MaxLinear, Inc. (MXL) Earnings Call Transcript & Summary

Good afternoon, everybody. Why don't we get started with the next presentation. We're really happy to have Steve Litchfield, who's the CFO of MaxLinear here with us. So Steve, thank you for coming, and welcome to Las Vegas.

As I've started with most of the companies, why don't we just talk about the demand environment. For the last 1.5 years in semiconductor land, it's been mainly about people talking about insufficient supply. Now all of a sudden demand has crept up to be a concern for folks in certain industries, certain verticals, more consumer stuff than what you guys do. But generally speaking, how are you seeing the demand environment right now?

Sure. Well, first, thanks for having us, Ross. So yes, demand environment, I guess it is kind of an interesting time, I think, in the market because I think we as well as plenty of others are still having shortages, and so it's still tough. I mean there's pockets of areas, substrates, I mean, even wafers, I mean there's various things that we are short of product. So trying to navigate that. And at the same time, as we look at the demand environment, I mean everything is holding up. Backlog visibility is good. That being said, as we look into next year, I mean, we have had customers, everyone's talking about what is coming next year and a little unclear and we've had some customers look -- talk about moving around scheduled shipments and things like that. And so that raises some concerns. So, as we look out into next year. But certain parts of the business, definitely less exposed. I mean, we're very excited about some of the things like in WiFi and fiber. You'll have more questions on those. But those are areas that new businesses, new products, I mean, our wireless infrastructure business, executing extremely well. So, we're still trying to get more product in order to support some of the growth businesses there.

Got you. So in the supply side, is that improving at this point, generally speaking, really but surely?

Yes. So, supply side is definitely improving. I mean, albeit there's some pockets here and there. It depends on nodes. It depends on substrate like ABF substrates continue to be somewhat of a headwind. But things are definitely improving, and I think it will continue to improve.

Got you. Well, yes, not that your demand is going to fall, but if demand in general slows down a little bit, that will solve the problem.

Yes. Yes. I mean we've been seeing some improvements. But I mean, yes, I think we definitely see more from here.

Got you. So, why don't we -- we're going to talk a lot about your core business, but why don't we knock out the Silicon Motion topic first and foremost. So, talk about the overall overriding strategic logic of the business. People look at it as a good company, but a very different company than what you currently do. And I think there's a little more overlap than people might be appreciative of initially. But talk about the strategic logic of it before we get into the financials.

Yes. I mean there's 2 or 3 kind of key items here. I mean, clearly, scale is a big aspect of the acquisition. I mean we're seeing more and more consolidation. The bigger you are, the more breadth of product offering technologies that you have, the better. So, that makes a big difference. It helps us wafer supply, I mean, specifically on the Silicon Motion side, and these guys do 2x, 3x more wafer volume than we do. And so that's definitely going to help out as far as pricing negotiations and the like. So, that's a positive. At the same time, I mean, we get to leverage a lot bigger R&D investment across a much bigger company, right? So, a lot of the R&D development, IP development that we're doing now can be leveraged across a much larger company. But a lot of the same IPs we're developing that they're developing. So, we intend to take advantage of that, right? And that's just another aspect of scale that we'll benefit from. And so at the end of the day, the scale piece is a big part of it. Naturally, I mean, the storage business is a big market with a big growth potential. I mean, double-digit growth over the next several years. We're excited about that. We see that as a potential. We play in this market. I mean a lot of folks aren't aware. We sell into the enterprise storage market today and are familiar how compression technology won a big award at FMS recently. So, we're excited about that market and have kind of tracked it for some time and thought it would be very complementary. So naturally getting into storage is exciting, but specifically in enterprise and data center storage is something, 70% of data centers are storage buys, right? So at the end of the day, our ability to sell controllers into that space, we think, is very compelling for companies, shareholders and the like. So, that's another big reason for the transaction. And then I guess, and lastly, financially, a very good transaction, excited. I mean, it's a large transaction for us. It does get us up to $2 billion gross margins. We think we can continue to make some nice improvements on their gross margins. To take it from there, we've identified $100 million worth of synergy. And...

Sorry for the background, nice folks. We're going to take care of that here in a second.

We've got $30 million from COGS that will come from wafer and back-end assembly test. I mean some improvements on the COGS front and then $70 million from the OpEx side that we expect to realize.

Since you guys announced this deal, the consumer side has been weaker and weaker. I know you don't own Silicon Motion right now, but how are you feeling about the deal given what the expectations were when you bought it or when you announced the deal, you haven't purchased it yet versus now considering the markets that they're addressing have tended to be weakening since that time?

I mean I don't think we've seen anything that we didn't expect. I mean there was early signs -- I mean, even Silicon Motion had talked about this back in January-February time frame with their earnings call, they had seen PC weakness at that time. So, that wasn't new. Clearly, during diligence, we saw this. We continue to watch the market. I mean these guys are -- I mean, handset, PCs are exposed. I think that being said, I mean, they've navigated these cycles in the past and have done extremely well in taking market share and continue to execute and I think that will continue to be the case.

They're making drinks back there, something with a blender. Sorry for those of you on the webcast. Trust me, it's funnier if you're here. You talked about, I think, a 25% accretion from a financial perspective. When we looked at it, if we put the 2 companies together and talked a little bit about the accretion and just even keeping a conservative view on SIMO's revenues, it seems like the accretion could be a bit more than that. Was the 25% just kind of a conservative metric that you guys were putting into the equation? Or were you -- is that just a reflection of your view on the potential slowdown in their business that you were embedding?

I think it's a little bit of both. I mean -- or I would chalk it up to conservatism in general. Yes, I mean, look, we had anticipated that they would see some potential slowdowns in their business, so we wanted to be conservative naturally. And at the same time, I mean, their gross margins are a bit lower than ours. And so we wanted to have the flexibility to be able to go out and kind of manage that appropriately, right? And whether that means not providing product or not pursuing maybe a different pricing dynamic, things like that, we would assess accordingly, and that's why we set that expectation lower.

Have you guys -- I've known you guys since your IPO, I can't recall an acquisition that you've completed where you didn't improve the gross margin over time. Is there anything structurally that would apply on Silicon Motion that would preclude that?

No, not at all. I mean, I think we're very confident that we can make improvements there. And I think it's a bit of just -- it's a priority. I don't think it was a big driver for them historically, and I think it will be for us going forward.

Right. Yes, I think they were more focused on the growth side, less on the profitability side, and you guys can balance that a little bit more. 2 last questions on this. 1, I think you guys just announced you're going to be doing the long-form SAMR approval as opposed to the short form. If you just want to update people on that. I don't...

Yes. Yes, there was a filing this afternoon made that -- yes, the short -- we will actually convert over to move forward with a long form, which is consistent with our view. I don't think there's really much of an update there. I mean, we've anticipated that the deal would close in the first half of next year. The SAMR process in general is quite an opaque process and so not great visibility there. But anticipating in the first half of next year, nothing has changed on the front from the standpoint that -- there's no overlap in our business. We're not a large company that's looking to do a lot of bundling, which is typically what regulators are concerned about. So, we think this has got a great chance to get through in a pretty quick manner. But nothing else has really changed on that front.

Got you. And then the last question on the deal is the somewhat unique choice -- well, you guys are choosing to use mainly debt for this. And so your leverage ratio is going to go up a lot higher than most. You didn't use shares, et cetera. So, talk a little bit about it. Is it still 3.5x to 4x levered when the deal is finalized? And how quickly can you bring that down, especially as the concerns about a recessionary environment and rising rates and all of those sorts of things make leverage ratios that high, scare some people.

Correct. Yes. So, that's right. I mean what we said that we'd expect it to be below 4x at close and then a year out, get that down below 3x. And so while I agree with you, that is relatively high. I mean there's definitely been more semiconductor deals done at higher levels, but completely acknowledge that it's on the higher end. Look, both businesses, our business, their business does throw off a lot of cash. We think we will be 100% focused on paying down that debt as fast as we can. And -- but we think that we can do that very quickly.

And what do you think the cost of the debt generally is going to be when it's all said and done?

Yes. So when we announced the deal, I mean, I think our expectation was somewhere in the 4.5% range. I think today, we would say it's probably closer to 5.5%, kind of given how the market has moved. I mean the debt itself will ultimately price closer to the time of the close of the deal. And so I think 5.5% is kind of where we expect to see it today. It will be -- we plan to do it in the Term Loan B market. Now we have been out in the pro rata market, kind of taking some of that off now, which saves us on fees, it lowers the rate and we can kind of reduce the risk a little bit. So, we've been active in doing that thus far.

So, let's get to your core business. And why don't we start with the biggest business first as far as percentage of sales, almost half of your company is your Broadband segment. That Intel Home Gateway business, it was just a home run from a couple of years ago. Talk a little bit about what the growth is from here? The concerns people have would be kind of as work from home or and/or return to the office, that transition takes place that some of the broadband demand might slow down. But I know it's not really as much of a unit game on your side. So, talk a little bit about the growth expectations going forward and what the drivers of those may be?

Sure. So yes, I mean, look, the broadband business has been relatively good. If I go back a couple of years, we had lost some share. And so some of that, we were winning back some shares. So, things have been going good on that front. And if you think about our overall broadband connectivity business, we've been gaining content per box, right? A lot of the story has been about that content increase from $15 to $30 plus of content. So, a lot of that growth has been driven there. Your specific question about what is that broadband growth. I think historically, that's kind of been low to mid-single-digit growth. That's kind of the way we see the market, right? Look, a lot of changes have happened in the broadband market as of late. I mean, you're seeing a lot of investment just beginning, right? So, I think as we look out over the next 3 to 5 years, there's a lot of market data showing up. Dell'Oro had a report recently that took that number up by at least 30% over the next 5 to 7 years, was a big increase. And I think it's consistent with what you're seeing in the market. You're seeing a lot of investment on fixed wireless access. You're seeing a lot of fiber rollouts. DSL guys are upgrading. The cable guys are having to upgrade. So, you're seeing a number of these guys upgrade. And as you know, Ross, we've always kind of positioned ourselves as that arms dealer. We don't really care which one of these solutions wins because we're supplying into all of them. And so excited about that. I mean, I think if you look out over the next 5 years, at least the market data does support a much higher number, and I think that's why ourselves, Broadcom has been out commenting about a double-digit growth over several years. That's not to say that, as we were talking about just slowdowns in general, not to say that you don't see some kind of moderation next year as things slow. Now that being said, we haven't seen like crazy unit growth, to your point, over the last couple of years. I mean, COVID time, like 2020, we saw that, but '21 and '22, I mean we kind of saw a moderating environment. And so I don't feel like we've got huge risk out there. That being said, it wouldn't be surprising to see some moderation. But beyond that, you've got a lot of additional CapEx dollars being spent over the next 2 to 3 years that are committed, that these things do take time to roll out. And they're big investments. And then you've also got a lot of government money that you haven't had historically. And that's pushing fiber. It's not fiber alone but definitely a lot of fiber deployments. That's a new market for us. And we -- last year, we did less than $10 million of fiber revenue or revenue attributed to fiber anyway. This year, we're expected to do probably a little north of $30 million this year. And then I think as I look into next year, I think you can potentially double again. So, that's exciting for us. And the key part about the fiber market is it's probably 2x -- maybe as much as 3x bigger than the cable market. So, while we have a lot of exposure in cable, at the end of the day, fiber is a lot bigger and we have the opportunity to penetrate that over the next several years.

And what was it that kept you out of that market historically?

That's an interesting question. Nothing really. We had sold into it, but it was just -- it wasn't a focus, frankly, of the business historically. And so now as it's grown, the customers are looking for alternatives. They've come to us. They see us as a great alternative. We do have the -- it's similar to cable and it's similar dollar volumes in the gateway. They also want a full solution. They want to have an SoC, they want to have WiFi. They need Ethernet. I mean so they want that entire box to be filled and then naturally the firmware that goes on top of that.

Okay. So, the fact that you didn't have the entire bundle before...

Potentially, was part of it. Yes, that's true.

And is there something that's inherently different in the technology? Obviously, I know the difference between coax and fiber. But is there something that is -- that precluded you from a technology perspective, not necessarily kind of a breadth of product perspective prior?

So, nothing obvious. I mean they're similar. The SoC itself is definitely similar. Yes, the technology is a little different, but the product -- I mean, it's really kind of processing horsepower inside of that box. And so it is very similar. And so right now, actually, one of the reasons we're winning on the PON side is because of that technology. It is because of that SoC and the differentiation that we have there. And then also the distribution. I mean it's critical that we're getting the WiFi wins and we have that and that is very important to the customer.

That's a perfect segue to your connectivity business, which kind of 20%, 25% of revenues growing really, really rapidly, WiFi has been the biggest horse pulling that along. Talk a little bit about what's allowing your WiFi business to grow? Well, first, rightsize where WiFi was and is for you guys and maybe where it will be? And then secondarily, talk a little bit about what's been driving that growth?

Sure. Yes. So, if you go back to 2020, we did kind of $25 million to $30 million of revenue from the WiFi business. Now that was early days of WiFi 6. We really didn't -- I mean we had a product in WiFi 5, but it wasn't very significant. We relate to market. So, winning in WiFi 6 was super critical, getting there early. So, we won a lot of shares. That business doubled the following year to north of $50 million. This year, we're expected to do well north of $100 million and then have talked about being north of $200 million next year. So, we've definitely made a lot of progress. I mean it is -- at the end of the day, it is that differentiation that we have in the product, the WiFi product itself. It's great that we're getting the attach, meaning we're selling alongside of our SSE and now we've got penetration within the fiber market. But then next also, we've got some third-party routers that we're starting to ship into that diversifies that revenue stream even further.

And how are you guys positioned for the next-gen WiFi when we go to WiFi 7?

Yes. So, very well positioned. We're seeing WiFi 6E kind of happen right now. WiFi 7 is behind it. I mean I think we'll -- there's definitely a lot going on in WiFi 7 right now, but I don't see real revenue driven until probably '24. We might see a little bit at the tail end of next year, but most of that happens in 2024. And it might be worth mentioning, one of the reasons these dollars or I should say, the revenues are going up is because the ASPs of a WiFi 5 solution versus say a WiFi 7 solution are quite different. I mean WiFi 5 is $5, $7 of content. Today, we're seeing $10-ish in our WiFi 6 solution. WiFi 6E, you bump that up another couple of dollars. WiFi 7 expected to be slightly ahead of that. So, the content of those solutions is also going up along with the unit volumes.

So when I think of it, correct me if I'm wrong, you guys had the front end. You've got the Intel Home Gateway business that brought the back-end side and the WiFi along with it, is really what's going on is that, that unified platform maybe use somebody else's WiFi, maybe use Intel's, but your focus is on bringing WiFi in and making sure that's part of the bundle. And so maybe somebody else was the WiFi solution and that's what's driving your growth? Or is it just mainly Intel had the asset, but you guys are focused more on it that's driving it? So, is it a substitution for somebody else? Or is it you guys just going out and convincing the customers or the merits of your solution and the merits of the bundle as a whole?

Yes. I mean look, we developed a product. We're winning the customer. I mean, I think early on, I mean, I mentioned that we were late to market on WiFi 5. And so when we came early with WiFi 6, that was critical, right? We had to win those sockets early on. We did that. What else did we have to do. We also had to make sure that we supported the customer, we have the software and the firmware, support services around it to make sure that we execute it, right? When you deploy one of these gateways, there is a lot of firmware that has to be supported. And so we had to do that during those ramps. And I think we've proven that or are proving that now and it has gone extremely well, which I think bodes well for the future that we can win more of these sockets going forward.

And what else is in the connectivity side. It's good to see the 50 to 100 to 200 move on the WiFi side of things, but there's other connectivity you guys play in as well.

It still has -- so our G.hn and MoCA, are existing technologies. MoCA has been growing while. Don't see a huge amount of growth from here on MoCA because WiFi will capture some of that content. That being said, it is kind of, I think, of a higher-end play. And so we've continued to see interest in MoCA. So, I think it does continue, but it's a smaller portion of the market and we'll be -- and that portion will be captured by WiFi. G.hn is a little smaller. Wireline technology has been around for a while. And then the last piece is Ethernet. So, Ethernet, 2.5 gig, 5 gig, getting a lot of adoption in the market right now. So, we've been very excited to win that, of course, on the gateways, but we're also winning outside of gateways. And so that's something that I think we can leverage a lot of our channel relationships to grow kind of beyond what they have done historically.

So, if I stop for a higher-level question between broadband, it's the first segment we talked about and connectivity, it seems like there's the part that's growing fast, in connectivity, it's Wi-Fi and then the other side, maybe not so much. And then in the broadband, you have the fiber side growing fast and then the cable side, not so much. How do you think those 2 dynamics of the faster-growing subsegments versus the slower, how do those net together for that combined, say, whatever it is 70%, 75% of the core?

Yes, look, I mean, at the end of the day, the WiFi business, I mean, we're still a very small player in WiFi, right? I mean it's a $2 billion-plus market. We talked about doing north of $100 million. So, I mean we're still a small player, a long way to go. We're winning sockets. We've got the performance today. So excited about that. And I think that's likely to continue as we diversify and really penetrate more of those other markets. I mean the fiber side kind of probably goes without saying, I mean, there's just a lot of emphasis on fiber. Look, I think the real takeaway, Ross, is probably thinking about broadband as a whole and how much investment is going to happen over the next 5 years.

You mean with connectivity together?

Yes. I mean, yes, the broadband market, which does -- would include WiFi is large and growing, right? And the amount of investment in CapEx that's going into the space is quite substantial. And frankly, it really hasn't started yet. I mean you look at that $65 billion of the Biden Infrastructure Bill. I mean they don't -- I would argue they don't even know where that money is going yet. Well, it won't go directly to us, but these operators are very focused on it, and I would expect to see them to get some of that money to offset and subsidize some of the deployments that they intend to make over the next several years. So, it is an exciting time. And I think you're seeing that on the fiber side. Fixed wireless access is another place that they're definitely very active in. And even the cable guys, I mean, they're going to have to respond. They've got to improve their own networks. I know there's been some concerns out there around like subscriber growth and things like that, which, I mean, I guess, in my mind, doesn't impact -- I mean I think it impacts a company like a Comcast or a Charter clearly. But at the same time, if they need to upgrade in order to compete with carriers, I think that, that works out okay for us because they're going to have to upgrade the gateways and the infrastructure itself in order to compete with them on a go-forward basis.

So, why don't we switch over to the infrastructure side of things. This has some sex appeal with the 5G side of things and some of the data center aspects, but it's been a little lumpier and it's a relatively small part of the business, kind of 15%-ish of sales. Talk a little bit about the wireless access side of things and how that side is going or the wireless infrastructure, let's leave it at that higher level.

Sure, sure. Yes. So infrastructure as a whole, you're right, I mean smaller portion of the business, but it's also, as you're aware, I mean, a place we've been investing heavily. Wireless infrastructure is a big piece of that. Wireless infrastructure to us is backhaul, cable -- not cable, sorry, modems as well as transceivers. So, that's a big part of it and access, right? So 5G access, Massive MIMO, big opportunity. We identified started investing what, 2 plus years ago and hasn't really emerged as fast as I think what everyone had anticipated. The markets pushed out. China, some of the shutdowns, the tariffs and the Huawei dynamics that happened in China definitely has slowed the market adoption. That being said, we started shipping the beginning -- first half of last year and has continued to progress. We've seen nice growth in that business over the last couple of years. And I think that continues. I think you're starting to see some signs in China that things are loosening up as well, where you're going to see some investment beyond Huawei. And then on the backhaul side, that's also, I would say, we've seen a fair amount of growth in backhaul. The modems, which we're really the only merchant supplier of modems today in backhaul have continued to grow. But then the transceiver is a new product for us and that's attributed to a lot of the growth this year and we'll continue into next year. We've been short on substrates and we talked about that in the earnings call recently, we're starting to see more supply come online in Q4 and then -- but some of that demand will naturally be pushed into Q1 of next year.

In the competitive landscape, no big changes on that front in that wireless infrastructure area?

No, none. On the transceiver side, it's mostly ADI and on the modem side, merchant supplier. Access, it's ADI and Texas Instruments.

Got you. And what about on the data center side of things, the whole PAM4 side of things. It's been kind of fits and starts about which of the cloud guys adopt to which technology at what time and you're fighting against a couple of behemoths in that space. Not that ADI is a small company, but Broadcom and Marvell are no slouches on their own.

Sure, sure. Yes. So, the optical space is very exciting. We've got this 5-nanometer chip that we're kind of first to market with a 5-nanometer solution. So, that's getting a lot of interest. And this is our second chip, our first entry into this market was our previous Telluride solution. focused on 400 gig. And so you bring up a good point. So, you've got a handful of these data center guys. There's only a few that really -- I mean, there's a lot of them that can move the needle, but the big 4 guys can move it a lot. And Google and Facebook started out at 200 gig. We came into the market at 400 gig. So, we didn't intersect that and that's a market that Inphi or Marvell now has done extremely well with. Now those guys are starting to move to 800 gig, which is the perfect point where we tend to intersect that with our 5-nanometer solution for 800 gig. So, that's -- it's great to see more customers kind of ready to launch an 800-gig solution. You also see the Amazons and Microsofts that will also continue to move up or either have a 400 or 800 gig solution. So, we think we're well positioned to take advantage of it. 800, I mean, this is probably -- we'll see some revenues next year, but probably the 800 gig, I think '24 ends up being a much bigger adoption year. But exciting times right now. I mean, we're first to market a head of Broadcom, ahead of Marvell. Those behemoths that you mentioned. So, it's exciting to be there early. We've got to keep that lead, right? And so we got to move quickly to get the firmware and get customer adoption happening.

And I think the importance of that getting that 5-nanometer part out can't be overstated and because a lot of the pushback I've heard over the years was you just didn't have the R&D budget to be able to go to that 5-nanometer lithography. And the road map was the issue. So, Telluride was great, but what's next always became the question. Now that you have this, that should definitely help.

That's right. And I think that you're dead on. I mean, these customers are and this is true of all of these big guys. They don't want to just see your product today. They want to see your road map over the next few years and making sure that you want to have the financial wherewithal, but also the technical prowess to be able to do it, right? And I think we've proven that. It's our frustrating that we didn't get more adoption on the first generation. But in some respects, not all that surprising, right? And I think it really sets us up well to take advantage of the markets with this next-generation solution.

And do you think the lack of adoption in the first one was because you just didn't intersect with the 200-gig solution that ended up being adopted by the early adopters?

Well, so we didn't have a 200 gig solution. So we -- so in some respects, yes, you're right. The fact that we didn't go to market with a 200-gig solution, I actually think it was the right decision to comment gig, but there just weren't as many sockets available, right? And then you also -- Amazon themselves kind of pushed out a little bit and it hasn't really turned into as big of a business, but it's starting, it's getting bigger now, but I think we're really, it just sets up well for that next-generation solution.

And then the optical side, the electric optical side, are there other opportunities beyond kind of the PAM4 stuff, ZR side of the equation between data centers. Is that something that you guys also are looking at?

Yes. So, you're right. I mean there are a lot more, I think, options available to us now, especially given that we've got this IP that we've built. Now we can start to leverage that across a broader set of applications. I was mentioning, we're leveraging across more customers. We're also leveraging across more applications. And that can be potentially intra data center, but we can also -- I mean, you're looking at the cable market is starting -- active electric cables is starting to emerge. It's something that we can address in more need for re-timers in the market. So, there's definitely a larger market emerging there that we can leverage these IPs across.

And then the last segment you have is the Industrial and Multi-Market side of things. That's -- calling it a catchall, I don't mean to have that be a [ surety ] term, but it's more broad-based, obviously, from the name more industrial. Talk a little bit about the drivers there. Is that where some of the storage efforts that you guys have already done organically underneath the covers would overlap with what Silicon Motion is doing? Just talk in general about the drivers there.

Sure. Yes. So, Industrial Multi-Market has kind of been, in some respects, it is somewhat of a catchall bucket. It is a broad-based distribution business that we've sold into industrial markets, I mean it's just a wide breadth of markets. There's thousands of customers. Most of that stuff goes through distribution. Historically, we've said it's growing at kind of GDP plus kind of a 3%, 4%, 5% growth per year is kind of what we typically expect from this product portfolio. And it's proven itself. We've upgraded the products. I mean it's mostly power management and interface products. And they have been growing -- those products primarily are focused around infrastructure or in some respects broadband and then -- but they can clearly sell into broad-based markets even like an Ethernet product or a power management, POL, regulator that we have targeted to sell into infrastructure. Now we put it into distribution and we have a wider breadth of opportunity. So, that's not a lot of changes on that front, but growing and continuing to do well.

So, in the last couple minutes that we have, when you guys announced the Silicon Motion deal, the stock got hit pretty substantially. Since then, the stock might be down a little bit, but so is everything else. So really, on a company-specific basis, it hasn't really moved very much different than anything else. What do you think people have missed the most? Or what's the message you'd want to convey on the merits of the Silicon Motion deal, assuming that was the reason why the stock took that step down when the deal was announced?

Yes. Well, look, I think if you look at the timing of the deal and I think the feedback that we got in May was it was kind of 2-fold. There was the consumer exposure, which you brought up a little bit earlier and the leverage. And I think it was, frankly, the combination. I think it was a bit of -- like the leverage, yes, it was a bit high, but in different markets, maybe I would have been more comfortable and vice versa, consumer, so, anyway it was that combination that I think made a little bit worse. So, as far as -- I think we're -- a lot of questions that we get and what we try to address is okay, so what about consumer. How bad is it, things like that, right? And you're seeing that play out now. I mean I think from our perspective, we had seen that, Motion has seen that, the market has seen that earlier. We're seeing it play out. But I think as you walk through and those who are more familiar with Silicon Motion, I think, are more comfortable with that as well because they've seen them execute. They've seen the share gains that they've made. They've seen the wins and how they've navigated this in the past. And so I think they're much more comfort -- and those that are familiar are much more comfortable. On the leverage side, also we spend a lot of time just talking through, cash flow generation on the MaxLinear side of the business has been extremely good. For that matter, Silicon Motion has been good also. And I think the model itself for the combined company is very compelling, and it doesn't require a huge amount of CapEx needs. There are some opportunities on the synergy side. There's some real estate opportunities. I mean, there's various ways that we intend to cut back on some of the capital required and then naturally just driving up profitability to increase cash flow and pay down that debt.

Got it. Well, we are right on time. So Steve, thank you so much for joining us out here in Vegas, and best of luck getting that deal closed.

Great. Thank you. Thank you, Ross.

Thanks.