MaxLinear, Inc. Announces Fourth Quarter 2021 Financial Results

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) research and development funded by others; (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) loss from extinguishment of debt; (xii) other non-recurring interest and other income (expenses), net attributable to acquisitions and (xiii) 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 February 2021. We currently expect that bonus awards under our fiscal 2021 program will be settled in common stock in the first quarter of fiscal 2022.

Expenses incurred in relation to acquisitions include amortization of purchased intangible assets, amortization of inventory 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. Gains related to acquisitions include a gain on sale of an investment in a privately-held entity included in interest and other income.

Research and development funded by others represents proceeds received under contracts for jointly funded R&D projects to develop technology that may be commercialized into a product in the future. Such proceeds have not yet been recognized in GAAP results as the Company may be required to repay all or a portion of the funds provided by the other party under certain conditions. Management believes it is not probable that it will trigger such conditions.

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.

Loss on extinguishment of debt is related to the charge-off of remaining unamortized debt discount and issuance costs on debt we repaid early with proceeds from a new term loan in June 2021.

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 first quarter 2022.

About MaxLinear, Inc.

MaxLinear, Inc. (NASDAQ: 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
	December 31, 2021			September 30, 2021			December 31, 2020
Net revenue	$	247,889		$	229,774		$	194,716
Cost of net revenue		106,112			99,981			111,629
Gross profit		141,777			129,793			83,087
Operating expenses:
Research and development		73,320			67,538			70,504
Selling, general and administrative		39,120			38,469			36,238
Total operating expenses		112,440			106,007			106,742
Income (loss) from operations		29,337			23,786			(23,655	)
Interest income		32			28			126
Interest expense		(2,400	)		(2,649	)		(4,724	)
Other income (expense), net		1,510			(105	)		(550	)
Total other income (expense), net		(858	)		(2,726	)		(5,148	)
Income (loss) before income taxes		28,479			21,060			(28,803	)
Income tax provision (benefit)		303			11,802			(4,131	)
Net income (loss)	$	28,176		$	9,258		$	(24,672	)
Net income (loss) per share:
Basic	$	0.37		$	0.12		$	(0.33	)
Diluted	$	0.35		$	0.12		$	(0.33	)
Shares used to compute net income (loss) per share:
Basic		76,755			76,582			74,335
Diluted		81,567			79,815			74,335

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
	Years Ended
	December 31, 2021			December 31, 2020
Net revenue	$	892,398		$	478,596
Cost of net revenue		396,566			265,798
Gross profit		495,832			212,798
Operating expenses:
Research and development		278,440			179,993
Selling, general and administrative		149,943			130,025
Impairment losses		—			86
Restructuring charges		2,204			3,833
Total operating expenses		430,587			313,937
Income (loss) from operations		65,245			(101,139	)
Interest income		78			409
Interest expense		(12,996	)		(12,952	)
Loss on extinguishment of debt		(5,221	)		—
Other income (expense), net		764			(1,170	)
Total other income (expense), net		(17,375	)		(13,713	)
Income (loss) before income taxes		47,870			(114,852	)
Income tax provision (benefit)		5,901			(16,259	)
Net income (loss)	$	41,969		$	(98,593	)
Net income (loss) per share:
Basic	$	0.55		$	(1.35	)
Diluted	$	0.53		$	(1.35	)
Shares used to compute net income (loss) per share:
Basic		76,037			73,133
Diluted		79,679			73,133

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

	Three Months Ended
	December 31, 2021			September 30, 2021			December 31, 2020
Operating Activities
Net income (loss)	$	28,176		$	9,258		$	(24,672	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation		24,353			23,117			22,694
Amortization of inventory fair value adjustments		—			—			18,500
Amortization of debt issuance costs and accretion of discount on debt and leases		416			513			815
Stock-based compensation		16,415			16,022			14,540
Deferred income taxes		(4,640	)		6,866			(13,235	)
Loss on disposal of property and equipment		—			145			—
(Gain) loss on foreign currency and other		250			(24	)		914
Excess tax benefits on stock based awards		(2,046	)		(738	)		(147	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(12,265	)		28,454			37,736
Inventory		(4,249	)		(28,844	)		(11,657	)
Prepaid expenses and other assets		(9,301	)		39			(4,597	)
Leased right-of-use assets		—			—			36
Accounts payable, accrued expenses and other current liabilities		(22,283	)		28,743			(10,099	)
Accrued compensation		9,746			8,616			9,485
Accrued price protection liability		(8,956	)		(5,319	)		29,280
Lease liabilities		(2,835	)		(2,723	)		(2,111	)
Other long-term liabilities		3,252			(48	)		6,787
Net cash provided by operating activities		16,033			84,077			74,269
Investing Activities
Purchases of property and equipment		(12,242	)		(9,624	)		(2,355	)
Purchases of intangible assets		(965	)		(5,504	)		(2,411	)
Cash used in acquisitions, net of cash acquired		(5,000	)		(7,500	)		—
Net cash used in investing activities		(18,207	)		(22,628	)		(4,766	)
Financing Activities
Payment of debt issuance cost		(29	)		(17	)		—
Repayment of debt		(20,000	)		(20,000	)		(17,188	)
Net proceeds from issuance of common stock		2,494			192			2,798
Minimum tax withholding paid on behalf of employees for restricted stock units		(2,068	)		(976	)		(643	)
Repurchase of common stock		(15,403	)		(1,008	)		—
Net cash used in financing activities		(35,006	)		(21,809	)		(15,033	)
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(1,636	)		(520	)		(1,178	)
Increase (decrease) in cash, cash equivalents and restricted cash		(38,816	)		39,120			53,292
Cash, cash equivalents and restricted cash at beginning of period		170,554			131,434			96,742
Cash, cash equivalents and restricted cash at end of period	$	131,738		$	170,554		$	150,034

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

	Years Ended
	December 31, 2021			December 31, 2020
Operating Activities
Net income (loss)	$	41,969		$	(98,593	)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Amortization and depreciation		91,792			76,513
Impairment losses		—			86
Amortization of inventory fair value adjustments		—			32,945
Amortization of debt issuance costs and accretion of discount on debt and leases		3,000			2,201
Stock-based compensation		59,358			47,597
Deferred income taxes		(3,235	)		(18,488	)
Loss on disposal of property and equipment		533			—
Impairment of leasehold improvements		226			319
Impairment of leased right-of-use assets		429			1,508
Loss on extinguishment of debt		5,221			—
Loss on foreign currency		634			1,289
Excess tax benefits on stock-based awards		(7,415	)		(677	)
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable		(51,690	)		(16,856	)
Inventory		(33,689	)		(31,837	)
Prepaid expenses and other assets		24,186			(38,954	)
Leased right-of-use assets		72			441
Accounts payable, accrued expenses and other current liabilities		12,771			57,094
Accrued compensation		33,595			32,606
Accrued price protection liability		(7,320	)		34,719
Lease liabilities		(9,905	)		(6,386	)
Other long-term liabilities		7,701			(1,934	)
Net cash provided by operating activities		168,233			73,593
Investing Activities
Purchases of property and equipment		(39,176	)		(12,487	)
Purchases of intangible assets		(7,581	)		(2,799	)
Cash used in acquisitions, net of cash acquired		(40,000	)		(160,000	)
Purchases of available-for-sale securities		(5,000	)		—
Net cash used in investing activities		(91,757	)		(175,286	)
Financing Activities
Proceeds from the issuance of debt		350,000			175,000
Payment of debt issuance cost		(4,173	)		(2,696	)
Repayment of debt		(409,813	)		(17,188	)
Net proceeds from issuance of common stock		8,780			8,068
Minimum tax withholding paid on behalf of employees for restricted stock units		(13,149	)		(3,535	)
Repurchase of common stock		(23,548	)		—
Net cash provided by (used in) financing activities		(91,903	)		159,649
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(2,869	)		(1,039	)
Increase (decrease) in cash, cash equivalents and restricted cash		(18,296	)		56,917
Cash, cash equivalents and restricted cash at beginning of period		150,034			93,117
Cash, cash equivalents and restricted cash at end of period	$	131,738		$	150,034

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

	December 31, 2021		September 30, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	130,572	$	169,424	$	148,901
Short-term restricted cash		105		107		115
Accounts receivable, net		119,724		106,867		67,442
Inventory		131,703		127,347		97,839
Prepaid expenses and other current assets		22,000		14,535		47,421
Total current assets		404,104		418,280		361,718
Long-term restricted cash		1,061		1,023		1,018
Property and equipment, net		60,924		53,022		39,470
Leased right-of-use assets		27,269		23,668		21,886
Intangible assets, net		152,540		163,894		207,266
Goodwill		306,668		302,828		302,828
Deferred tax assets		89,168		84,660		86,065
Other long-term assets		8,650		6,519		2,191
Total assets	$	1,050,384	$	1,053,894	$	1,022,442

Liabilities and stockholders’ equity
Current liabilities	$	207,395	$	231,274	$	233,661
Long-term lease liabilities		24,640		21,400		20,862
Long-term debt		306,153		326,027		363,592
Other long-term liabilities		22,998		17,650		13,210
Stockholders’ equity		489,198		457,543		391,117
Total liabilities and stockholders’ equity	$	1,050,384	$	1,053,894	$	1,022,442

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

	Three Months Ended
	December 31, 2021			September 30, 2021			December 31, 2020
GAAP gross profit	$	141,777		$	129,793		$	83,087
Stock-based compensation		152			151			160
Performance based equity		137			123			124
Amortization of inventory fair value adjustments		—			—			18,500
Amortization of purchased intangible assets		10,759			10,743			10,667
Non-GAAP gross profit		152,825			140,810			112,538

GAAP R&D expenses		73,320			67,538			70,504
Stock-based compensation		(8,243	)		(7,691	)		(7,410	)
Performance based equity		(8,224	)		(6,642	)		(6,124	)
Research and development funded by others		(2,000	)		—			—
Acquisition and integration costs		(25	)		—			—
Non-GAAP R&D expenses		54,828			53,205			56,970

GAAP SG&A expenses		39,120			38,469			36,238
Stock-based compensation		(8,020	)		(8,179	)		(6,970	)
Performance based equity		(3,934	)		(3,120	)		(2,991	)
Amortization of purchased intangible assets		(5,928	)		(5,811	)		(6,200	)
Acquisition and integration costs		(192	)		(135	)		(1,200	)
IP litigation costs, net		—			—			(32	)
Non-GAAP SG&A expenses		21,046			21,224			18,845

GAAP income (loss) from operations		29,337			23,786			(23,655	)
Total non-GAAP adjustments		47,614			42,595			60,378
Non-GAAP income from operations		76,951			66,381			36,723

GAAP interest and other income (expense), net		(858	)		(2,726	)		(5,148	)
Non-recurring interest and other income (expense), net		(1,893	)		73			384
Non-GAAP interest and other income (expense), net		(2,751	)		(2,653	)		(4,764	)

GAAP income (loss) before income taxes		28,479			21,060			(28,803	)
Total non-GAAP adjustments		45,721			42,668			60,762
Non-GAAP income before income taxes		74,200			63,728			31,959

GAAP income tax provision (benefit)		303			11,802			(4,131	)
Adjustment for non-cash tax benefits/expenses		4,149			(7,979	)		6,048
Non-GAAP income tax provision		4,452			3,823			1,917

GAAP net income (loss)		28,176			9,258			(24,672	)
Total non-GAAP adjustments before income taxes		45,721			42,668			60,762
Less: total tax adjustments		4,149			(7,979	)		6,048
Non-GAAP net income	$	69,748		$	59,905		$	30,042

Shares used in computing non-GAAP basic net income per share		76,755			76,582			74,335
Shares used in computing non-GAAP diluted net income per share		81,567			79,815			77,926
Non-GAAP basic net income per share	$	0.91		$	0.78		$	0.40
Non-GAAP diluted net income per share	$	0.86		$	0.75		$	0.39

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

	Years Ended
	December 31, 2021			December 31, 2020
GAAP gross profit	$	495,832		$	212,798
Stock-based compensation		620			577
Performance based equity		469			482
Amortization of inventory fair value adjustments		—			32,945
Amortization of purchased intangible assets		42,992			37,730
Non-GAAP gross profit		539,913			284,532

GAAP R&D expenses		278,440			179,993
Stock-based compensation		(30,364	)		(22,252	)
Performance based equity		(27,713	)		(16,118	)
Research and development funded by others		(5,800	)		—
Acquisition and integration costs		(155	)		—
Non-GAAP R&D expenses		214,408			141,623

GAAP SG&A expenses		149,943			130,025
Stock-based compensation		(28,374	)		(24,172	)
Performance based equity		(12,301	)		(8,262	)
Amortization of purchased intangible assets		(23,625	)		(23,529	)
Acquisition and integration costs		(1,913	)		(14,322	)
IP litigation costs, net		(11	)		(181	)
Non-GAAP SG&A expenses		83,719			59,559

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

GAAP restructuring expenses		2,204			3,833
Restructuring charges		(2,204	)		(3,833	)
Non-GAAP restructuring expenses		—			—

GAAP income (loss) from operations		65,245			(101,139	)
Total non-GAAP adjustments		176,541			184,489
Non-GAAP income from operations		241,786			83,350

GAAP loss on extinguishment of debt		(5,221	)		—
Loss on extinguishment of debt		5,221			—
Non-GAAP loss on extinguishment of debt		—			—

GAAP interest and other income (expense), net		(12,154	)		(13,713	)
Non-recurring interest and other income (expense), net		(1,377	)		384
Non-GAAP interest and other income (expense), net		(13,531	)		(13,329	)

GAAP income (loss) before income taxes		47,870			(114,852	)
Total non-GAAP adjustments		180,385			184,873
Non-GAAP income before income taxes		228,255			70,021

GAAP income tax provision (benefit)		5,901			(16,259	)
Adjustment for non-cash tax benefits/expenses		7,794			20,460
Non-GAAP income tax provision		13,695			4,201

GAAP net income (loss)		41,969			(98,593	)
Total non-GAAP adjustments before income taxes		180,385			184,873
Less: total tax adjustments		7,794			20,460
Non-GAAP net income	$	214,560		$	65,820

Shares used in computing non-GAAP basic net income per share		76,037			73,133
Shares used in computing non-GAAP diluted net income per share		79,679			74,928
Non-GAAP basic net income per share	$	2.82		$	0.90
Non-GAAP diluted net income per share	$	2.69		$	0.88

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

	Three Months Ended
	December 31, 2021	September 30, 2021	December 31, 2020
GAAP gross profit	57.2%	56.5%	42.7%
Stock-based compensation	0.1%	0.1%	0.1%
Performance based equity	0.1%	0.1%	0.1%
Amortization of inventory fair value adjustments	—%	—%	9.5%
Amortization of purchased intangible assets	4.3%	4.7%	5.5%
Non-GAAP gross profit	61.7%	61.3%	57.8%

GAAP R&D expenses	29.6%	29.4%	36.2%
Stock-based compensation	(3.3) %	(3.4) %	(3.8) %
Performance based equity	(3.3) %	(2.9) %	(3.1) %
Research and development funded by others	(0.8) %	—%	—%
Acquisition and integration costs	—%	—%	—%
Non-GAAP R&D expenses	22.1%	23.2%	29.3%

GAAP SG&A expenses	15.8%	16.7%	18.6%
Stock-based compensation	(3.2) %	(3.6) %	(3.6) %
Performance based equity	(1.6) %	(1.4) %	(1.5) %
Amortization of purchased intangible assets	(2.4) %	(2.5) %	(3.2) %
Acquisition and integration costs	(0.1) %	(0.1) %	(0.6) %
IP litigation costs, net	—%	—%	—%
Non-GAAP SG&A expenses	8.5%	9.2%	9.7%

GAAP income (loss) from operations	11.8%	10.4%	(12.2) %
Total non-GAAP adjustments	19.2%	18.5%	31.0%
Non-GAAP income from operations	31.0%	28.9%	18.9%

GAAP interest and other income (expense), net	(0.4) %	(1.2) %	(2.6) %
Non-recurring interest and other income (expense), net	(0.8) %	—%	0.2%
Non-GAAP interest and other income (expense), net	(1.1) %	(1.2) %	(2.5) %

GAAP income (loss) before income taxes	11.5%	9.2%	(14.8) %
Total non-GAAP adjustments before income taxes	18.4%	18.6%	31.2%
Non-GAAP income before income taxes	29.9%	27.7%	16.4%

GAAP income tax provision (benefit)	0.1%	5.1%	(2.1) %
Adjustment for non-cash tax benefits/expenses	1.7%	(3.5) %	3.1%
Non-GAAP income tax provision	1.8%	1.7%	1.0%

GAAP net income (loss)	11.4%	4.0%	(12.7) %
Total non-GAAP adjustments before income taxes	18.4%	18.6%	31.2%
Less: total tax adjustments	1.7%	(3.5) %	3.1%
Non-GAAP net income	28.1%	26.1%	15.4%

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

	Years Ended
	December 31, 2021	December 31, 2020
GAAP gross profit	55.6%	44.5%
Stock-based compensation	0.1%	0.1%
Performance based equity	0.1%	0.1%
Amortization of inventory fair value adjustments	—%	6.9%
Amortization of purchased intangible assets	4.8%	7.9%
Non-GAAP gross profit	60.5%	59.5%

GAAP R&D expenses	31.2%	37.6%
Stock-based compensation	(3.4) %	(4.7) %
Performance based equity	(3.1) %	(3.4) %
Research and development funded by others	(0.7) %	—%
Acquisition and integration costs	—%	—%
Non-GAAP R&D expenses	24.0%	29.6%

GAAP SG&A expenses	16.8%	27.2%
Stock-based compensation	(3.2) %	(5.1) %
Performance based equity	(1.4) %	(1.7) %
Amortization of purchased intangible assets	(2.7) %	(4.9) %
Acquisition and integration costs	(0.2) %	(3.0) %
IP litigation costs, net	—%	—%
Non-GAAP SG&A expenses	9.4%	12.4%

GAAP impairment losses	—%	0.02%
Impairment losses	—%	(0.02) %
Non-GAAP impairment losses	—%	—%

GAAP restructuring expenses	0.3%	0.8%
Restructuring charges	(0.3) %	(0.8) %
Non-GAAP restructuring expenses	—%	—%

GAAP income (loss) from operations	7.3%	(21.1) %
Total non-GAAP adjustments	19.8%	38.5%
Non-GAAP income from operations	27.1%	17.4%

GAAP loss on extinguishment of debt	(0.6) %	—%
Loss on extinguishment of debt	0.6%	—%
Non-GAAP loss on extinguishment of debt	—%	—%

GAAP interest and other income (expense), net	(1.4) %	(2.9) %
Non-recurring interest and other income (expense), net	(0.2) %	0.1%
Non-GAAP interest and other income (expense), net	(1.5) %	(2.8) %

GAAP income (loss) before income taxes	5.4%	(24.0) %
Total non-GAAP adjustments	20.2%	38.6%
Non-GAAP income before income taxes	25.6%	14.6%

GAAP income tax provision (benefit)	0.7%	(3.4) %
Adjustment for non-cash tax benefits/expenses	0.9%	4.3%
Non-GAAP income tax provision	1.5%	0.9%

GAAP net income (loss)	4.7%	(20.6) %
Total non-GAAP adjustments before income taxes	20.2%	38.6%
Less: total tax adjustments	0.9%	4.3%
Non-GAAP net income	24.0%	13.8%

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