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MaxLinear (NYSE:MXL)
Q3 2019 Earnings Call
Oct 24, 2019, 4:30 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Greetings, and welcome to the MaxLinear 2019 Q3 earnings call. [Operator instructions] It is now my pleasure to introduce Brian Nugent of Investor Relations. Please go ahead, sir.

Brian Nugent -- Investor Relations

Thank you, operator. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss MaxLinear's third-quarter 2019 financial results. Today's call is being hosted by Dr. Kishore Seendripu, CEO; and Steve Litchfield, chief financial officer and chief corporate strategy officer.

After our prepared comments, we will take questions. Our comments today include forward-looking statements within the meaning of applicable securities laws, including statements relating to our fourth-quarter 2019 revenue, gross margin, operating expense, tax expense, tax rate and interest and other expense guidance, as well as statements relating to trends, opportunities and uncertainties in various product and geographic markets, including, without limitation, statements concerning growth opportunities for our wireless infrastructure and connectivity markets and for improved revenues in our broadband markets. These forward-looking statements involve substantial risks and uncertainties, including risks arising from competition, the outcome of global trade negotiations, export restrictions, potential supply constraints, our dependence on a limited number of customers, average selling price trends, risks that our markets and growth opportunities may not develop as we currently expect and that our assumptions concerning these opportunities may prove incorrect, and numerous other risks outlined in the Risk Factors section of our recent SEC filings, including our previously filed Form 10-K for the year ended December 31, 2018, our Form 10-Q for the quarter ended June 30, 2019, and our Form 10-Q for the quarter ended September 30, 2019, which was filed today. Any forward-looking statements are made as of today, and MaxLinear has no obligation to update or revise any forward-looking statements.

The third-quarter 2019 earnings release is available in the Investor Relations section of our website at maxlinear.com. In addition, we report certain historical financial metrics, including net revenue, gross margins, operating expenses, income or loss from operations, income taxes, net income or loss and net income or loss per share on both GAAP and non-GAAP basis. We encourage investors to review the detailed reconciliation of our GAAP and non-GAAP presentations in the press release available on our website. We do not provide a reconciliation of non-GAAP guidance for future periods because of the inherent uncertainty associated with our ability to project certain future charges, including stock-based compensation and its associated tax effects.

Non-GAAP financial measures discussed today do not replace the presentation of MaxLinear GAAP financial results. We are providing this information to enable investors to perform more meaningful comparisons of our operating results in a manner similar to management's analysis of our business. Lastly, this call is being webcast, and a replay will be available on our website for two weeks. And now let me turn the call over to Kishore Seendripu, CEO of MaxLinear.

Kishore Seendripu -- Chief Executive Officer

Thank you, Brian, and good afternoon, everyone. Thank you all for joining us today. Our Q3 2019 revenue was $80 million, consistent with our guidance. Gross margin remained solid, and operating expenses declined on disciplined execution.

We also delivered $21.8 million in strong cash flows from operations. As a percentage of our overall revenue, our Connected Home business stood at 51%; infrastructure at 25%; and industrial and multimarket was 24%. We continue to successfully execute on our critical engineering and customer engagement milestones in our strategic infrastructure and high performance analog markets. In early 2020, we expect production adoption of 400 gigabit and 400 gigabit PAM4 DSP SoCs in the hyperscale data center market.

We are also excited about our first 5G wireless tier one OEM design win for our industry-leading 14 nanometer CMOS 4x4 massive MIMO Quad RF transceiver SoC solution. We're on track to see initial revenue in 2020 for our wireless RF transceivers in the 5G market. We continue to make significant strides in our data center and customer initiatives. In the near term, we have further solidified our position with our deal in hyperscale data center and customer ahead of their industry-first 400 gigabit RAN.

At ECOC, we announced our second-generation Telluride PAM4 DSP SoC fiber-optic portfolio optimized for a single lambda 100-gigabit QSFP and SFP modules. We also announced that Delta Electronics and Centera Photonics have developed DR, FR and LR optical modules for data center leveraging our second-gen solution. We believe single lambda 100-gigabit and 400-gigabit solutions will dominate data center and 5G wireless front to all deployments over the next several years. We are well-positioned to be one of the leaders in this market.

In 5G wireless, we are excited about our first 5G wireless RF transceiver, tier one OEM customer design win. In Q3, we accelerated the pace of our customer engagements for our industry-leading 5G RF transceiver SoC solution. Early customer feedback confirmed that we are hitting the demand in performance and features required by this market. As a reminder, our 5G RF transceiver had the highest performance, double the bandwidth and superior system-level integration and up to 50% lower power consumption versus competition.

Strategically, we are focusing on growing our content on a persistent remote radio unit basis, enable an expanding product offering and tier one customer engagements. In wireless backhaul, we faced headwinds in Q3 due mainly to the Huawei restriction. However, we are confident in our ability to grow backhaul revenues in 2020 based on the layering of several new tier one OEM adoptions in the coming quarters. This is highlighted by a top four RAN OEM starting shipments in Q4.

Our RF SoC is the only solution to support channel aggregation with doubled data capacity in existing available spectrum for current and future 5G transport networks. In the Connected Home, in Q3, we saw a good follow-through on our MoCA 2.5 system builds at Verizon. However, we do expect to pause in Q4 as the supply chain transitions from the build phase to the launch phase. Our cable data business stabilized in Q3, though it is still too early to call a bottom.

However, we have designed engagement supporting the next wave of DOCSIS 3.0 deployment for North America and for expansion outside North America. Overall, we are on track with industry-leading diversification initiatives to drive strong future revenue growth in 5G wireless, optical data center and high-performance analog power and industrial markets. With that, let me turn the call over to Mr. Steve Litchfield, our chief financial officer and chief corporate strategy officer, for a review of the Q3 business results and our forward guidance.

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Thank you, Kishore. I'll first review our Q3 2019 results and then further discuss our outlook for Q4 2019. On revenue of $80 million, we saw our Connected Home business up 5% sequentially with increases in connectivity and cable data offering, a step-down in satellite revenues, which continues to deteriorate. Our infrastructure business decreased 11% driven by a slowdown across high-speed interconnect, wireless backhaul and HPA categories.

Our industrial multi-market business was down 9% sequentially. I'd like to give a brief update on Huawei. We did receive clearance to ship certain products to Huawei late in the quarter and have reengaged with them. That said, the demand picture of Huawei remains highly uncertain mainly due to the evolving broader regulatory environment, but also due to Huawei's dependence on other components within our systems and various inventory levels associated with each.

GAAP and non-GAAP gross margins for the third quarter were approximately 52.4% and 63.1% of revenue, respectively. This compares to GAAP gross margin guidance of 52% to 52.5%, and non-GAAP gross margin guidance of 63% to 63.5%. The delta between GAAP and non-GAAP gross margins in the third quarter reflects the amortization of $8.5 million of purchased intangible assets from previous acquisitions and $0.2 million of stock-based compensation. Third-quarter GAAP operating expenses were approximately $45.2 million, which was below our GAAP guidance of $46.5 million to $47.5 million due to mainly lower-than-expected stock-based bonus accruals.

GAAP operating expenses included stock-based compensation and stock-based bonus accruals of $8.5 million and amortization of purchased intangible assets of $5.7 million. Non-GAAP operating expenses were $30.8 million, which was down $2 million sequentially and below our non-GAAP guidance of $31 million to $32 million due to disciplined expense management. We've been successful managing the spend during this transitional period. After sequential reductions in the last three quarters, our quarterly non-GAAP opex run rate was down almost 14% year-over-year.

Moving to the balance sheet and cash flow statement. Our cash flow generated from operating activities in the third quarter of 2019 was $21.8 million versus $12.4 million generated in the second quarter of 2019. We made $20 million in debt prepayments during the quarter toward our term loan as we continue to focus on debt paydown with our cash generation. This brings the total debt prepayments to $213 million and our loan balance down to $212 million.

Our day sales outstanding for the third quarter was approximately 64 days, which was slightly above the prior-quarter day sales outstanding of 63 days. Our inventory turns increased to 3.8, compared to 3.6 in the second quarter. That leads me to our guidance. We currently expect revenue in the fourth quarter of 2019 to be approximately $67 million to $73 million, down 12.5% sequentially at the midpoint of our guidance range.

We expect Connected Home revenues to be down approximately 25% sequentially driven primarily by a pause in connectivity shipments related to inventory digestion after a strong build in Q3 -- Q2 and Q3. Significant weakness in the satellite market, which will now become an insignificant portion of our revenues, and a subdued recovery in the cable data due to continued macro headwinds in the cable market. We expect infrastructure revenue to be flat to slightly up, owing to a recovery in wireless backhaul, including Huawei demand levels and expected early stage PAM4 DSP shipments offset by an expected decline in HPA shipments in this category. We expect our industrial and multi-market to be approximately flat to slightly down.

We expect fourth-quarter GAAP gross profit margin to be approximately 52% to 52.5% of revenue and non-GAAP gross profit margins to be approximately 63.5% of 64% of revenue, up sequentially due to improved mix and a continued focus on COGS improvement. As a reminder, our gross profit margin percentage forecast could vary, plus or minus 2% depending on the product mix and other factors. Even as we focused on reducing our run rate spend levels, we continue to fund strategic development programs, targeting at delivering strong top line growth in 2020 and beyond with particular focus on infrastructure initiatives and our stated goal of increasing the operating leverage in the business. As such, we expect Q4 2019 GAAP operating expenses to decline approximately $1 million quarter-on-quarter to a range of $44 million to $44.5 million, driven mainly by reductions in professional fees and prototyping expenses.

We expect Q4 2019 non-GAAP operating expenses to be down approximately $0.8 million sequentially to a range of $29.5 million to $30.5 million. We expect GAAP tax expense to be approximately zero and a non-GAAP tax rate of 5%. We expect interest and other expenses in the quarter to be $2.6 million to $2.7 million. In closing, we are pleased to report progress in our infrastructure initiatives highlighted by our expanding product portfolio and design engagements in the 400 gig data center market, engineering and customer milestones in our 5G massive MIMO transceiver platform, and execution on our infrastructure power management development initiatives.

As we continue to navigate through a turbulent environment in the near term, we will focus on maintaining strong profitability and cash flow generation, as well as executing on our strategic investments. These infrastructure initiatives and strong engineering execution, combined with upcoming upgrade cycles in the data center and wireless markets, position us well to deliver strong leverage in our business as many of the new product rollouts start to layer in incremental revenue streams in 2020. With that, I'd like to open up the call for questions. Operator?

Questions & Answers:


Operator

[Operator instructions] Our first question comes from Alessandra Vecchi with William Blair. Please state your question.

Alessandra Vecchi -- William Blair and Company -- Analyst

Hi, guys. Congratulations on a good quarter in a tough environment, and especially on the 5G OEM win and the PAM4 traction. On the Connected Home side though, so you guys said that the Verizon had sort of picked up with the MoCA shipments, and that was part of the contribution to Q3. If I do the math correctly, on Q4, it implies sort of a $30 million Connected Home ramp, which is significantly more than the ramp in Q2, Q3.

Can you see -- can you sort of help me understand better where the rest of the delta is coming from?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

So -- hi, Alex. I'm not quite sure I followed the thinking, but let me take a stab at it. So, yeah, we did talk about the pause in Verizon. I mean the two pieces that brought down our Connected Home business, the guidance specifically in Q4 were, yes, the MoCA ramp at Verizon.

So that had a big buildup in Q2, Q3, and now we're seeing a pause there. There's a number of reasons for that, but we're seeing that pause right now. The other one is satellite. I mentioned a couple of times in the prepared remarks, the satellite business is down significantly.

Our guidance, in particular, is down. We've kind of expected this business to bottom at some point. It really hasn't. At this point, it's down to a relatively low number.

I mean low-single digits on a quarterly basis. So the bad is that it's down by a large amount from the previous quarter. But the positive here is that, going forward, it's almost insignificant to our revenues in the future.

Alessandra Vecchi -- William Blair and Company -- Analyst

OK. That was helpful. And then can you help us maybe understand a little bit how to think about the timing of the Verizon ramps from these sort of trials to sort of, call it, volume production?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Yeah. So as we stated, I mean, you've kind of gone through this build phase. And as it launches though, we'll see some follow-through. I mean we see it pause probably in Q1, but I expect it does pick up.

I don't know if it's early Q2, but I mean I would expect at some point in Q2 that it would start to recover.

Alessandra Vecchi -- William Blair and Company -- Analyst

OK. Thank you. That's very helpful. That's it for me.

Operator

Our next question comes from Ross Seymore with Deutsche Bank.

JiHyung Yoo -- Deutsche Bank -- Analyst

Hi. This is Ji for Ross. Thank you for letting me ask a question. Could you just clarify what MaxLinear is exactly shipping to Huawei? And what licenses you've received approval to ship for? And I guess is that the full run rate of Huawei sales at this point? Or should we expect more licenses to be approved in the future?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Yes, Ji. So I don't want to go through every single product in what was approved and not approved. We do ship -- most of these products show up in our infrastructure end market. Their HPA, as well as wireless products.

So these guys are a big wireless backhaul, but also access consumer of our products. So we did get approval. So I think that was the positive in the quarter. It was late in the quarter so there was a fairly small amount of contribution.

Going forward, I think it's encouraging. But as I stated, there is a fair amount of inventory that they've kind of built up. There was a lot of speculation around this early in the year. I think that's playing out as to be in the case.

But I think we are encouraged, we are engaged, and there's good potential as we look into 2020.

JiHyung Yoo -- Deutsche Bank -- Analyst

OK. Great. And the -- you guided the industrial, multimarket segment flat to slightly down. That seems to be a little bit better than other broader peers.

Can you discuss what you're seeing in that end market given the macro headwinds?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Sure. Look, I wouldn't necessarily read too much into that. We had a pretty tough quarter in Q3. It was down a fair amount, and this has been very lumpy for us.

I mean, I think if we started out the year, it was down quite a bit. We saw a nice recovery in Q2, and then it ended up being a lot softer in Q3 than we had expected. So while we do see it being flat to slightly down, we've got a number of new products. We've had some headwinds on a couple of products like on the server side, for example, that has been a headwind, especially in Q3.

We're optimistic that as we -- in the next couple of quarters, we'll see some recovery there.

Operator

Thank you. Our next question comes from Quinn Bolton with Needham & Company. Please state your question.

Quinn Bolton -- Needham and Company -- Analyst

Hey, guys. I just wanted to follow up on the Connected Home. It did sound like the satellite business is now down to immaterial levels at a low single-digit percentage of revenue. It sounds like the MoCA connectivity business is probably not far off that level in Q4.

I just wanted to see if you would confirm that. If that's the case, would you sort of think going forward that admittedly off a lower base, we finally see stabilization in Connected Home with potentially some growth on the cable data side? Or is it premature to call for stabilization?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Yeah, Quinn. Look, you've -- I think you accurately captured what we're trying to say. I mean, definitely, satellite and MoCA are down the levels that are super, super low. Hopefully, that is indeed the bottom.

At a minimum, we've mitigated tons of risk at this point. With regard to cable data side, I would say, moving into 2020, I think we actually -- hesitant to say this, but it actually does feel a little bit better. I think our market share is definitely in a good place. We're not expecting some big aggressive ramp, but definitely feel like we're in a much better place looking out over the next few quarters.

Quinn Bolton -- Needham and Company -- Analyst

Great. Second question, just wanted to sort of get your thoughts. It seems pretty clear coming out of the ECOC show that the largest hyperscaler looking to adopt the 400 gig modules is facing a number of delays. I think some of it is just the cost of the optics at nearly $1,000 a module.

Some of it is firmware issues. But it seems like they've significantly reduced their potential demand for 400 gig DR4 modules in 2020. How does that affect your business? Or if that's tough to answer, could you give us your sense to how many 400 gig DR4s might be shipped to the entire hyperscale market in 2020 so we can try and level set the models?

Kishore Seendripu -- Chief Executive Officer

So, Quinn, I think that what you gathered at the end of ECOC is probably accurate on the readiness of the modules. However, regarding the cost structure of the module, that is not correct. I mean, if you look at any previous generation of products at this phase of trial soaking, they are in that price range. Based on what we know and the people we are working with, who are qualified in various stages of deploying -- of trial deployment or the pre-phase for the ramp, we don't see the cost as an issue.

So regarding the reduction in the forecast for both this big hyperscale data center guys would ramp, now that's a purely calendar event, it is not driven by the -- because of the cost, they're going to deploy less. They're committed to ramping this new generation of data centers. And if calendar slips, so does the volume for the calendar year. So I would just say whatever model you have, you delayed on the TAM by six months, you'll be just fine.

So -- and I do not know what you are referring to, but it's based on the number of data centers that are built and so on and so forth, and you layer the first hyperscale data center person, the company in the first half of this year starting of second year -- of 2020 starting, and they layer in the next one at the -- in the second half of the following year. I think the math will just work itself out. So I'm not at all seeing a picture where their volumes are going to be down because the cost structure, I just see it as a delay in the qualification process. And as for their concern, primarily, I know it's more formal type of issues, much more than a cost structure-based issue.

So I would like to correct the sense of the cost structure of the module.

Quinn Bolton -- Needham and Company -- Analyst

Thank you, Kishore, for that. And then just lastly, obviously, you guys, a big announcement for the 4x4 transceiver for 5G. Can you answer just a couple of questions? One, hopefully, that's not with Huawei because then perhaps, it would be subject to shipment bans, but can you confirm that that design win wouldn't be affected by any current entity list issues in place? And then second, I assume this is a sub-six gigahertz radio, but can you give to give us any more detail? Is it sort of targeting a specific geography? Is it a worldwide ban? How big could this platform be for this tier one customer?

Kishore Seendripu -- Chief Executive Officer

Quinn, obviously, there are four top-tier OEMs based on worldwide shipments of wireless access products, and there are two or three others that do matter that -- because of all these tariff environment, how is that game is going to get played out. We are being evaluated by all of them, and we have a design win with a tier one OEM from Europe. OK. That much, I can confirm.

So it will not be subject so far as we know to the regulatory environment. But before I go further, I want to say that -- and you have heard some earnings calls from substitute product companies that sell FPGAs and so on and so forth. The story we have told about FPGAs being replaced by ASIC solution, that is really happening. And the second part of it is that much of the volume reductions of those FPGA companies may be referring to a really more related to the China geography rather than to any European entity OEM.

That's our statement. So we have -- really, this leading up to all the big volumes in 5G are happening in China. They're at least a couple of years ahead on the volume situation. While there's a lot of excitement in North America about 5G, it's primarily a millimeter wave, and the viability of broadcast millimeter wave is really, really questionable.

The volumes are really tiny, and the ASPs are high temporarily, but the viability in the broadcast market is still challenged. So all the worldwide deployment in 5G are in the sub-six gigahertz band, and they will be for the next several years to come. And that's where we have our design win on the sub-six gigahertz band. And we hope to announce that we have other design wins by the end of the year, hopefully, by the Mobile World Congress for sure.

And we're feeling quite optimistic that ours is the best product in the marketplace. And by the time we are there in Mobile World Congress, we hopefully are announcing maybe another new generation of product to address a bigger TAM. So we feel very good where we are positioned.

Quinn Bolton -- Needham and Company -- Analyst

Thank you, Kishore

Operator

Our next question comes from Gary Mobley with Wells Fargo Securities. Please state your question.

Gary Mobley -- Wells Fargo Securities -- Analyst

Hey, guys. I just wanted to follow up on the last line of questions relating to the RF transceiver. If I'm not mistaken, this market is on pace to be roughly, what, $700 million, $800 million in a few years' time. And based on the way you described your tier one customer, it sounds like it's Nokia, and it sounds like perhaps your market share opportunity in this $800 million market could be roughly 10% or 12%.

Can you confirm, based on this tier one design win, whether or not that can actually translate into roughly $100 million in annual sales?

Kishore Seendripu -- Chief Executive Officer

So Gary, that's very, very difficult for us to see. I just want to very candid when these platforms are selected. They do a number platforms throughout -- through all the yearly process, and how much volume each platform gets is unknown at this stage. However, having been selected on a platform, you can assume that you'll also make subsequent platforms potentially share with another supplier.

We do not know at this point who would that be. So to the extent that there are three players in this market, outside of, what I'll say, Huawei internal sourcing being a very, very strong push internally. So we would say that we are among the three potential suppliers for the transceiver market. So I think you would want to use that from your own calculation of what our design wins could imply.

But having said that, you want to understand that the real ramps are going to be happening even in China toward the end of the year, the ramping -- ramps will be happening as they transition to lower cost, what I call generation of system-level platform design, and that's what we are trying to catch as a company. So the end market still remains China. We believe, in the U.S., it'll roll through later on to potentially T-Mobile and Sprint. This is speculation.

No confirmation or anybody. So that would be the cadence in which 5G would roll out in the world.

Gary Mobley -- Wells Fargo Securities -- Analyst

OK. All right. On the topic of the Connected Home business, you mentioned the tough times for the satellite business. Is that inclusive of both the set-top box business, which is mostly over in Europe and then as well the DBS outdoor unit?

Kishore Seendripu -- Chief Executive Officer

I think when we speak of our satellite business, we do not differentiate between -- we have -- never have differentiated in gateway or satellite outdoor unit business. So -- and we have never differentiated between Europe and North America markets because they're basically the major satellite providers in the world and the umbrella as we speak. So I do not think it matters at that level.

Gary Mobley -- Wells Fargo Securities -- Analyst

OK. And I guess the reason I'm asking is that, of course, one of your main competitors in customer -- in pay-TV customer premise equipment is getting slapped on the wrist by the EU or, perhaps, more than that. And perhaps, that creates more of a level playing field for competitors. And so are we just too far down the road in you maybe not paying as much attention to this market? Or is this -- or is there really an opportunity for you to maybe take back some share?

Kishore Seendripu -- Chief Executive Officer

It's really -- one cannot dispute that what the EU has done should bode well for us. In what ways, we are not sure. And I think the other tools beyond slapping wrists that they could have used, but they have not, unfortunately. So we'll just cross our fingers and wait.

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Well, not yet.

Kishore Seendripu -- Chief Executive Officer

Not yet. So I think really the positive news that at this point, our focus and strategy has been our infrastructure investments in data center, high-performance analog industrial and 5G wireless, we're doubling down on that, and we are focused on growing those businesses.

Gary Mobley -- Wells Fargo Securities -- Analyst

All right. Great. Thank you, guys.

Operator

Our next question comes from Bill Peterson with JP Morgan. Please state you question.

Bill Peterson -- J.P. Morgan -- Analyst

Yeah. Hi. Thanks for taking the question, and congrats on the transceiver win. I wanted to ask another question related to Huawei, and there's been a lot of speculation that they're really on a path for insourcing.

Concerning the existing business, things like backhaul, I mean, is there a chance that this could never come back? And then, are they still telling you they're going to buy, it's just a matter of time? Or I mean it's kind of a question on the engagements. Are they still actively looking to buy these in the future? Or how do you see that coming back over time?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

So I think, Bill, look, we're very cautious on our expectations with Huawei at this point, especially as it relates to revenues and numbers that we're providing to TheStreet. I think that being said, I think we are encouraged by our relationship and, I guess, as we're positioned there for the long term.

Bill Peterson -- J.P. Morgan -- Analyst

OK. That's fair. And returning to Connected Home, and I guess kind of more like a longer-term question. capex, of course, the value -- if you look at some of the -- I think Comcast had their earnings today and are kind of still talking about capital intensity declining and continuing to decline.

I know our analysts have capex down this year and next year. What does it take, I guess, from the broader perspective, to drive investments? Do we need to do full duplex? And I know in the case of full duplex, I believe Cisco is kind of putting their program on the back burner. The cable guys don't seem to be in a rush. What form of -- I guess a longer-term perspective can kind of really turn that business around?

Kishore Seendripu -- Chief Executive Officer

So, Bill, obviously, first and foremost, I want to get back to what Steve said in his remarks, in his prepared remarks. We actually feel pretty good where our share stands and some level of traction for recovery in our share more than what we have today and next year in terms of share. However, the spend is lower, much lower even in 2019 than one would have ever imagined. And so I think the recovery happens in a way that the threat from the fiber deployment that are -- AT&T and Verizon are embarking on pretty strongly.

And in fact, you can see what's happening to our MoCA products in the Verizon. I mean they're coming very aggressively and rolling on MoCA because they want much more bandwidth in the home that is high quality of service distribution inside the home for data networks. So I think that the way this is going to change is as the aggressive behavior of Verizon and AT&T happen in the various metropolitan areas in the East Coast and Northeast, then the Comcast of the world will have to respond with increased bandwidth offerings, and that will drive growth back into the system. That will happen next year.

We do not know in the North America. But we do know that other regions are going to start coming online on DOCSIS 3.1 deployments, and we should benefit from that.

Bill Peterson -- J.P. Morgan -- Analyst

OK. Thanks for that, and good luck.

Operator

[Operator instructions] Our next question comes from Tore Svanberg with Stifel. Please state your question.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Yes. Thank you. I know Telluride is not ramping yet. But as far as you can, Kishore, could you talk a little bit more about the road map beyond Telluride? 16 nanometers going to seven nanometer? Just trying to understand sort of the investment that's going to continue to go into that segment going forward.

Kishore Seendripu -- Chief Executive Officer

So Tore, obviously, we do not talk about technology nodes. We never discuss our technology nodes as a future investment. We always announce technology node when the product is announced. So, obviously, what other products we have developed in the market, they'll always be in the best in class with -- in terms of their performance, integration levels and so forth.

We have done that with the Telluride product as well. So we are coming to the road being very, very robust on the technology road front as well. And remember that it's not just about the data center side, we actually take advantage of the technology nodes we developed in the data center side, on our wireless market as well. So we feel that we're on track to be offering newer products in the next 18 months and in between.

And our opex reflects a spend level that will make us be able to do that without compromising NAV. If this question is being motivated by the opex discipline, as we call it, it's really opex discipline on markets that are -- don't need investments versus opex is in markets where, if you launch products today, we have high-quality, high-growth revenues in the future. And I think translating that to infrastructure investment, there is optical data center or wireless, and even our high performance analog power and the industrial market investments that are ongoing now.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Very good. And moving on to wireless infrastructure. Just trying to sort of understand the partnerships and things like that. Did you win the business straight from the OEM? Or is there an element of reference design here as well, perhaps, with some processor companies? Or is it just purely you and the OEM?

Kishore Seendripu -- Chief Executive Officer

So in this market, there is no reference design that works for 5G wireless access deployment whether it's active antenna systems or remote radio units, right? I think I want to get back to the strategy that we outlined three years ago. What are the reasons we have gone the infrastructure market is because we don't want to have to be in anybody's reference design. We don't want to be different than anybody else as digital back-end processor. We want to be in control of our own destiny.

So the next best partnership we can have is directly with the OEM. In the wireless market, our front-end directly interfaces with the digital front-end that the OEMs themselves develop. So you really have to win the designs OEM by OEM with their DFE front end. So that's how we have won the selection, and this is also a result of joint development agreement and MOUs that we have in -- we had in place before even we embarked on this process to get into 5G wireless markets.

So yes, we won it on our own, nobody helped us, and we're helping our customers to win. Let's put it that way.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

Very good. Just one last question. I know you don't give calendar year guidance or calendar '20 guidance. But if you look at the three segments, Connected Home, infrastructure and industrial, I mean, I assume you're expecting growth at infrastructure.

But if you look at the other two, assuming the markets stay flat, is there anything within each one that you can talk about where you could perhaps see some growth in those two segments?

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Yeah, Tore. Yes. I mean, you're right, we don't give specific guidance out that far. As you pointed out, look, our infrastructure business is really set up to grow nicely in 2020.

Albeit the starting point is a little later, but we really are confident in backhaul, very confident access starts to contribute in '20. And so that piece -- on top of that, the PAM4 DSP product will have a nice contribution as well. So all of that'll lead to very good year-over-year growth in 2020. The Connected Home is the one that, we would expect that to be down kind of given the levels that we've come down to.

I mean, I think it improves throughout the year, but on a year-over-year basis, it's likely to be down. And then, on the industrial and multimarket front, look, it's been a rough 2019. I'm just -- I'd say more from a market cyclicality standpoint. I think we see some modest improvements in 2020.

Tore Svanberg -- Stifel Financial Corp. -- Analyst

All right. Thank you.

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Thanks, Tore.

Operator

Ladies and gentlemen, there are no further questions at this time. I'll pass it back to management for closing remarks. Thank you.

Kishore Seendripu -- Chief Executive Officer

Well, thank you, operator. We'll be participating at the Stifel 2019 Midwest One-on-One Growth Conference in Chicago on November 7; the Needham Networking, Communications, Security Conference in New York on November 12; the Wells Fargo TMT Summit in Las Vegas on December 4; and the Barclays Global Technology, Media and Telecommunications Conference in San Francisco on December 11. So we hope to see many of you there. With that being said, we thank you all for joining us today, and we look forward to reporting on our progress to you next quarter.

Thank you very much.

Duration: 44 minutes

Call participants:

Brian Nugent -- Investor Relations

Kishore Seendripu -- Chief Executive Officer

Steve Litchfield -- Chief Financial Officer and Chief Corporate Strategy Officer

Alessandra Vecchi -- William Blair and Company -- Analyst

JiHyung Yoo -- Deutsche Bank -- Analyst

Quinn Bolton -- Needham and Company -- Analyst

Gary Mobley -- Wells Fargo Securities -- Analyst

Bill Peterson -- J.P. Morgan -- Analyst

Tore Svanberg -- Stifel Financial Corp. -- Analyst

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