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Greetings, and welcome to the MaxLinear 2019 Q3 Earnings Call. At this time, all participants are in a listen-only mode. [Operator Instructions]
It is now my pleasure to introduce Brian Nugent of Investor Relations . 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 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 revenues, 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.
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 remain solid and operating expenses declined on disciplined execution. We also delivered $21.8 million and 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 market.
In early 2020, we expect production at option of 100 gigabit and 400 gigabit PAM4 DSP SoC in the hyperscale datas into market. We are also excited about our first 5G wireless Tier 1 OEM design win for our industry leading 4G nanometer CMOS, 4x4 massive MIMO Quad RF transceiver SoC solution.
We are 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 datacenter customer initiatives. In the near-term, we’ve further solidified our position with our deal in hyperscale datacenter end 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 single lambda of 100 gigabit QSFP and SFP modules. We also announced that Delta Electronics and Centera Photonics have developed DR, FR, and LR optical modules for datacenter leveraging our second gen solution. We believe single lambda of 100 gigabit and 400 gigabit solutions will dominate datacenter 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 1 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 confirms that we are hitting the demanding performance and features required by this market.
As a reminder, our 5G RF transceiver has the highest performance, double the bandwidth and superior system level integration at up to 50% lower power consumption versus competition. Strategically, we are focusing on growing our content on a per system remote radio unit basis, enable an expanding product offering and Tier 1 customer engagements.
In wireless backhaul, we face headwinds in Q3 due mainly to the Huawei restriction. However, we have confidence in our ability to grow backlog revenues in 2020. Based on the layering of several new tier 1 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 double data capacity at existing available spectrum for current and future 5G transport networks. In the Connected Home, in Q3, we saw a good follow through on our MoCA2.5 system builds at Verizon. However, we do expect a 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 too still early to call a bottom. However, we’ve design engagements supporting the next wave of DOCSIS 3.1 deployments 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.
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 and 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 multimarket business was down 9% sequentially. I would 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's the demand picture. While we 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 purchase 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 towards our term loan as we continue to focus on debt pay down with our cash generation. This brings the total debt prepayments to $213 million and our loan balance down to $212 million.
Our days 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 multimarket 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% to 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 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 0 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 datacenter 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 rollout start to layer in incremental revenue streams in 2020./
With that, I would like to open up the call for questions. Operator?
Thank you. [Operator Instructions] Our first question comes from Alessandra Vecchi with William Blair. Please state your question.
Hi, guys. Congratulations on a good quarter in a tough environment. And especially on the 5G OEM win in the PAM4 traction. On the Connected Home side, so you guys said that the Verizon had sort of picked up with the 3 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 to home ramp, which is significantly more than the ramp in Q2, Q3. Can you -- Steve, can you sort of help me understand better, where the rest of the delta is coming from?
So, hi, Alex. I’m not quite just follow up the thinking, but let me take a stab at it. So, yes, we did talk about the pause in horizon. 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 build up in Q2, Q3, and now we are seeing a pause there. There's a number of reasons for that. But we are 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 its down. We’ve kind of expanded 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 like insignificant to our revenues in the future.
Okay. 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 the sort of trials to sort of call it volume production?
Yes. So as we stated, I mean, you kind of gone through this build phase and as it launches though we will see some follow-up through. I mean, we see it pause probably in Q1, but I expect it does pick up -- I don’t know if its early Q2, but I mean I would expect at some point in Q2 that it would start to recover.
Okay. Thank you. That’s very helpful. That’s it for me.
Our next question comes from Ross Seymore with Deutsche Bank. Please state your question.
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?
Yes. Ji, -- so, I don't want to go through every single product and what was approved and not approved. We do ship -- most of these products show up in our infrastructure end market. There are HPA as well as wireless products. There -- so these guys are 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 to be in the case. But I think we are encouraged we are engaged and there's good potential as we look into 2020.
Okay, 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?
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 end up being a lot softer in Q3 than we had expected. So while we do see it being flat to slightly down, we 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 are optimistic that as we -- in the next couple of quarters, we will see some recovery there.
Thank you. Our next question comes from Quinn Bolton with Needham & Company. Please state your question.
Hey, guys. Just wanted to follow-up on the Connected Home. It sounds 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. 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?
Yes. Quinn, look, you -- 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 the cable data side, I would say moving into 2020, I think we actually -- hesitant to say this, but I actually does feel a little bit better. I think our market share is definitely in a good place. We are not expecting some -- a big aggressive ramp, but definitely feel like we're in a much better place looking out over the next few quarters.
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 400 gig modules is facing a number of delays. I think some of it is just the cost of the optics at nearly a $1,000 a module. Some of its 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 of how many 400 gig DR4s might be shipped to the entire hyperscale market in 2020, so we can try and level set the models?
So, Quinn, I think that what to 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 what this big hyperscale data center guys would ramp, now that’s a purely calendar event, it's 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 the 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 will be just fine. So -- and I do not know what you’re resetting to, but it's based on the number of datacenters that are built and so on so forth and you layer the first hyperscale datacenter 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 second half of the following year. I think the math will just work itself out. So I’m not at all seeing a picture there. Their volumes are going to down, because the cost structure. I just see it as a delay in the qualification process. And as for them [indiscernible] 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.
Thank you, Kishore for that. And then just lastly, obviously you guys -- 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 design win wouldn't be affected by any current entity list issues in place? And then, second, I assume this is a sub 6 gigahertz radio, but can you give us anymore detail? Is it sort of targeting a specific geography? Is it a worldwide ban? How big could this platform be for this Tier 1 customer? Thanks.
Quinn, obviously, there are 4 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 1 OEM from Europe. Okay, 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’ve heard some earnings calls from substitute product companies that sell FPGAs and so on so forth. The story we’ve 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 those FPGA companies may be referring to are really more related to the China geography rather than to any European entity or EM. That’s our statement. So where is this leading up to? All the big volumes in 5G are happening in China. They’re at least a couple of years ahead of the volume situation. While there's lot of excitement in North America for 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 6 gigahertz band and they will be for the next several years to come. And that’s where we’ve our design win on the sub 6 gigahertz band. And we hope to announce that we’ve other design wins by the end of the year, hopefully, by the Mobile World Congress for sure. And we are 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 and maybe another new generation of product to address a bigger TAM. So we feel very good where we’re positioned.
Thank you, Kishore.
Our next question comes from Gary Mobley with Wells Fargo Securities. Pleased state your question.
Hey, guys. I just want 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 $700 million, $800 million in a few years time. And based on the way you described your Tier 1 customer, it sounds like its Nokia, and it sounds like perhaps your market share opportunity in this $800 million market could be roughly 10% or 12%. Can you could confirm based in this Tier 1 design win, whether or not that can actually translate into roughly $100 million in annual sales.
So Gary that’s very, very difficult for us to see. I just want to -- I want to be very candid when these platforms are selected, they do a number of platforms throughout the yearly process and how much volume each platform gets, its unknown at this stage. However, having being selected on a platform, you can assume that you'll also make subsequent platforms, potentially you share with another supplier. We do not know at this point, who would that be. So to the extent that the players in this market outside of what I say, Huawei internal sourcing being a very, very strong push internally. So we would say that we are among the three potential supply is for the transceiver markets. 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 towards the end of the year. The ramping -- the ramps being happening as they transition to lower costs, what I call generation of system level platform design. And that’s what we’re trying to catch as a company. So the end market still remains -- China, we believe in the U.S it will roll through later on to potentially T-Mobile and Sprint. It's a speculation. No confirmation for anybody. So I think that will be cadence in which 5G would roll out in the world.
Okay. All right. And on the topic of the connected home business, you mentioned the tough times for the satellite businesses. Is that inclusive of both the set-top box business which is mostly in Europe and then as well the DBS outdoor unit?
I think when we speak of our satellite business, we do not differentiate between -- we’ve never have differentiate between gateway or satellite outdoor unit business. So -- and we have never differentiated in Europe or North America market because it basically the major satellite providers in the world in the umbrella is to speak. So I don't think it matters at that level.
Okay. 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 crates more of a level playing field for competitors. And so, I was just too far down the road and will you maybe not paying as much attention to this market or is this -- or is that really an opportunity for you to maybe take back some share?
It's really -- one cannot dispute that what 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’ve not unfortunately. So we will just cross our fingers and wait.
Not yet.
Not yet. So I think it will be a positive news, but at this point our focus as strategy it has been our infrastructure investments in data center, high-performance analog industrial and 5G wireless, we are doubling down on that and we are focused on growing those businesses.
All right. Great. Thank you, guys.
Thank you. Our next question comes from Bill Peterson with JPMorgan. Please state your question.
Yes. 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 in-sourcing. Concerning the existing business things like that backhaul, I mean, is there a chance that this can never come back. And are they still telling 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?
So I think they'll -- 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 the street. 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.
Okay. That's fair. Returning to Connected Home, 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 is the take I guess from the broader perspective to drive investments, do we need the 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 -- from a -- I guess longer term perspective can kind of really turn that business around.
So, Bill, obviously, first and foremost want to get back to what Steve said in his remarks, 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 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, these -- they are 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 the aggressive behavior of Verizon and AT&T happened 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 growth back into the system. Does that 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 deployment and we should benefit from that.
Okay. Thanks for that and good luck.
Thank you.[Operator Instructions] Our next question comes from Tore Svanberg with Stifel. Please state your question.
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 roadmap beyond Telluride? 16 nanometer going to 7 nanometer, just trying to understand some of the investment that's going to continue to go into that segment going forward?
So, Tore, obviously we do not talk about technology nodes. We never discuss our technology node as a future investment. We already announced technology mode when the product is announced. So obviously whatever we have developed in the market, there always been the best-in-class in terms of their performance, integration levels and so forth. We have done that with the Telluride product as well. So we are coming into the road being very, very robust on the technology road front as well. And remember that it's not just about the datacenter side, we actually take advantage of the technology, because we develop in the datacenter side on our wireless markets as well. So we feel that we are on track to be offering newer products in the next 18 months and in between. And our OpEx reflects a spent level that will make us -- be able to do that without compromising NAV. If this is being motivated by the OpEx discipline as we call it, it is really OpEx disciplined 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 investments, there's optical datacenter wireless and even our high performance analog power and industrial market investments that are ongoing now.
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?
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, one of the reasons we’ve gone into the infrastructure market is because we don't want to have to be in anybody's reference design. We don't want to be dependent on anybody else as digital back end processor. We want to be in control of our own destiny. So the next best partnership you can have is directly with the OEM. In the wireless market, our front end directly interfaces with the digital front ends 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 to be embarked on this process to get into 5G wireless markets. So, yes, we won it on our own. Nobody helped us and we are helping our customers to win. Let's put it that way.
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 were expecting growth in infrastructure, but if you look at the other two, assuming the market today flat. Is there anything within each one that you can talk about, where you could perhaps see some growth in those two segments?
Yes, Tore. 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 of the -- and on top of that the PAM4 DSP product will have a nice contribution as well. So all that will 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 come down to. I mean, I think it improves throughout the year, but on a year-over-year basis it is likely to be down. And then on the Industrial and Multimarket front, look, it's been a rough 2019. And just -- I would say more from a market cyclicality standpoint, I think we see some modest improvements in 2020.
Great. Thank you.
Thanks, Tore.
Ladies and gentlemen, there are no further questions at this time. I'll pass it back to management for closing remarks. Thank you.
Well, thank you, operator. We will be participating at the Stifel 2019 Midwest One-on-One Growth Conference in Chicago on November 7. The Needham Networking Conference -- 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.
Thank you. This concludes today’s conference. All participants disconnect. Have a great day.