Acquisition and Integration Related Costs - includes such items as professional fees incurred in connection with pre-acquisition and integration specific activities, post-acquisition employee retention amounts, contingent consideration adjustments, severance and other amounts accrued or paid to terminated employees of acquired businesses, costs including salaries incurred which are not expected to have a continuing contribution to operations or are expected to have a diminishing contribution during the integration period and the amortization of the fair market step-up value of acquired inventory and fixed assets. We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.

Discontinued Operations excluding consulting income - includes the profit and loss amounts of discontinued operations, with the exception of consulting income associated with a consulting agreement we entered into at the time of our Automotive business divestiture. We believe excluding gains and losses associated with historically divested businesses from our net income provides management with a comparable basis to our current ongoing operating activities. We do not exclude the consulting agreement income classified as discontinued operations because management views this income as part of our ongoing operations and correlated with future operations since we both derive income and incur ongoing costs associated with the consulting services available under the consulting agreement.

Other - primarily includes transaction expenses incurred as part of our Credit Agreement Amendments in the fourth fiscal quarter of 2016 as well as the second and third fiscal quarters of 2017. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments - adjustments to arrive at an estimate of our Adjusted Non-GAAP tax rate associated with our Adjusted Non-GAAP income over a period of time. We determine our Adjusted Non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors including our historical and forecast earnings by jurisdiction, discrete items, cash taxes paid in relation to our Adjusted Non-GAAP Net Income before income taxes and our ability to realize tax assets. We generally assess this Adjusted Non-GAAP income tax rate quarterly and have utilized 10% for our second and third fiscal quarters of 2017, 12% for our first fiscal quarter of 2017 and 15% for our fiscal year 2016. Our historical effective income tax rate under GAAP has varied significantly from our Adjusted Non-GAAP income tax rate. Items that have historically resulted in significant difference between our effective income tax rate under GAAP and our Adjusted Non-GAAP income tax rate include changes in fair values of the common stock warrant liability, which is excluded from our Adjusted Non-GAAP net Income and is neither deductible nor taxable for tax purposes, income taxed in foreign jurisdictions at generally lower tax rates, non-deductible compensation, research and development tax credits and merger expenses, as well as the establishment of a valuation allowance against our U.S. deferred tax assets during the three months ended March 31, 2017. We believe it is beneficial for our management to review our Adjusted Non-GAAP income tax rate on a consistent basis over periods of time. Items such as those noted above may have a significant impact on our U.S. GAAP income tax expense and associated effective tax rate over time. Our Adjusted Non-GAAP income tax rate is an estimate, and may differ from our effective income tax rate determined under GAAP.

Adjusted EBITDA - is a calculation that adds depreciation expense and consulting agreement income to our Adjusted Non-GAAP Income from Operations. Adjusted EBITDA is a measure that management reviews and utilizes for operational analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analysis purposes.

Free Cash Flow - is a calculation that starts with cash flow from operating activities, reduces this amount by our capital expenditures in the applicable period and adds AppliedMicro transaction related payments. Free Cash Flow is a measure that management reviews and utilizes for cash flow analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analyzing a company's cash flow.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited and in thousands, except per share data)
			Three Months Ended															Twelve Months Ended
			September 29, 2017					June 30, 2017					September 30, 2016					September 29, 2017					September 30, 2016
Revenue			$	166,381				$	194,555				$	152,697				$	698,772				$	544,338
Cost of revenue			79,485					101,926					70,893					371,888					262,729
Gross profit			86,896					92,629					81,804					326,884					281,609
Operating expenses:
Research and development			39,398					38,729					30,109					147,986					107,698
Selling, general and administrative			42,398					46,666					40,265					187,886					145,433
Impairment charges			4,352					—					—					4,352					11,765
Restructuring charges			401					586					1,365					2,744					3,465
Total operating expenses			86,549					85,981					71,739					342,968					268,361
Income (loss) from operations			347					6,648					10,065					(16,084		)			13,248
Other income (expense):
Warrant liability gain (expense)			13,958					(9,085		)			(12,691		)			(2,522		)			(16,431		)
Interest expense, net			(6,953		)			(7,178		)			(5,310		)			(28,855		)			(18,427		)
Other (expense) income, net			(1		)			(1,139		)			5					(2,044		)			39
Total other income (expense)			7,004					(17,402		)			(17,996		)			(33,421		)			(34,819		)
Income (loss) before income taxes			7,351					(10,754		)			(7,931		)			(49,505		)			(21,571		)
Income tax expense (benefit)			7,352					3,223					(11,804		)			100,911					(17,983		)
Income (loss) from continuing operations			(1		)			(13,977		)			3,873					(150,416		)			(3,588		)
(Loss) income from discontinued operations			(10,719		)			(13,700		)			1,228					(19,077		)			5,022
Net (loss) income			$	(10,720	)			$	(27,677	)			$	5,101				$	(169,493	)			$	1,434
Net (loss) income per share:
Basic:
Income (loss) from continuing operations			$	(0.00	)			$	(0.22	)			$	0.07				$	(2.48	)			$	(0.07	)
(Loss) income from discontinued operations			(0.17		)			(0.21		)			0.02					(0.31		)			0.09
(Loss) income per share - basic			$	(0.17	)			$	(0.43	)			$	0.10				$	(2.79	)			$	0.03
Diluted:
Income (loss) from continuing operations			$	(0.21	)			$	(0.22	)			$	0.07				$	(2.48	)			$	(0.07	)
(Loss) income from discontinued operations			(0.16		)			(0.21		)			0.02					(0.31		)			0.09
(Loss) income per share - diluted			$	(0.38	)			$	(0.43	)			$	0.09				$	(2.79	)			$	0.03
Shares - Basic			64,243					64,019					53,676					60,704					53,364
Shares - Diluted			65,156					64,019					55,285					60,704					53,364

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands)
			September 29, 2017					September 30, 2016
ASSETS
Current assets:
Cash and cash equivalents			$	130,104				$	332,977
Short term investments			84,121					23,776
Accounts receivable, net			136,096					108,331
Inventories			136,074					114,935
Income tax receivable			18,493					21,607
Assets held for sale, current			35,571					—
Prepaids and other current assets			22,438					11,318
Total current assets			562,897					612,944
Property and equipment, net			131,019					99,167
Goodwill and intangible assets, net			934,857					379,626
Deferred income taxes			948					89,606
Other long-term assets			7,402					7,208
TOTAL ASSETS			$	1,637,123				$	1,188,551
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable			$	815				$	1,152
Current portion of long-term debt obligations			6,885					6,051
Liabilities held for sale			2,144					—
Accounts payable, accrued liabilities and other			107,275					84,947
Total current liabilities			117,119					92,150
Lease payable, less current portion			17,275					2,463
Long-term debt obligations, less current portion			661,471					573,882
Common stock warrant liability			40,775					38,253
Deferred income taxes			15,172					11,765
Other long-term liabilities			7,937					7,254
Total liabilities			859,749					725,767
Stockholders' equity			777,374					462,784
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	1,637,123				$	1,188,551

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)
			Twelve Months Ended
			September 29, 2017					September 30, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(169,493	)			$	1,434
Adjustments to reconcile (loss) income to net operating cash			253,377					118,813
Change in operating assets and liabilities			(22,834		)			(41,015		)
Net cash provided by operating activities			61,050					79,232
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net			(270,008		)			(85,517		)
Purchases, sales and maturities of investments			(60,493		)			15,257
Proceeds from discontinued operations			25,520					7,500
Proceeds from sale of assets			215					—
Purchases of property and equipment			(32,804		)			(31,326		)
Acquisition of intellectual property			—					(777		)
Net cash used in investing activities			(337,570		)			(94,863		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable			96,558					247,625
Payments of notes payable and assumed debt			(5,884		)			(14,076		)
Proceeds from stock option exercises and employee stock purchases			8,281					5,460
Repurchase of common stock			(18,534		)			(9,995		)
Other adjustments			(6,768		)			(1,660		)
Net cash provided by financing activities			73,653					227,354
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(6		)			(1,058		)
NET CHANGE IN CASH AND CASH EQUIVALENTS			(202,873		)			210,665
CASH AND CASH EQUIVALENTS — Beginning of period			332,977					122,312
CASH AND CASH EQUIVALENTS — End of period			$	130,104				$	332,977
Supplemental disclosure of non-cash activities
Issuance of common stock in connection with the AppliedMicro Acquisition			465,082					—

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (unaudited and in thousands, except per share data)
			Three Months Ended																					Twelve Months Ended
			September 29, 2017							June 30, 2017							September 30, 2016							September 29, 2017							September 30, 2016
			Amount				% Revenue			Amount				% Revenue			Amount				% Revenue			Amount				% Revenue			Amount				% Revenue
Gross profit - GAAP			$	86,896			52.2			$	92,629			47.6			$	81,804			53.6			$	326,884			46.8			$	281,609			51.7
Amortization expense			8,592				5.2			8,416				4.3			6,366				4.2			30,286				4.3			26,615				4.9
Share-based and non-cash compensation			931				0.6			956				0.5			628				0.4			3,647				0.5			2,546				0.5
Impairment and restructuring charges			—				—			—				—			—				—			—				—			1,950				0.4
Acquisition and integration related costs			208				0.1			11,736				6.0			542				0.4			45,283				6.5			3,645				0.7
Adjusted gross profit (Non-GAAP)			$	96,627			58.1			$	113,737			58.5			$	89,340			58.5			$	406,100			58.1			$	316,365			58.1

			Three Months Ended																											Twelve Months Ended
			September 29, 2017									June 30, 2017									September 30, 2016									September 29, 2017									September 30, 2016
			Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue
Operating expenses - GAAP			$	86,549				52.0				$	85,981				44.2				$	71,739				47.0				$	342,968				49.1				$	268,362				49.3
Amortization expense			(10,993		)			(6.6	)			(10,832		)			(5.6	)			(6,498		)			(4.3	)			(35,456		)			(5.1	)			(23,640		)			(4.3	)
Share-based and non-cash compensation			(7,606		)			(4.6	)			(9,833		)			(5.1	)			(9,099		)			(6.0	)			(37,991		)			(5.4	)			(33,904		)			(6.2	)
Impairment and restructuring charges			(4,753		)			(2.9	)			(586		)			(0.3	)			(1,365		)			(0.9	)			(7,096		)			(1.0	)			(15,230		)			(2.8	)
Litigation costs			(675		)			(0.4	)			(569		)			(0.3	)			(1,037		)			(0.7	)			(2,284		)			(0.3	)			(2,194		)			(0.4	)
Acquisition and integration related costs			(3,635		)			(2.2	)			(2,645		)			(1.4	)			(2,146		)			(1.4	)			(33,382		)			(4.8	)			(9,784		)			(1.8	)
Other			(220		)			(0.1	)			(719		)			(0.4	)			(573		)			(0.4	)			(1,123		)			(0.2	)			(573		)			(0.1	)
Adjusted operating expenses (Non-GAAP)			$	58,667				35.3				$	60,797				31.2				$	51,021				33.4				$	225,636				32.3				$	183,037				33.6

			Three Months Ended																					Twelve Months Ended
			September 29, 2017							June 30, 2017							September 30, 2016							September 29, 2017									September 30, 2016
			Amount				% Revenue			Amount				% Revenue			Amount				% Revenue			Amount					% Revenue				Amount				% Revenue
Income (loss) from operations - GAAP			$	347			0.2			$	6,648			3.4			$	10,065			6.6			$	(16,084	)			(2.3	)			$	13,247			2.4
Amortization expense			19,585				11.8			19,248				9.9			12,864				8.4			65,742					9.4				50,255				9.2
Share-based and non-cash compensation			8,538				5.1			10,789				5.5			9,727				6.4			41,638					6.0				36,450				6.7
Impairment and restructuring charges			4,753				2.9			586				0.3			1,365				0.9			7,096					1.0				17,180				3.2
Litigation costs			675				0.4			569				0.3			1,037				0.7			2,284					0.3				2,194				0.4
Acquisition and integration related costs			3,843				2.3			14,380				7.4			2,688				1.8			78,664					11.3				13,428				2.5
Other			218				0.1			719				0.4			573				0.4			1,123					0.2				573				0.1
Adjusted income from operations (Non-GAAP)			$	37,959			22.8			$	52,939			27.2			$	38,319			25.1			$	180,463				25.8				$	133,327			24.5
Depreciation expense			7,461				4.5			6,739				3.5			4,689				3.1			25,908					3.7				18,710				3.4
Consulting income			1,875				1.1			1,875				1.0			1,880				1.2			7,500					1.1				7,516				1.4
Adjusted EBITDA (Non-GAAP)			$	47,295			28.4			$	61,553			31.6			$	44,888			29.4			$	213,871				30.6				$	159,553			29.3

			Three Months Ended																											Twelve Months Ended
			September 29, 2017									June 30, 2017									September 30, 2016									September 29, 2017									September 30, 2016
			Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue
Net (loss) income - GAAP			$	(10,720	)			(6.4	)			$	(27,677	)			(14.2	)			$	5,101				3.3				$	(169,493	)			(24.3	)			$	1,434				0.3
Amortization expense			19,585					11.8				19,248					9.9				12,864					8.4				65,742					9.4				50,255					9.2
Share-based and non-cash compensation			8,538					5.1				10,789					5.5				9,727					6.4				41,638					6.0				36,450					6.7
Impairment and restructuring charges			4,753					2.9				586					0.3				1,365					0.9				7,096					1.0				17,180					3.2
Warrant liability expense			(13,958		)			(8.4	)			9,085					4.7				12,691					8.3				2,522					0.4				16,432					3.0
Non-cash interest, net			827					0.5				1,122					0.6				503					0.3				3,373					0.5				1,731					0.3
Litigation costs			675					0.4				569					0.3				1,037					0.7				2,284					0.3				2,194					0.4
Acquisition and integration related costs			3,843					2.3				14,380					7.4				2,688					1.8				78,664					11.3				13,406					2.5
Discontinued operations, excluding consulting income			12,594					7.6				15,575					8.0				647					0.4				26,577					3.8				2,478					0.5
Other			218					0.1				1,856					1.0				573					0.4				3,131					0.4				573					0.1
Tax effect of non-GAAP adjustments			3,981					2.4				(1,653		)			(0.8	)			(17,114		)			(11.2	)			83,943					12.0				(36,605		)			(6.7	)
Adjusted net income (Non-GAAP)			$	30,336				18.2				$	43,880				22.6				$	30,082				19.7				$	145,477				20.8				$	105,528				19.4

			Three Months Ended																														Twelve Months Ended
			September 29, 2017										June 30, 2017										September 30, 2016										September 29, 2017										September 30, 2016
			Net Income (Loss)					Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share
Net (loss) income - GAAP			$	(10,720	)								$	(27,677	)								$	5,101									$	(169,493	)								$	1,434
Warrant liability gain			(13,958		)								—											—										—										—
Net (loss) income - diluted			$	(24,678	)			$	(0.38	)			$	(27,677	)			$	(0.43	)			$	5,101				$	0.09				$	(169,493	)			$	(2.79	)			$	1,434				$	0.03
Adjusted (Non-GAAP)			$	30,336				$	0.46				$	43,880				$	0.67				$	30,082				$	0.54				$	145,477				$	2.32				$	105,528				$	1.91

			Three Months Ended															Twelve Months Ended
			September 29, 2017						June 30, 2017						September 30, 2016						September 29, 2017						September 30, 2016
			Shares						Shares						Shares						Shares						Shares
Diluted shares - GAAP			64,243						64,019						55,285						60,704						53,364
Incremental shares			1,687						1,916						—						1,877						1,855
Adjusted diluted shares (Non-GAAP)			65,930						65,935						55,285						62,581						55,219

			Three Months Ended																											Twelve Months Ended
			September 29, 2017									June 30, 2017									September 30, 2016									September 29, 2017									September 30, 2016
			Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue
Interest expense, net - GAAP			$	6,953				4.2				$	7,178				3.7				$	5,512				3.6				$	28,855				4.1				$	18,942				3.5
Non-cash interest expense			(827		)			(0.5	)			(1,122		)			(0.6	)			(503		)			(0.3	)			(3,373		)			(0.5	)			(1,731		)			(0.3	)
Adjusted Interest Expense (Non-GAAP)			$	6,126				3.7				$	6,056				3.1				$	5,009				3.3				$	25,482				3.6				$	17,211				3.2

			Three Months Ended																											Twelve Months Ended
			September 29, 2017									June 30, 2017									September 30, 2016									September 29, 2017									September 30, 2016
			Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue				Amount					% Revenue
Cash flow from operations			$	12,361				7.4				$	27,850				14.3				$	24,885				16.3				$	61,050				8.7				$	79,232				14.6
Capital expenditures			(8,308		)			(5.0	)			(8,201		)			(4.2	)			(7,226		)			(4.7	)			(32,804		)			(4.7	)			(32,103		)			(5.9	)
AppliedMicro transaction related payments			3,426					2.1				419					0.2				—					—				31,959					4.6				—					—
Free cash flow (Non-GAAP)			$	7,479				4.5				$	20,068				10.3				$	17,659				11.6				$	60,205				8.6				$	47,129				8.7
Free cash flow as a percentage of adjusted net income			25		%							46		%							59		%							41		%							45		%

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