MaxLinear, Inc. Announces First Quarter 2021 Financial Results

In addition to these risks and uncertainties, investors should review the risks and uncertainties contained in our filings with the Securities and Exchange Commission (SEC), including our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on February 11, 2021, and our Current Reports on Form 8-K, as well as the information to be set forth under the caption “Risk Factors” in MaxLinear’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, which we expect to file soon. All forward-looking statements are based on the estimates, projections and assumptions of management as of April 28, 2021, and MaxLinear is under no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

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, 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 2021, which we currently intend to settle in shares of our common stock; (iii) accruals related to our performance based bonus plan for 2020, which we settled in shares of common stock in 2021; (iv) amortization of inventory fair value adjustments; (v) amortization of purchased intangible assets; (vi) depreciation of fixed asset fair value adjustments; (vii) acquisition and integration costs related to our acquisitions; (viii) professional fees and settlement costs related to IP and commercial litigation matters; (ix) severance and other restructuring charges; (x) impairment losses on intangible assets; (xi) other non-recurring interest and other income (expenses), net attributable to acquisitions and (xii) non-cash income tax benefits and expenses. 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. 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.

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 2020 performance periods were settled through the issuance of shares of common stock under our equity incentive plans in March 2021. We currently expect that bonus awards under our fiscal 2021 program will be settled in common stock in the first quarter of fiscal 2021.

Expenses incurred in relation to acquisitions include amortization of inventory fair value adjustments, amortization of purchased intangible assets, depreciation of fixed asset fair value adjustments, acquisition and integration costs primarily consisting of professional and consulting fees, and amortization of discount on deferred purchase price payments to interest expense.

Impairment losses relate to certain intangible assets.

Restructuring charges incurred are related to our restructuring plans which eliminate redundancies and primarily include severance and restructuring costs related to impairment of leased right-of-use assets or from 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.

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 second quarter 2021.

About MaxLinear, Inc.

MaxLinear, Inc. (NYSE: MXL) is a leading provider of radio frequency (RF), analog, digital and mixed-signal integrated circuits for access and connectivity, 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
	March 31, 2021			December 31, 2020			March 31, 2020
Net revenue	$	209,359		$	194,716		$	62,027
Cost of net revenue	97,640			111,629			31,265
Gross profit	111,719			83,087			30,762
Operating expenses:
Research and development	63,166			70,504			25,689
Selling, general and administrative	36,469			36,238			24,632
Impairment losses	—			—			86
Restructuring charges	2,166			—			489
Total operating expenses	101,801			106,742			50,896
Income (loss) from operations	9,918			(23,655		)	(20,134		)
Interest income	—			126			225
Interest expense	(4,206		)	(4,724		)	(2,476		)
Other income (expense), net	(104		)	(550		)	180
Total interest and other income (expense), net	(4,310		)	(5,148		)	(2,071		)
Income (loss) before income taxes	5,608			(28,803		)	(22,205		)
Income tax provision (benefit)	1,806			(4,131		)	(6,736		)
Net income (loss)	$	3,802		$	(24,672	)	$	(15,469	)
Net income (loss) per share:
Basic	$	0.05		$	(0.33	)	$	(0.21	)
Diluted	$	0.05		$	(0.33	)	$	(0.21	)
Shares used to compute net income (loss) per share:
Basic	74,852			74,335			72,039
Diluted	78,283			74,335			72,039

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)

	Three Months Ended
	March 31, 2021			December 31, 2020			March 31, 2020
Operating Activities
Net income (loss)	$	3,802		$	(24,672	)	$	(15,469	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation	22,325			22,694			16,733
Impairment losses	—			—			86
Amortization of inventory fair value adjustments	—			18,500			—
Amortization of debt issuance costs and accretion of discount on debt and leases	844			815			410
Stock-based compensation	12,955			14,540			6,827
Deferred income taxes	541			(13,235		)	(6,208		)
Loss on disposal of property and equipment	368			—			—
Impairment of leasehold improvements	226			—			163
Impairment of leased right-of-use assets	429			—			44
(Gain) loss on foreign currency and other	21			914			(246		)
Excess tax (benefits) deficiencies on stock based awards	(1,809		)	(147		)	94
Changes in operating assets and liabilities:
Accounts receivable	(20,079		)	37,736			5,615
Inventory	5,658			(11,657		)	353
Prepaid expenses and other assets	29,860			(4,597		)	1,443
Leased right-of-use assets	36			36			640
Accounts payable, accrued expenses and other current liabilities	(22,032		)	(10,099		)	(785		)
Accrued compensation	1,376			9,485			3,361
Accrued price protection liability	7,299			29,280			(4,537		)
Lease liabilities	(2,002		)	(2,111		)	(1,430		)
Other long-term liabilities	454			6,787			(446		)
Net cash provided by operating activities	40,272			74,269			6,648
Investing Activities
Purchases of property and equipment	(6,152		)	(2,355		)	(1,035		)
Purchases of intangible assets	(1,112		)	(2,411		)	—
Purchases of long-term investments	(5,000		)	—			—
Net cash used in investing activities	(12,264		)	(4,766		)	(1,035		)
Financing Activities
Repayment of debt	(20,000		)	(17,188		)	—
Net proceeds from issuance of common stock	1,298			2,798			488
Minimum tax withholding paid on behalf of employees for restricted stock units	(7,442		)	(643		)	(475		)
Repurchase of common stock	(2,673		)	—			—
Net cash provided by (used in) financing activities	(28,817		)	(15,033		)	13
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(32		)	(1,178		)	(303		)
Increase (decrease) in cash, cash equivalents and restricted cash	(841		)	53,292			5,323
Cash, cash equivalents and restricted cash at beginning of period	150,034			96,742			93,117
Cash, cash equivalents and restricted cash at end of period	$	149,193		$	150,034		$	98,440

MAXLINEAR, INC.
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)

	March 31, 2021		December 31, 2020		March 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	148,095	$	148,901	$	98,373
Short-term restricted cash	114		115		10
Accounts receivable, net	87,521		67,442		44,796
Inventory	92,154		97,839		31,088
Prepaid expenses and other current assets	17,096		47,421		6,342
Total current assets	344,980		361,718		180,609
Long-term restricted cash	984		1,018		57
Property and equipment, net	40,787		39,470		15,751
Leased right-of-use assets	24,403		21,886		9,864
Intangible assets, net	191,542		207,266		173,570
Goodwill	302,828		302,828		238,330
Deferred tax assets	85,524		86,065		73,492
Other long-term assets	7,551		2,191		1,752
Total assets	$	998,599	$	1,022,442	$	693,425

Liabilities and stockholders’ equity
Current liabilities	$	197,637	$	233,661	$	62,428
Long-term lease liabilities	22,419		20,862		8,029
Long-term debt	344,116		363,592		207,197
Other long-term liabilities	13,649		13,210		7,614
Stockholders’ equity	420,778		391,117		408,157
Total liabilities and stockholders’ equity	$	998,599	$	1,022,442	$	693,425

MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)

	Three Months Ended
	March 31, 2021			December 31, 2020			March 31, 2020
GAAP gross profit	$	111,719		$	83,087		$	30,762
Stock-based compensation	169			160			148
Performance based equity	82			124			69
Amortization of inventory fair value adjustments	—			18,500			—
Amortization of purchased intangible assets	10,747			10,667			8,581
Non-GAAP gross profit	122,717			112,538			39,560

GAAP R&D expenses	63,166			70,504			25,689
Stock-based compensation	(7,162		)	(7,410		)	(3,746		)
Performance based equity	(4,598		)	(6,124		)	(1,750		)
Acquisition and integration costs	(92		)	—			—
Non-GAAP R&D expenses	51,314			56,970			20,193

GAAP SG&A expenses	36,469			36,238			24,632
Stock-based compensation	(5,624		)	(6,970		)	(2,933		)
Performance based equity	(1,890		)	(2,991		)	(1,136		)
Amortization of purchased intangible assets	(6,070		)	(6,200		)	(5,723		)
Acquisition and integration costs	(1,561		)	(1,200		)	(3,270		)
IP litigation costs, net	(11		)	(32		)	(60		)
Non-GAAP SG&A expenses	21,313			18,845			11,510

GAAP impairment losses	—			—			86
Impairment losses	—			—			(86		)
Non-GAAP impairment losses	—			—			—

GAAP restructuring expenses	2,166			—			489
Restructuring charges	(2,166		)	—			(489		)
Non-GAAP restructuring expenses	—			—			—

GAAP income (loss) from operations	9,918			(23,655		)	(20,134		)
Total non-GAAP adjustments	40,172			60,378			27,991
Non-GAAP income from operations	50,090			36,723			7,857

GAAP and non-GAAP interest and other income (expense), net	(4,310		)	(5,148		)	(2,071		)
Non-recurring interest and other income (expense), net	310			384			—
Non-GAAP interest and other income (expense), net	(4,000		)	(4,764		)	(2,071		)

GAAP income (loss) before income taxes	5,608			(28,803		)	(22,205		)
Total non-GAAP adjustments	40,482			60,762			27,991
Non-GAAP income before income taxes	46,090			31,959			5,786

GAAP income tax provision (benefit)	1,806			(4,131		)	(6,736		)
Adjustment for non-cash tax benefits/expenses	959			6,048			7,083
Non-GAAP income tax provision	2,765			1,917			347

GAAP net income (loss)	3,802			(24,672		)	(15,469		)
Total non-GAAP adjustments before income taxes	40,482			60,762			27,991
Less: total tax adjustments	959			6,048			7,083
Non-GAAP net income	$	43,325		$	30,042		$	5,439

Shares used in computing non-GAAP basic net income per share	74,852			74,335			72,039
Shares used in computing non-GAAP diluted net income per share	78,283			77,926			72,673
Non-GAAP basic net income per share	$	0.58		$	0.40		$	0.08
Non-GAAP diluted net income per share	$	0.55		$	0.39		$	0.07

MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

	Three Months Ended
	March 31, 2021		December 31, 2020		March 31, 2020
GAAP gross profit	53.4	%	42.7	%	49.6	%
Stock-based compensation	0.1	%	0.1	%	0.2	%
Performance based equity	—	%	0.1	%	0.1	%
Amortization of inventory fair value adjustments	—	%	9.5	%	—	%
Amortization of purchased intangible assets	5.1	%	5.5	%	13.8	%
Non-GAAP gross profit	58.6	%	57.8	%	63.8	%

GAAP R&D expenses	30.2	%	36.2	%	41.4	%
Stock-based compensation	(3.4	)%	(3.8	)%	(6.0	)%
Performance based equity	(2.2	)%	(3.2	)%	(2.8	)%
Acquisition and integration costs	—	%	—	%	—	%
Non-GAAP R&D expenses	24.5	%	29.3	%	32.6	%

GAAP SG&A expenses	17.4	%	18.6	%	39.7	%
Stock-based compensation	(2.7	)%	(3.6	)%	(4.7	)%
Performance based equity	(0.9	)%	(1.5	)%	(1.8	)%
Amortization of purchased intangible assets	(2.9	)%	(3.2	)%	(9.2	)%
Acquisition and integration costs	(0.8	)%	(0.6	)%	(5.3	)%
IP litigation costs, net	—	%	—	%	(0.1	)%
Non-GAAP SG&A expenses	10.2	%	9.7	%	18.6	%

GAAP impairment losses	—	%	—	%	0.1	%
Impairment losses	—	%	—	%	(0.1	)%
Non-GAAP impairment losses	—	%	—	%	—	%

GAAP restructuring expenses	1.0	%	—	%	0.8	%
Restructuring charges	(1.0	)%	—	%	(0.8	)%
Non-GAAP restructuring expenses	—	%	—	%	—	%

GAAP income (loss) from operations	4.7	%	(12.2	)%	(32.5	)%
Total non-GAAP adjustments	19.2	%	31.0	%	45.1	%
Non-GAAP income from operations	23.9	%	18.9	%	12.7	%

GAAP and non-GAAP interest and other income (expense), net	(2.1	)%	(2.6	)%	(3.3	)%
Non-recurring interest and other income (expense), net	0.1	%	0.2	%	—	%
Non-GAAP interest and other income (expense), net	(1.9	)%	(2.4	)%	(3.3	)%

GAAP income (loss) before income taxes	2.7	%	(14.8	)%	(35.8	)%
Total non-GAAP adjustments before income taxes	19.3	%	31.2	%	45.1	%
Non-GAAP income before income taxes	22.0	%	16.4	%	9.3	%

GAAP income tax provision (benefit)	0.9	%	(2.1	)%	(10.9	)%
Adjustment for non-cash tax benefits/expenses	0.5	%	3.1	%	11.4	%
Non-GAAP income tax provision	1.3	%	1.0	%	0.6	%

GAAP net income (loss)	1.8	%	(12.7	)%	(24.9	)%
Total non-GAAP adjustments before income taxes	19.3	%	31.2	%	45.1	%
Less: total tax adjustments	0.5	%	3.1	%	11.4	%
Non-GAAP net income	20.7	%	15.4	%	8.8	%

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