for folks are entering a sweet spot with your product cycle. Couple of questions. So Kishore and Adam, I wanted to understand the mechanics of the December quarter.

Sounds like some of the cable inventory caution in the September quarter has reversed, but really you're seeing strength on the satellite side. So on the satellite side, can you share a little bit more color. You’ve got your digital swim, the Entropic acquisition brought in some of the analog stuff.

How is the demand environment playing out? Are people willing to switch to the digital side quicker or the willingness is to stick on with the analog? And on the cable side with the recent ODM consolidation and DOCSIS 3.1, do you believe the behavior of your customers are changing now, especially as we look into early 2016?.

Hey Anil, this is Kishore. I would just go in the reverse order of your questions. First I would like to start with cable, DOCSIS 3.1. I think as we have told in last call there are two tiers of cable operators, one the primary one being Comcast being really leading the charge.

In the March, it transition to DOCSIS 3.1 to move towards multi-gigabit date services and eventually to 10-gigabit data services using coaxial cable. The ultimate goal is to have all legacy customers and new customers to be able to grow the data bandwidth capacity to multi-gigabit services.

And you also have seen the Comcast call and you've seen that they are really gaining significant muscle and strength, subscriber growth for data for their X1 software platform, which is where we are shaping all our new 24-channel products. Now getting to next question, the tier-2 cable operators Time Warner and so on so forth.

They are also transitioning to 24 channel solutions. Liberty Global as well and there are other operators who are not leading the charge as aggressively as Comcast, but they are also looking forward to deploying multi-gigabit services. And they can choose to provide downstream bandwidth using DOCSIS 3.0, for example with a 32-channel solutions.

So we got multiple ways to get to multi-big gigabit services but we expect DOCSIS 3.1 to start yielding revenues or ramping in the second half of 2016, and you also have seen our announcement of a robust DOCSIS 3.1 platform with an newly announced chips for the DOCSIS front-end, PGA amplifiers and the integrated MoCA RF transceiver.

So that's the first part of the cable related question. Next moving to the satellite outdoor unit based questions. We saw particular strength not only just in satellite outdoor unit and analog channel-stacking devices, but we are also seeing ramp of satellite digital outdoor units at more than one operator.

And so you can see that you’re getting benefiting from the mix of both analog channels satellite digital outdoor units stacking solutions.

So at this point, the calling the trend on how digital outdoor unit ramps relative to analog channel stacking is premature, because ramps ramp at different operators but either case we are benefiting from that strong trend.

And your more subtle question regarding the demand for this new channel stacking units in terms of the customer subscriber reception to it.

The way to look at is that these are being deployed to enable multi-channel services inside the home, and the upgrading is a natural part of the sequence of things that operators are doing, already enable multi-channel data content services inside the home.

so I would not call it as push or a pull event, much more as a more orderly rollouts, so we’re not seeing any unusual spike in ramp. So I hope those answered your questions that you raised..

Great, Kishore. Then if you don't mind me squeezing in one. I sense that you guys are pretty positive on Physpeed acquisition and some of the product lines there. Is the revenue - can you give a sense of how much revenue contribution is coming from that and is it 1%, 2% or it's not even that at this stage? Thank you..

Yes, I think I can answer that question quite well. Actually we told in the last call, we closed Q3 with sub-$1 million revenues related to Physpeed but we already said in the script that we are going to hit the $1 million run rate in Q4.

To be honest with you, we have got more backlog than call for in the forecast, but at this point we want to be careful about ensuring that we can ramp our products officially to meet the backlog and hopefully we can give you a positive surprise based on our supply situation. There are two aspects to the supply.

One, there is a number of platforms with the LTE deployments in China into couple of major customers. We got major market share there and ramping in a major market share and we are qualifying these multiple platforms and as they are being qualified, those particular platforms are ramping.

So there are two velocities here one is the supply velocity, the other one is designs being completely qualified and ramping. So we feel pretty good that this quarter we’re going to exceed the $1 million per quarter revenue run rate and our backlog is substantially more than that..

Great. And congrats..

Next, we'll hear from Gary Mobley with Benchmark..

Hi guys. Thanks for taking my question. I had a question about cable data ASPs. Is this still case that 2015 looks to be sort of flattish year on a unit volume basis at any growth you might generate there on the sales side, would be all purely function of ASP increases in them.

As it relates to DOCSIS 3.1 CPE ASPs, could you talk about how your bomb changes DOCSIS 3.1 relative to DOCSIS 3.0 taking into consideration your PGA attach rate. I know there is lot of acronyms there but hopefully all that makes sense..

Okay. Let me answer the question, Gary. So basically if you look what we - we are projecting with our own forecast, no market share change positions related to the OEM customers or cable providers - so for the cable data providers. So as a result, we don’t expecting to see changes in the market share.

However we do expect a very modest growth in the cable volumes, and as you will have heard from the Comcast call, they are picking up more and more subscribers but data bandwidth. So we are planning for a modest growth based on those kinds of commentaries. Secondly, the ASP content is increasing.

If you just compare the 24 channel versus the eight channel device that. There is a 30% delta in the ASP. So that’s just the cable DOCSIS front-end.

However in the new generation boxes deployments, which we - there are some platforms that are transitioning to where our PGs amplifiers are also being deployed and there are some platforms where we have the PG amplifiers, the DOCSIS front-end and our MoCA device as well.

So you can see that with regard to the content in the DOCSIS 3.0 boxes with the new 24-channel platform, we will be picking up significantly more bond content by virtue of the fact that we have added MoCA to it so you can look it as at 2x increase in the total bond on the platform for MaxLinear..

Okay. Lastly, you talked about perhaps some positive impact to back from AT&T’s by DirecTV and the possibility of AT&T converting some of those to subs over to the DirecTV platform video platform.

I wonder if you have any more insight into the fruition of the $120 million incremental revenue and have you started to see any positive impact from it so for? That's it from me. Thanks..

It's kind of hard to call the trend, If that impact were playing out, it would just be the beginning of it where we cannot discern as much. And also we have not seen a confirmation of that trend yet.

So we feel that by the time all the marketing activities are lined up and aligned with regard to that switchover of video subscribers from viewers, I don't expect to have a firm answer for you till the end of first half of next year..

All right. Thank you guys..

Alex Gauna with JMP Securities has our next question..

Good afternoon guys and congratulations on the great quarter. I was wondering, Kishore, if you could give us the ballpark on how the operator revenue split between, say that cable infrastructure camp and the satellite camp.

And then also if there is a material difference in the near intermediate term outlook for growth prospects in either camp? Thanks..

I think, in your question you've wrapped up a few things that are not exactly the way we have called for a revenue description. We do not include cable infrastructure yet in our revenues.

So there is not much to speak of whether if you want me, I can talk where the wonderful prospects of trend with the deep cable fiber DOCSIS 3.1 deployments where a really they are going to distribute access much closer to the client premises, in that particular duration - sorry, please go ahead, Gary..

Let me clarify it. I mean between so the cable modem, cable set-top box driven revenue so we are counting on the Comcast, the Cox, the Time Warner’s versus the satellite camp where we're looking at the DirecTV and the Sky camp overseas.

How does that breakout? I've been getting questions from investors in terms of really service provider is a big category, how does it split between the two roughly?.

Yes, I'll take a stab at this. Alex, it’s Adam.

I would say that when we - after we completed the deal and we articulated what the combined business look like going forward, we were saying that within the operator business which was roughly three quarters of the total business from MaxLinear, the split was more in favor of cable than the satellite but satellite was growing faster because of some of the new platform dynamics that were in place and the new platforms ramping.

And we said that as we exit 2015, you would start to get close to an even split between satellite and cable contribution within that mix and we are very much on track for that to be the case.

It's still - cable will still be ahead of satellite as we exit 2015, but very, very close and you could see at some point kind of them touching together in 2016 but it's really pretty close as we exit 2015. And within that keep in mind that there is products that span both cable and satellite particularly MoCA, right.

So MoCA sells into cable platforms, it sells into satellite platforms. So there is kind of technologies that span both those operator classes if you will..

Okay, that's great. That's very helpful. And Kishore that touches on something you just mentioned in terms of some of your optimism on MoCA on the next-gen cable platforms. I typically think of MoCA more on the set-top box front.

But are we seeing a lot more potential attach, a real-time attached to the contribute in the near-term on the cable modem front?.

Absolutely. In fact, whenever we talk of 24-channel today in the new XP3 three platform that we shipped to end customer for example Comcast. MoCA is one-to-one attachment on every data platform.

MoCA is now transforming or already began its transformation from a video distribution high-quality of service delivery to being as backbone for both data and video content. And so all that data platforms where over the top consumptions are using MoCA inside the data gateways specifically for Comcast on the X1 platform I can confirm that for you..

Okay. And one last quick one, if I could. You surprised me by saying you had expectations for the SoC business to be up, I believe I heard you say in the March quarter.

And I'm wondering if you could give us any more color that strikes me as somewhat longer horizon that you don't usually have visibility into what's going on there and does any of that optimism bleed into the other categories? Thank you..

It turns out that to the extent that we can find a pattern, the ordering pattern on the video SOs is related DTA whether it’s cable or satellite big players.

Generally somewhere between Q1, Q2 and Q3 beginning, they do their bulk of their ordering and they really go clamped on Q4, Q1 early - and that kind of mirrors their budget cycles, I'm assuming the capital expenditures cycles. So for example, if we were to play forward to the next year, it would not be surprisingly if Q3, Q4 were down.

If it is the timing of which part of Q3, this whole thing plays out. We are reflecting on a certain seasonality pattern if you will.

But coming back to what’s driving the revenues per se, if you step back and say, okay, over the next three years, where would MaxLinear’s HD DTA revenues come from? Clearly the cable operators and the one satellite operator.

In the cable operator side, you can imagine Time Warner and Cox have announced big-time programs for HD DTA conversion to really go digital.

I think Cox has announced as many as 12 million subscribers being converted to - where the HD DTA convergence will be deployed over three years and Time Warner has announced somewhere between around 5 to 10 million subscribers. So there is a huge pipeline of customer convergence to where they will issue out HD DTA boxes.

So you can see that these revenues are non-ending anytime soon, but there are timing issues. Well, for example, as Time Warner may come down, Cox could be still going strong. So it's hard to model that.

So well, definitely the lifetime of this HD DTA products or IPTV SoC products the satellite operator is clearly not a one year, two year, these are multiyear thing but how the profile looks like in terms of sunsetting these are multiyear multiple year horizon. So I hope that answers your question..

That did. That was helpful. Thanks. Congratulations again..

Thank you..

Next we’ll hear from Ross Seymore with Deutsche Bank..

Hi guys, congrats on the strong quarter and guide. I guess, a couple of questions on the quarter itself. Kishore, you mentioned that some inventory burn occurred on the cable gateway side or the cable data side in the third quarter. Would you expect that restocking in the fourth.

Any more color on that? What was the inventory burnt for and what is that gives you the confidence in the restocking given that in the past that has turned out to be a problematic transition at times for you guys?.

Okay, if I were to say, I know for sure I would cut my tongue next time, right. So the whole idea here is that we did not see any throughput based on the earnings calls of our customers. Their very strong robust third quarters, but they are ordering order patterns when quite subdued for us in Q3.

And then they did mention that they are going to take their stalking down in terms of inventory trying to get to lower inventory levels. So it's more a detective work, if you will.

However, based on the backlog resumption, that's happened pretty strongly but data it would not be far-fetched to conclude that towards the end of Q4 where the shipments are being positioned or requested, that they are doing behaviors where while their own shipments to the MSOs have not diminished.

They are just cleaning their homes to bring their inventory levels down for the end of the year balance sheet issues and then ordering stronger and heading into Q1 for MaxLinear..

So I guess that's a perfect segue to my next question.

I know you guys aren’t guiding two out beyond some of the commentary you’ve just answered on the video SoC side, but given that change in mix in your company versus anytime in the past, is there any sort of seasonal pattern that you could talk about in a typical to the extent there ever is that typical first quarter and how those revenues played out seasonally across the various segments of your company?.

It's so tough. We could speak to our old revenues, but let me try to a guess here. Three quarters of a revenue of approximately operator revenues and they were all kind of being consistently Q4, they go - they do strange things in Q4 and early Q1 and they go strong in Q2 and early Q3 that seems to be a pattern.

So to the extent that three quarters of revenues operator base, we could speak for that seasonality. However we are in a unique situation where the satellite gateway ramp is going on with Sky properties and some of our customers in the U.S. as well.

And once again we are also finding or negotiating some declines in legacy businesses of Entropic versus new businesses of these operators. So it's kind of muddled up, but again just sum it up for your benefit, three quarters revenues operator.

So there is some seasonality Q4 and early Q1 challenges and Q2 strong early Q3 strong that would be the extent to which I can't speak for patterns..

Yet, there is a little more side - I’d add a little bit to that. There is little - obviously there has always been seasonality to our consumer business, particularly the hybrid TV business but that’s such a small piece of our mix that we really don't see it moving the needle very much.

So when it was as much as 30% or more of our revenue, it definitely had an influence where it was much stronger typically in Q3, Q4; weaker in the first half of the year. We are just not - that pattern is still there. It’s just much more muted given the overall size of the company now..

And if I could sneak in one more just from a longer term perspective. Did you guys look at 2016 as a whole. You have lot of different things going on moving parts there as well.

So I guess boils it down to Kishore on a dollar basis not percent, what do you expect to be the biggest drivers of upside and where do you see there is some potential dollar downside as an offset as we think about the year as a whole?.

I think that there are timing risks - timing related challenges with legacy revenues of analog channel-stacking and SoC timing is seasonality driven in the latter half of next year. Those are seasonality related and then the analog channel-stacking is timing related.

And since we'll be rolling digital outdoor unit revenue and analog channel-stacking revenues, we see modest upside and modest downside. On the cable side, we see pretty decent upside on MoCA revenues. We see strong upside in satellite gateway revenues and we also see very strong on a relative basis. I know you asked on a dollar basis.

I want to reiterate that we said that in 2016 our high-speed interconnect revenues will be in the $10 million to $20 million of revenue. So of all of those our high-speed interconnect revenues are the most sexy ones, if you will. Its infrastructure high gross margin oriented.

That led gateway revenues are very, very meaningful and probably the bigger ones and then you have revenues coming from MoCA into the three chunky revenues, if you will, that would drive growth..

Great. Thank you..

Next we’ll hear from Tore Svanberg with Stifel..

Yes, thank you, and congratulations on the results. First of all, just a quick one for Adam. Adam, the higher gross margin in Q4.

Is that solely just a function of mix where legacy SoC will be down sequentially?.

Mix is certainly a piece of it. There are other things that are some timing related items that are working - that we believe will work in our favor as far as some of the non-standard cost in our model. So it's really mix, plus a bunch of other ins and outs, but the majority of it’s really mix related..

Very good and - go ahead Kishore..

And I think that we will - now that by the end of December six months may be behind us with the proper scrutiny of the Entropic product lines. We should start seeing operations benefit to start contributing to the COGS beginning of next year..

Sounds good. Last few quarters, your backlog has been pretty.

Where do you stand right now?.

I think it's as good as it's been in the last quarter. It’s somewhere in the closer to the 90% backlog range..

Now coming back to the topic on DOCSIS 3.1 and content.

So just to clarify, the MxL236 would be used regardless right but the variation is on the multi-attach?.

That depends - varies from operator to operator right until now on the DOCSIS 3.0 platforms, that PGA that was used was not MaxLinear’s platform. At various customers, we are transitioning the platform and across down on to - on their cost down to MaxLinear’s PGAs.

So on the Comcast platform for example, the XB3 MaxLinear’s - there is MaxLinear MoCA attached at another customer, and there is no MaxLinear attached at another customer. So it varies by operator and it varies by OEM.

But I would say that all in all on the substantially majority share of the 24-channel at Comcast would have MaxLinear MoCA attached to it. PGA will be rolling into it in the 24-channel platform. But once we move to DOCSIS 3.1 platforms, MaxLinear’s DOCSIS 3.1 PGA will be default on all the MaxLinear platforms..

That's very helpful. Last question, you mentioned $10 million to $20 million in high speed or Physpeed revenues next year.

Should we assume that that's going to be primarily a 100-gig long-haul or you could you potentially even get some metro and data center revenue?.

I think there is a 100-gig long haul and metro and we'll also be announcing we did make some announcements earlier but only now we are beginning to attack the datacenter. We have some products that we are beginning to sample. They will be - datacenter related revenue towards the second half - in the second half of next year ramping.

So that's the reason I have such a broad range between $10 million to $20 million.

And I would say that there is definitely upside because we got interesting products coming out and I would be delighted if we were to be on the high end of the range and one of those situations where I am like I don't a reason to why we cannot make it happen if we did we get what are if we can provide more resources with the design platforms go flawlessly through in our own manufacturing is no longer the limitation..

Very good. Then congratulations again on the Entropic integration. Thank you..

Thank you..

Next we'll hear from Quinn Bolton with Needham & Company..

Hey guys, congratulations on the nice results. Just wanted to come back to Q3 Q4 here. I didn't hear - maybe I missed it but any comments on the satellite gateway ramp? I think you have both the North American and the European vendor currently ramping. So it's a little surprise not to hear any commentary on sort of how that business trended in Q3, Q4.

Obviously it sounds like it’s a big part of - or let's say big growth driver next year, but can you make any comments for the second half of ‘15?.

Satellite gateway..

So can you repeat the question Quinn. Your question was Q3 to Q4 the trends in the satellite gateway.

Is it correct?.

That's right and Q3 versus Q2..

Yes, so I'll give you a little bit of color on the satellite gateway. So the Q2 period was really the first real break ramp up for us on the satellite gateway.

That's where - if you recall prior to the Entropic acquisition, we are saying at what point in time would satellite represent more than 10% of our mix kind of indicating that it had achieve some form of liftoff. And certainly that happened in Q2 and that was pretty big ramp for us.

Q3 gateway, we’re experiencing right now a little bit of digestion from that shipments of that product. That ships us strongly in Q2 and really we’re expecting some bounce back in Q4 but certainly much stronger demand as we head into the Q1 period. So we're kind of in that typical big period where operators will take a big slog of delivery.

They build up the inventory. They fill their hubs and they start to deploy the products and then they basically kind of get that, digest a little bit of it and then kind of resume a more normal deployment pattern once they've the got the initial deployments underway. So we feel very confident about where we are. Again Q2 was very, very strong.

We got from that. Q3 was reasonably - was a reasonable quarter as well, pretty much in line with what our expectations would have been had we not had such a big Q2. And then Q4, again is pretty much in line but we expect more exciting growth and kind of I would say significance of the revenues to be in Q1..

To give you a little bit color, the way the operators order is they give us the six month rolling forecast and they give you - one of them gives us some kind of an open deal over six month period.

So we have good visibility into what Q1 would look like, that's where we feel pretty good that there is no hiccup in the throughput side from the customer..

We are expecting a very strong 2016 on the gateway side and we've had a very good start to that ramp with a strong 2015, very much in line, if not better than what we were expecting as we enter 2015..

And just to clarify, are both of the European and North American operator gateway ramps now sort of going through that initial channel fill and get more into steady-state pool in 2016, or is there a timing difference between when the North American ramps and when the European operator ramps?.

So the way - it looks like, initially European guy was much ahead and then they had some fits and starts and then the American operator kind of got caught up.

Now within kind of they are closely paired, though there are some uncertainty associated with the planning process with the American operator due to consolidation situation, and whereas we are getting more clarity on the European operator because they are beyond their consolidation now..

Got it. And just turning over to the channel-stacking business. It sounds like you are seeing currently a nice ramp in the digital side of that business but there is some timing uncertainties when your large analog channel stacking switch customers start their digital migration.

Now that you've got another quarter under your belt, do you have any improved visibility into when that large North American operator may start the digital channel-stacking switch conversion?.

There are multiple operators in North America who are deploying our digital channel-stacking solution as well. So one of them is going quite strong. One of them is being very deliberate between the - by the way and both - and all of them buy our analog channel-stacking solution as well.

So one is being much more aggressive on the digital channel-stacking ramp and there we do not have any risk of, what I call, revenue working in not favorably for us.

And the other one, there would be more deliberate and with how they are going to - how and when they are going to mix analog with digital, but they are also beginning to ramp digital channel-stacking, however they are doing it with lesser volume platforms right now and they are being much more deliberate.

So I would say that all in all, right now that trend is working in our favor but we will need to see as we exit 2016 how that plays out. And if this trend continues, it's a good one for us. If it picks up some more momentum, it's still good for us.

It just that both the - deliberate deployments one of these operator is actually in our favor and we are actually counting on that right now, not in our forecast as much is like we are hoping for that..

Yes.

To give you a little more color, Quinn, too, just to give you some context, the digital channel-stacking - we always were forecasting the digital channel-stacking would be maybe a third of the satellite revenue gateway or would be two-thirds but really in the second half of the year, we are looking at digital channel-stacking being as large, if not larger, than the gateway.

And at the same time as analog is also continuing to be very strong as well. So you are seeing strength across analog deployments. You're seeing more strength than we anticipated on the digital channel side.

So digital channel-stacking has a group of products of the family is definitely out-delivering what our expectations were on an organic basis and also when we were doing the combination with Entropic. And that’s not to diminish what's happening on the gateway side because that is also being very consistent with our forecast that we had entering 2015.

So that's delivered as well, just been really good upside that we are seeing on the channel-stacking for both analog and digital at this time..

Great. And then just last one from me, Adam. You've done a great job on the non-GAAP OpEx and the $20.5 million to $29.5 million range the last three quarters. I think probably many of our models, if you look out to 2016 probably anticipate OpEx increasing to the $32 million to $35 million a quarter range as it progresses the year.

Obviously that sounds like OpEx may come in well below that kind of level.

Can you give us any sense how we should be thinking about OpEx in the 2016 on a quarterly basis?.

I think that the way we've always told on the OpEx side is that much of our OpEx activities always been driven by hiring and now our higher anticipation for next year really are much lesser than before. So the OpEx pickup should be more gradual than earlier years as we went from Q1 to Q4.

So Adam, do you want to give some color or it’s too early to do that because our AOP planning is not complete yet..

Well, I would say that right now we're - and I've been pretty consistent in talking to folks about this that we are not expecting significant step-ups in OpEx in 2016 from where we exit 2015. So the fact that we provide some guidance - when I say significant, we'll see the normal merit. We'll see a little bit of headcount additions.

We'll see some remixing and so forth. There is a little bit more tape-out intensity in 2016, given our roadmap that we had in 2015.

But all in all, if you think about kind of bracketing the OpEx right now on a quarterly basis to being in the 30 to - I would say even $30 million to $32 million is probably the range that I would be expecting for any quarter right now as I look out into 2016.

Again it’s preliminary, as Kishore said, we’re still going through our planning but I think that's a reasonable place to be..

That's great. Very helpful. Thank you very much..

Our next question comes from Krishna Shankar with ROTH Capital..

Yes, Kishore and Adam congratulations on the nice results.

For most of the satellite gateway deployments that you have now, are they all mainly analog switches and will that be an ASP bump in content as you move to the combination of digital switches and satellite gateway?.

The satellite gateway is a new market for us, so they are very different markets, right. There is a gateway market where we get ASPs, we have said anywhere between $5 to $10 and then on the switches they have the similar range of pricing on the digital channel-stacking solutions.

So I must congratulate the operators for beating us up so well that we can't expect ASP increases on our legacy solutions. On the other hand, they give it as new market platforms with good revenue opportunity because the ASPs. But not relative to what we think we truly get need to be paid, but we are happy to have their business..

Great.

And then on the cable side with respect to DOCSIS 3 and 3.1, can you talk about the competitive environment, how you see things out there especially with the large competitor and that throws off a merger, what do you see in terms of competition and what customers are telling you?.

I think the cable data platform is primary always being the platform we are on, the Intel platform and then the Broadcom platform, right. And I would say that competitively we don't expect any share changes.

However at this point, we are very, very comfortable saying that our platform has a lowest power and the best-in-class performance for DOCSIS 3.1 applications. And while - when we talk of these PGAs, it looks like it's another amplifier - is just not another amplifier.

The DOCSIS 3.1 PGA is an incredible power consumption beast and it’s really, really putting a spanner in the competitive platforms where they do not get a credible PGA, so their power budgets are incredibly bad.

And since we do not sell our PGA outside of our own guard analog mixed signal components, we feel we’re in a very, very good positively position with advantage owing to our MoCA, owing to DOCSIS front-end and PGA products..

Thanks.

And then Adam on gross margin for 2016, can you sort of speak broadly on gross margin trends just given the mix towards more balanced cable and satellite and potentially more comps infrastructure that lot of upside to gross margin for 2016?.

I think that that trend is going to be upfront in 2016 on margin, but I'd be really cautious to get too far ahead of ourselves. I would say that as you can see we're moving back in the right direction in Q4.

I would expect that that trend would continue in 2016, but I really right now still think that it's going to be difficult to get back to a 60% plus gross margin in the 2016 timeframe. I think that's really 2017 and beyond, just as a function of mix and ramping new platforms that have yet to be dialed in on a cost basis.

So I think we're going to be moving in the right direction. It's going to be incremental. It's not going to be any significant shifting. And I think we'll work our way back towards the 60 point margin as we exit 2016, but I wouldn't be modeling at the 60 quite yet for any time..

For the entire year definitely not, but I think we are hopeful that as we exit, we will be getting us right in the 60% corner there..

Great. Thank you..

And we have a follow-up question from Ross Seymore with Deutsche Bank..

Hi guys.

One last question for me, and housekeeping for Adam, especially since you guys get bonuses in shares, what should we think about for share count in the fourth quarter and then generally speaking direction on that for ‘16?.

Directionally speaking you should be thinking around, I would say, anywhere between 500,000 and 700,000 shares per quarter in total for all the programs including the RSU vesting for a long-term incentive plans or share-based bonus and our ESPP. I think that 500,000 to 700,000 shares is the right on the quarterly basis.

It's just a little bit lumpier in some quarters versus the other, may tends to be a heavier release window for us given our annual cycles but net-net that's about the range..

And I guess one another one since I have it here with - on the high-speed interface side of things, can you talk a little bit about what is allowing you to take that share and go to the $10 million to $20 million in revenues next year? Is it still exceeding performance-driven or it’s price coming into the equation as well?.

What’s allowing us is because we have the unique part. I mean colloquially put people have crappy parts, we have great part.

I mean, that would be the summation of why we are winning which we are so surprise so fast it's happening, but I would say all in all there is a dirt of suppliers who really are high quality what we call high quality analog mixed signal design companies.

So far this market has been fed with discrete component mentality and thinking and how they design them. So when we showed up with their laser driver parts, it was readily accepted into the market and that's why we’re winning.

And secondly, we have not yet seen a pricing pressure on the driver products, but I would not be surprised on the lesser performance, trans-impedance amplifier, TIAs, there are many lenders who can do that and that's going to be more price competitive.

And honestly as you know, we are battle hard in that and we're just going to be entering that market and we hope to take share away based on our design excellence..

Perfect. Thanks again guys..

At this time there are no further questions. I will turn the conference over to Dr. Seendripu for any additional or closing remarks..

Thank you operator. As a reminder, we will be participating in the Stifel Midwest one-on-one conference on November 12 in Chicago. We'll also be at the Consumer Electronics Show in Vegas in the week of January 4 and the Needham & Company 18th Annual Growth Stock Conference in mid-January in New York. We hope to see many of you there.

With that, I want to thank you all for joining us today and we look forward to reporting on our progress to you in the next quarter..

That does conclude today's conference call. Thank you for your participation..