Use of Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including non-GAAP gross margin, operating expenses, operating expenses as a percentage of revenue, income from operations as percentage of revenue, pre-tax margins, effective tax rate, net income and diluted earnings per share. These supplemental measures exclude the effects of (i) stock-based compensation expense; (ii) accruals related to our performance based bonus plan for 2018, which we currently intend to settle in shares of our common stock; (iii) accruals related to our performance based bonus plan for 2017, which we settled in shares of common stock in 2018; (iv) amortization of purchased intangible assets and inventory step up; (v) depreciation of fixed assets step-up; (vi) acquisition and integration costs related to 2017 acquisitions; (vii) professional fees and settlement costs related to our previously disclosed IP and commercial litigation matters; (viii) impairment losses on acquired intangible assets; (ix) severance and other restructuring charges; and (x) non-cash income tax benefits and expenses and effects of the Tax Act. These non-GAAP measures are not in accordance with and do not serve as an alternative for GAAP. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

We believe that non-GAAP financial measures can provide useful information to both management and investors by excluding certain non-cash and other one-time expenses that are not indicative of our core operating results. Among other uses, our management uses non-GAAP measures to compare our performance relative to forecasts and strategic plans and to benchmark our performance externally against competitors. In addition, management’s incentive compensation will be determined in part using these non-GAAP measures because we believe non-GAAP measures better reflect our core operating performance.

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Our equity incentive plans are important components of our employee incentive compensation arrangements and are reflected as expenses in our GAAP results. Stock-based compensation expense has been and will continue to be a significant recurring expense for MaxLinear.

Bonuses under our executive and non-executive bonus programs have been excluded from our non-GAAP net income for all periods reported. Bonus payments for the 2017 performance periods were settled through the issuance of shares of common stock under our equity incentive plans in February 2018. We currently expect that bonus awards under our fiscal 2018 program will be settled in common stock in the first quarter of fiscal 2019. While we include the dilutive impact of equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income.

Expenses incurred in relation to acquisitions include amortization of purchased intangible assets and step-up of inventory to fair value, depreciation of step-up of property and equipment to fair value, acquisition and integration costs primarily consisting of professional and consulting fees.

Restructuring charges incurred are related to our restructuring plans which address issues primarily relating to the integration of the Company and acquired businesses or internal operations and primarily include severance and restructuring costs related to exiting certain facilities.

Expenses incurred in relation to our intellectual property and commercial litigation include professional fees incurred.

Income tax benefits and expense adjustments are those that do not affect cash income taxes payable. Effects of the Tax Act were excluded from Non-GAAP effective tax rate.

Reconciliations of non-GAAP measures for the historic periods disclosed in this press release appear below. Because of the inherent uncertainty associated with our ability to project future charges, particularly related to stock-based compensation and its related tax effects as well as potential impairments, we have not provided a reconciliation for non-GAAP guidance provided for the first quarter 2019.

About MaxLinear, Inc.

MaxLinear, Inc. (NYSE: MXL) is a leading provider of radio frequency (RF), analog and mixed-signal integrated circuits for the connected home, wired and wireless infrastructure, and industrial and multi-market applications. MaxLinear is headquartered in Carlsbad, California. For more information, please visit www.maxlinear.com.

MXL is MaxLinear’s registered trademark. Other trademarks appearing herein are the property of their respective owners.

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
		Three Months Ended
		December 31, 2018				September 30, 2018				December 31, 2017
Net revenue		$	87,627			$	85,010			$	113,721
Cost of net revenue		41,727				41,134				61,628
Gross profit		45,900				43,876				52,093
Operating expenses:
Research and development		29,667				29,047				30,116
Selling, general and administrative		25,208				24,963				26,843
Impairment losses		—				2,198				—
Restructuring charges		1,737				236				800
Total operating expenses		56,612				56,444				57,759
Loss from operations		(10,712		)		(12,568		)		(5,666		)
Interest income		24				17				14
Interest expense		(3,194		)		(3,473		)		(4,044		)
Other income (expense), net		229				39				(793		)
Total interest and other expense, net		(2,941		)		(3,417		)		(4,823		)
Loss before income taxes		(13,653		)		(15,985		)		(10,489		)
Income tax provision (benefit)		(13,964		)		(2,050		)		8,959
Net income (loss)		$	311			$	(13,935	)		$	(19,448	)
Net income (loss) per share:
Basic		$	—			$	(0.20	)		$	(0.29	)
Diluted		$	—			$	(0.20	)		$	(0.29	)
Shares used to compute net income (loss) per share:
Basic		69,186				68,742				67,147
Diluted		71,267				68,742				67,147

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
		Years Ended
		December 31, 2018				December 31, 2017
Net revenue		$	384,997			$	420,318
Cost of net revenue		176,223				212,355
Gross profit		208,774				207,963
Operating expenses:
Research and development		120,046				112,279
Selling, general and administrative		101,789				105,831
Impairment losses		2,198				2,000
Restructuring charges		3,838				9,524
Total operating expenses		227,871				229,634
Loss from operations		(19,097		)		(21,671		)
Interest income		78				274
Interest expense		(14,255		)		(10,378		)
Other income (expense), net		422				(2,223		)
Total interest and other expense, net		(13,755		)		(12,327		)
Loss before income taxes		(32,852		)		(33,998		)
Income tax benefit		(6,653		)		(24,811		)
Net loss		$	(26,199	)		$	(9,187	)
Net loss per share:
Basic		$	(0.38	)		$	(0.14	)
Diluted		$	(0.38	)		$	(0.14	)
Shares used to compute net loss per share:
Basic		68,490				66,252
Diluted		68,490				66,252

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
		Three Months Ended
		December 31, 2018				September 30, 2018				December 31, 2017
Operating Activities
Net income (loss)		$	311			$	(13,935	)		$	(19,448	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation		19,125				19,767				20,236
Impairment losses		—				2,198				—
Amortization of inventory step-up		—				—				9,715
Amortization of debt issuance costs and discount		287				287				287
Stock-based compensation		7,999				7,940				7,770
Deferred income taxes		(8,827		)		304				16,650
(Gain) loss on disposal of property and equipment		430				—				(33		)
(Gain) loss on foreign currency		(268		)		(184		)		738
Excess tax benefits on stock-based awards		(820		)		(93		)		(1,961		)
Impairment of leasehold improvements		35				—				—
Changes in operating assets and liabilities:
Accounts receivable		(867		)		25,016				9,492
Inventory		19				2,581				543
Prepaid expenses and other assets		1,905				712				(424		)
Accounts payable, accrued expenses and other current liabilities		648				(10,606		)		(2,494		)
Accrued compensation		2,387				2,671				1,351
Deferred revenue and deferred profit		—				—				(12,862		)
Accrued price protection liability		2,036				(5,662		)		(6,658		)
Other long-term liabilities		(227		)		(275		)		(1,159		)
Net cash provided by operating activities		24,173				30,721				21,743
Investing Activities
Purchases of property and equipment		(1,412		)		(1,609		)		(3,070		)
Proceeds from sale of property and equipment		—				—				30
Net cash used in investing activities		(1,412		)		(1,609		)		(3,040		)
Financing Activities
Repayment of debt		(15,000		)		(35,000		)		(20,000		)
Net proceeds from issuance of common stock		2,732				91				2,960
Minimum tax withholding paid on behalf of employees for restricted stock units		(2,606		)		(1,178		)		(1,718		)
Net cash used in financing activities		(14,874		)		(36,087		)		(18,758		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(1,939		)		103				371
Increase (decrease) in cash, cash equivalents and restricted cash		5,948				(6,872		)		316
Cash, cash equivalents and restricted cash at beginning of period		68,243				75,115				74,096
Cash, cash equivalents and restricted cash at end of period		$	74,191			$	68,243			$	74,412

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
		Years Ended
		December 31, 2018				December 31, 2017
Operating Activities
Net loss		$	(26,199	)		$	(9,187	)
Adjustments to reconcile net loss to cash provided by operating activities:
Amortization and depreciation		79,027				66,738
Impairment losses		2,198				2,000
Provision for losses on accounts receivable		—				133
Accretion of investment discounts, net		—				(60		)
Amortization of inventory step-up		—				25,557
Amortization of debt issuance costs and discount		1,148				763
Stock-based compensation		31,721				32,668
Deferred income taxes		(12,144		)		(31,767		)
Loss on disposal of property and equipment		430				168
Loss on sale of available-for-sale securities		—				38
(Gain) loss on foreign currency		(809		)		2,153
Excess tax benefits on stock-based awards		(2,028		)		(8,559		)
Impairment of leasehold improvements		735				—
Changes in operating assets and liabilities:
Accounts receivable		6,595				(4,377		)
Inventory		11,696				(1,788		)
Prepaid expenses and other assets		5,833				1,272
Accounts payable, accrued expenses and other current liabilities		1,161				(1,918		)
Accrued compensation		8,961				1,567
Deferred revenue and deferred profit		(138		)		(1,629		)
Accrued price protection liability		(5,117		)		6,395
Other long-term liabilities		(381		)		(5,103		)
Net cash provided by operating activities		102,689				75,064
Investing Activities
Purchases of property and equipment		(7,825		)		(7,468		)
Proceeds from sale of property and equipment		—				30
Purchases of intangible assets		—				(5,378		)
Cash used in acquisition, net of cash acquired		—				(473,304		)
Purchases of available-for-sale securities		—				(30,577		)
Maturities of available-for-sale securities		—				84,546
Net cash used in investing activities		(7,825		)		(432,151		)
Financing Activities
Proceeds from issuance of debt		—				416,846
Repayment of debt		(93,000		)		(70,000		)
Repurchases of common stock		—				(334		)
Net proceeds from issuance of common stock		6,839				12,052
Minimum tax withholding paid on behalf of employees for restricted stock units		(7,623		)		(11,543		)
Net cash provided by (used in) financing activities		(93,784		)		347,021
Effect of exchange rate changes on cash and cash equivalents		(1,301		)		1,582
Decrease in cash, cash equivalents and restricted cash		(221		)		(8,484		)
Cash, cash equivalents and restricted cash at beginning of period		74,412				82,896
Cash, cash equivalents and restricted cash at end of period		$	74,191			$	74,412

MAXLINEAR, INC.
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
		December 31, 2018				September 30, 2018				December 31, 2017
Assets
Current assets:
Cash and cash equivalents		$	73,142			$	67,185			$	71,872
Short-term restricted cash		645				349				1,476
Accounts receivable, net		59,491				58,633				66,099
Inventory		41,738				41,757				53,434
Prepaid expenses and other current assets		5,595				6,329				8,423
Total current assets		180,611				174,253				201,304
Long-term restricted cash		404				709				1,064
Property and equipment, net		18,404				19,413				22,658
Intangible assets, net		244,900				261,813				315,045
Goodwill		238,330				238,330				237,992
Deferred tax assets		51,518				42,691				39,878
Other long-term assets		4,664				4,935				6,921
Total assets		$	738,831			$	742,144			$	824,862
Liabilities and stockholders’ equity
Current liabilities		$	70,567			$	66,464			$	76,386
Long-term debt		255,757				270,470				347,609
Other long-term liabilities		12,571				12,816				13,443
Total stockholders’ equity		399,936				392,394				387,424
Total liabilities and stockholders’ equity		$	738,831			$	742,144			$	824,862

MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
		Three Months Ended
		December 31, 2018				September 30, 2018				December 31, 2017
GAAP gross profit		$	45,900			$	43,876			$	52,093
Stock-based compensation		132				131				101
Performance based equity		56				53				35
Amortization of inventory step-up		—				—				9,715
Amortization of purchased intangible assets		8,875				8,969				8,465
Depreciation of fixed asset step-up		—				95				112
Non-GAAP gross profit		54,963				53,124				70,521
GAAP R&D expenses		29,667				29,047				30,116
Stock-based compensation		(4,399		)		(4,726		)		(4,349		)
Performance based equity		(1,254		)		(1,517		)		(1,031		)
Amortization of purchased intangible assets		—				—				(97		)
Depreciation of fixed asset step-up		(76		)		(321		)		(297		)
Non-GAAP R&D expenses		23,938				22,483				24,342
GAAP SG&A expenses		25,208				24,963				26,843
Stock-based compensation		(3,481		)		(3,070		)		(3,105		)
Performance based equity		(948		)		(785		)		(937		)
Amortization of purchased intangible assets		(7,994		)		(7,994		)		(8,760		)
Depreciation of fixed asset step-up		(2		)		(12		)		(20		)
Acquisition and integration costs		—				—				(54		)
IP litigation costs, net		(3		)		(19		)		(38		)
Non-GAAP SG&A expenses		12,780				13,083				13,929
GAAP Impairment losses		—				2,198				—
Impairment losses		—				(2,198		)		—
Non-GAAP Impairment losses		—				—				—
GAAP restructuring expenses		1,737				236				800
Restructuring charges		(1,737		)		(236		)		(800		)
Non-GAAP restructuring expenses		—				—				—
GAAP loss from operations		(10,712		)		(12,568		)		(5,666		)
Total non-GAAP adjustments		28,957				30,126				37,916
Non-GAAP income from operations		18,245				17,558				32,250
GAAP and non-GAAP interest and other income (expense), net		(2,941		)		(3,417		)		(4,823		)
GAAP loss before income taxes		(13,653		)		(15,985		)		(10,489		)
Total non-GAAP adjustments		28,957				30,126				37,916
Non-GAAP income before income taxes		15,304				14,141				27,427
GAAP income tax provision (benefit)		(13,964		)		(2,050		)		8,959
Adjustment for non-cash tax benefits/expenses and effects of the Tax Act		15,035				3,040				(7,853		)
Non-GAAP income tax provision		1,071				990				1,106
GAAP net income (loss)		311				(13,935		)		(19,448		)
Total non-GAAP adjustments before income taxes		28,957				30,126				37,916
Less: total tax adjustments		15,035				3,040				(7,853		)
Non-GAAP net income		$	14,233			$	13,151			$	26,321
Shares used in computing non-GAAP basic net income per share		69,186				68,742				67,147
Shares used in computing non-GAAP diluted net income per share		71,267				70,634				70,175
Non-GAAP basic net income per share		$	0.21			$	0.19			$	0.39
Non-GAAP diluted net income per share		$	0.20			$	0.19			$	0.38

MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
		Years Ended
		December 31, 2018				December 31, 2017
GAAP gross profit		$	208,774			$	207,963
Stock-based compensation		489				332
Performance based equity		234				139
Amortization of inventory step-up		—				25,557
Amortization of purchased intangible assets		35,781				25,316
Depreciation of fixed asset step-up		303				337
Deferred profit eliminated in purchase price accounting		—				4,682
Non-GAAP gross profit		245,581				264,326
GAAP R&D expenses		120,046				112,279
Stock-based compensation		(17,953		)		(16,190		)
Performance based equity		(5,208		)		(4,001		)
Amortization of purchased intangible assets		—				(386		)
Depreciation of fixed asset step-up		(1,050		)		(1,618		)
Non-GAAP R&D expenses		95,835				90,084
GAAP SG&A expenses		101,789				105,831
Stock-based compensation		(13,279		)		(11,016		)
Performance based equity		(3,512		)		(2,514		)
Amortization of purchased intangible assets		(31,976		)		(28,827		)
Depreciation of fixed asset step-up		(36		)		(106		)
Acquisition and integration costs		—				(10,062		)
IP litigation costs, net		(83		)		(272		)
Non-GAAP SG&A expenses		52,903				53,034
GAAP impairment losses		2,198				2,000
Impairment losses		(2,198		)		(2,000		)
Non-GAAP impairment losses		—				—
GAAP restructuring expenses		3,838				9,524
Restructuring charges		(3,838		)		(9,524		)
Non-GAAP restructuring expenses		—				—
GAAP loss from operations		(19,097		)		(21,671		)
Total non-GAAP adjustments		115,940				142,879
Non-GAAP income from operations		96,843				121,208
GAAP and non-GAAP interest and other income (expense), net		(13,755		)		(12,327		)
GAAP loss before income taxes		(32,852		)		(33,998		)
Total non-GAAP adjustments		115,940				142,879
Non-GAAP income before income taxes		83,088				108,881
GAAP income tax benefit		(6,653		)		(24,811		)
Adjustment for non-cash tax benefits/expenses and effects of the Tax Act		12,469				32,433
Non-GAAP income tax provision		5,816				7,622
GAAP net loss		(26,199		)		(9,187		)
Total non-GAAP adjustments before income taxes		115,940				142,879
Less: total tax adjustments		12,469				32,433
Non-GAAP net income		$	77,272			$	101,259
Shares used in computing non-GAAP basic net income per share		68,490				66,252
Shares used in computing non-GAAP diluted net income per share		70,709				69,665
Non-GAAP basic net income per share		$	1.13			$	1.53
Non-GAAP diluted net income per share		$	1.09			$	1.45

MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
		Three Months Ended
		December 31, 2018			September 30, 2018			December 31, 2017
GAAP gross profit		52.4	%		51.6	%		45.8	%
Stock-based compensation		0.2	%		0.2	%		0.1	%
Performance based equity		0.1	%		0.1	%		—	%
Amortization of inventory step-up		—	%		—	%		8.5	%
Amortization of purchased intangible assets		10.1	%		10.6	%		7.4	%
Depreciation of fixed asset step-up		—	%		0.1	%		0.2	%
Non-GAAP gross profit		62.7	%		62.5	%		62.0	%
GAAP R&D expenses		33.9	%		34.2	%		26.5	%
Stock-based compensation		(5.0	)%		(5.6	)%		(3.8	)%
Performance based equity		(1.4	)%		(1.8	)%		(1.0	)%
Amortization of purchased intangible assets		—	%		—	%		(0.1	)%
Depreciation of fixed asset step-up		(0.1	)%		(0.5	)%		(0.2	)%
Non-GAAP R&D expenses		27.3	%		26.4	%		21.4	%
GAAP SG&A expenses		28.8	%		29.4	%		23.6	%
Stock-based compensation		(4.0	)%		(3.6	)%		(2.7	)%
Performance based equity		(1.1	)%		(0.9	)%		(1.0	)%
Amortization of purchased intangible assets		(9.1	)%		(9.4	)%		(7.7	)%
Depreciation of fixed asset step-up		—	%		—	%		—	%
Acquisition and integration costs		—	%		—	%		—	%
IP litigation costs, net		—	%		—	%		—	%
Non-GAAP SG&A expenses		14.6	%		15.4	%		12.2	%
GAAP Impairment losses		—	%		2.6	%		—	%
Impairment losses		—	%		(2.6	)%		—	%
Non-GAAP Impairment losses		—	%		—	%		—	%
GAAP restructuring expenses		2.0	%		0.3	%		0.7	%
Restructuring charges		(2.0	)%		(0.3	)%		(0.7	)%
Non-GAAP restructuring expenses		—	%		—	%		—	%
GAAP loss from operations		(12.2	)%		(14.8	)%		(5.0	)%
Total non-GAAP adjustments		33.0	%		35.4	%		33.3	%
Non-GAAP income from operations		20.8	%		20.7	%		28.3	%
GAAP and non-GAAP interest and other income (expense), net		(3.4	)%		(4.0	)%		(4.2	)%
GAAP loss before income taxes		(15.6	)%		(18.8	)%		(9.2	)%
Total non-GAAP adjustments before income taxes		33.0	%		35.4	%		33.3	%
Non-GAAP income before income taxes		17.5	%		16.6	%		24.1	%
GAAP income tax provision (benefit)		(15.9	)%		(2.4	)%		7.9	%
Adjustment for non-cash tax benefits/expenses and the effects of the Tax Act		17.2	%		3.6	%		(7.0	)%
Non-GAAP income tax provision		1.2	%		1.2	%		0.9	%
GAAP net income (loss)		0.4	%		(16.4	)%		(17.1	)%
Total non-GAAP adjustments before income taxes		33.0	%		35.4	%		33.3	%
Less: total tax adjustments		17.2	%		3.6	%		(7.0	)%
Non-GAAP net income		16.2	%		15.5	%		23.1	%

MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
		Years Ended
		December 31, 2018			December 31, 2017
GAAP gross profit		54.2	%		49.5	%
Stock-based compensation		0.1	%		0.1	%
Performance based equity		0.1	%		—	%
Amortization of inventory step-up		—	%		6.0	%
Amortization of purchased intangible assets		9.3	%		6.0	%
Depreciation of fixed asset step-up		0.1	%		0.2	%
Deferred profit eliminated in purchase price accounting		—	%		1.1	%
Non-GAAP gross profit		63.8	%		62.9	%
GAAP R&D expenses		31.2	%		26.7	%
Stock-based compensation		(4.7	)%		(3.9	)%
Performance based equity		(1.4	)%		(1.0	)%
Amortization of purchased intangible assets		—	%		(0.1	)%
Depreciation of fixed asset step-up		(0.3	)%		(0.3	)%
Non-GAAP R&D expenses		24.9	%		21.4	%
GAAP SG&A expenses		26.4	%		25.2	%
Stock-based compensation		(3.4	)%		(2.6	)%
Performance based equity		(0.9	)%		(0.6	)%
Amortization of purchased intangible assets		(8.3	)%		(6.9	)%
Depreciation of fixed asset step-up		—	%		—	%
Acquisition and integration costs		—	%		(2.4	)%
IP litigation costs, net		—	%		(0.1	)%
Non-GAAP SG&A expenses		13.7	%		12.6	%
GAAP Impairment losses		0.6	%		0.5	%
Impairment losses		(0.6	)%		(0.5	)%
Non-GAAP Impairment losses		—	%		—	%
GAAP restructuring expenses		1.0	%		2.3	%
Restructuring charges		(1.0	)%		(2.3	)%
Non-GAAP restructuring expenses		—	%		—	%
GAAP loss from operations		(5.0	)%		(5.2	)%
Total non-GAAP adjustments		30.1	%		34.0	%
Non-GAAP income from operations		25.2	%		28.8	%
GAAP and non-GAAP interest and other income (expense), net		(3.6	)%		(2.9	)%
GAAP loss before income taxes		(8.5	)%		(8.1	)%
Total non-GAAP adjustments before income taxes		30.1	%		34.0	%
Non-GAAP income before income taxes		21.6	%		25.9	%
GAAP income tax benefit		(1.7	)%		(5.9	)%
Adjustment for non-cash tax benefits/expenses and the effects of the Tax Act		3.2	%		7.7	%
Non-GAAP income tax provision		1.5	%		1.8	%
GAAP net loss		(6.8	)%		(2.2	)%
Total non-GAAP adjustments before income taxes		30.1	%		34.0	%
Less: total tax adjustments		3.2	%		7.7	%
Non-GAAP net income		20.1	%		24.1	%

« Previous Page 1 | 2 | 3 | 4  Next Page »