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MaxLinear, Inc. Announces Third Quarter 2016 Financial Results

CARLSBAD, Calif., Nov. 07, 2016 (GLOBE NEWSWIRE) -- MaxLinear, Inc. (NYSE:MXL), a leading provider of radio frequency (RF) and mixed-signal integrated circuits for cable and satellite broadband communications, the connected home, and wired and wireless infrastructure markets today announced financial results for the third quarter ended September 30, 2016.

Management Commentary

“We are pleased to announce strong third quarter 2016 revenue of $96.3 million, consistent with prior guidance, representing an increase of 1 percent year-over-year. GAAP and non-GAAP gross margins were 57.6 percent and 63.1 percent, respectively. GAAP and non-GAAP operating margins were 11 percent and 30 percent, respectively, and approximately $18.4 million of operating cash flow was generated during the quarter. Our operating results benefited from the revenue contributions of our recently closed wireless infrastructure acquisitions addressing the cellular access and backhaul markets, which partially offset seasonal softness in certain cable and satellite broadband operator platforms. Our diversifying revenues across broadband access, wireless infrastructure, and fiber-optic telecom and data-center infrastructure markets, combined with continued tight operating expense management resulted in another quarter of strong profitability,” commented Kishore Seendripu, Ph.D., Chairman and CEO.

“We continue to increase our analog and mixed-signal content in our broadband access and connectivity platforms addressing broadband service provider markets. These initial revenue contributions from our wireless infrastructure investments illustrate progress being made towards the realization of our strategy of leveraging our leading RF CMOS mixed-signal technology platform into the large wired and wireless infrastructure markets,” continued Kishore Seendripu, Ph.D., Chairman and CEO.

Generally Accepted Accounting Principles (GAAP) Results

Net revenue for the third quarter 2016 was $96.3 million, a decrease of 5 percent compared to the second quarter 2016, and an increase of 1 percent compared to the third quarter 2015. Gross margin for the third quarter 2016 was 57.6 percent of revenue, compared to 61.9 percent for the second quarter 2016, and 53.6 percent for the third quarter 2015.

Operating expenses were $44.8 million, $40.5 million and $49.4 million for the third quarter 2016, second quarter 2016 and third quarter 2015, respectively.  Operating expenses increased 11 percent compared to the second quarter 2016, and decreased 9 percent compared to the third quarter 2015. Operating expenses as a percentage of revenue were 47 percent for the third quarter 2016, 40 percent for the second quarter 2016 and 52 percent for the third quarter 2015. Operating margins were 11 percent, 22 percent and 2 percent for the third quarter 2016, second quarter 2016 and third quarter 2015, respectively.

Net income for the third quarter 2016 was $9.7 million, or $0.14 per share (diluted). These results compare to net income of $22.6 million, or $0.33 per share (diluted), for the second quarter 2016, and $1.6 million, or $0.03 per share (diluted), for the third quarter 2015.

Gross margin, operating margin and net income for the three and nine months ended September 30, 2016 includes purchase accounting expenses and charges related to our acquisitions of the wireless infrastructure backhaul business in July 2016 and wireless infrastructure access business in April 2016.

Cash flow provided by operations for the third quarter 2016 totaled $18.4 million, compared to cash provided by operations of $32.3 million for the second quarter 2016, and cash provided by operations of $22.1 million for the third quarter 2015.

Cash, cash equivalents and investments totaled $110.2 million at September 30, 2016, compared to $176.5 million at June 30, 2016, and $104.8 million at September 30, 2015.  The $110.2 million at September 30, 2016 reflects $80.0 million of cash paid for our acquisition of the wireless infrastructure backhaul business from Broadcom Corporation in July 2016.

Non-GAAP Results

Non-GAAP gross margin for the third quarter 2016 was 63.1 percent of revenue, compared to 63.8 percent for the second quarter 2016, and 56.7 percent for the third quarter 2015.

Non-GAAP operating expenses were $31.5 million, $30.6 million and $29.1 million for the third quarter 2016, second quarter 2016 and third quarter 2015, respectively. Non-GAAP operating expenses increased 3 percent when compared to the second quarter 2016, and increased 8 percent when compared to third quarter 2015. Non-GAAP operating expenses as a percentage of revenue were 33 percent, 30 percent and 31 percent for the third quarter 2016, second quarter 2016 and third quarter 2015, respectively. Non-GAAP operating margins were 30 percent, 34 percent and 26 percent for the third quarter 2016, second quarter 2016 and third quarter 2015, respectively.

Non-GAAP net income for the third quarter 2016 was $28.8 million, or $0.43 per share (diluted), compared to $33.9 million, or $0.50 per share (diluted), for the second quarter 2016, and $25.0 million, or $0.40 per share (diluted), for the third quarter 2015.

Fourth Quarter 2016 Revenue and Gross Margin Guidance

We expect revenue in the fourth quarter 2016 to be between $85 million and $89 million, GAAP gross margin to be approximately 57 percent to 58 percent of revenue, and non-GAAP gross margin to be 63 percent to 64 percent of revenue. Our estimates of forward-looking non-GAAP gross margins exclude estimates for amortization of inventory step-up, stock-based compensation expense, stock-based bonus accruals, acquisition related expenses, and restructuring charges, each of which is described in more detail below under the caption “Use of Non-GAAP Financial Measures.”  The timing and amounts of these material amounts needed to estimate non-GAAP financial measures are inherently unpredictable or outside our control to predict.  Accordingly, we cannot provide a quantitative reconciliation of non-GAAP gross margin without unreasonable effort.  Material changes to any of these items could have a significant effect on our guidance and future GAAP results.

Conference Call Details

MaxLinear will host its third quarter financial results conference call today, November 7, 2016 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). To access this call, dial US toll free: 1-855-629-3857 / International: 1-661-378-9892 with conference ID: 91352866. A live webcast of the conference call will be accessible from the investor relations section of the MaxLinear website at http://investors.maxlinear.com, and will be archived and available after the call at http://investors.maxlinear.com until November 21, 2016. A replay of the conference call will also be available until November 21, 2016 by dialing toll free: 1-855-859-2056 and referencing passcode: 91352866.

Cautionary Note Concerning Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among others, statements concerning our future financial performance (including our current guidance for fourth quarter 2016 revenue and gross margin). These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from any future results expressed or implied by the forward-looking statements. Forward-looking statements are based on management’s current, preliminary expectations and are subject to various risks and uncertainties. The closing of recent acquisitions of wireless infrastructure assets from Microsemi and Broadcom present particular risks associated with our ability to integrate the acquired businesses, and maintain relationships with employees, customers, and vendors.  In addition, our current expectations with respect to the size of the available market and growth opportunities in future years are subject to substantial management assumptions that are themselves subject to material risks and uncertainties.   Additional risks and uncertainties that could affect our assumptions and expectations with respect to the completed acquisitions that also generally affect our business, operating results, financial condition, and stock price, include, intense competition in our industry; our dependence on a limited number of customers for a substantial portion of our revenues; uncertainties concerning how end user markets for our products will develop; potential uncertainties arising from continued consolidation among cable television and satellite operators in our target markets and continued consolidation among competitors within the semiconductor industry generally; our ability to develop and introduce new and enhanced products on a timely basis and achieve market acceptance of those products, particularly as we seek to expand outside of our historic markets; potential decreases in average selling prices for our products; risks relating to intellectual property protection and the prevalence of intellectual property litigation in our industry, including pending litigation against us by a third parties in the United States District Court in Delaware and Superior Court of California; our reliance on a limited number of third party manufacturers; and our lack of long-term supply contracts and dependence on limited sources of supply. 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 most recent Annual Report on Form 10-K for the year ended December 31, 2015 as amended by Amendment No. 1 filed with the SEC on April 28, 2016; our subsequent Quarterly Report on Form 10-Q for the quarters ended March 31, 2016, June 30, 2016, and for the quarter ended September 30, 2016, which we expect to file shortly; and our Current Reports on Form 8-K. In addition, when available, investors should review the information to be set forth under the caption “Risk Factors” in MaxLinear’s Annual Report on Form 10-K for the year ended December 31, 2015 and subsequent Quarterly Reports on Form 10-Q. All forward-looking statements are based on the estimates, projections and assumptions of management as of November 7, 2016, 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 net income, gross margin, operating expenses, operating expenses as a percentage of revenue, operating margins and earnings per share. These supplemental measures exclude the effects of (i) stock-based compensation expense and its related tax effect, if any; (ii) an accrual related to our performance based bonus plan for 2016, which we currently intend to settle in shares of our class A common stock; (iii) an accrual related to our performance based bonus plan for 2015, which we settled in shares of our class A common stock in 2015 and 2016; (iv) an accrual related to our performance based bonus plan for 2014, which we settled in stock in May 2015; (v) amortization of purchased intangible assets and inventory step up; (vi) restricted merger proceeds and contingent consideration and incentive award; (vii) acquisition and integration costs related to our recently completed acquisitions; (viii) professional fees and settlement costs related to our previously disclosed IP and commercial litigation matters; (ix) IPR&D and production mask impairment losses; (x) severance and restructuring charges; and (xi) release of valuation allowance due to net deferred tax liability acquired. 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 first and second half of the 2015 performance periods were settled through the issuance of shares of Class A common stock under our equity incentive plans in August 2015 and May 2016. Bonus payments for the first half of the 2016 performance periods were settled through the issuance of shares of Class A common stock under our equity incentive plans in August 2016 and we currently expect that bonus payments under our 2016 programs for the second half of 2016 will also be settled in Class A common stock in May 2017. 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.

Restricted stock units granted under our equity incentive plan to Physpeed continuing employees if certain 2015 and 2016 revenue targets are met contingent upon continued employment reflect 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, acquisition and integration costs primarily consisting of professional and consulting fees, restricted merger proceeds which represent merger proceeds held back from the former principal shareholders of Physpeed which were paid on a quarterly basis through October 31, 2016 and the change in fair value of contingent consideration.

IPR&D and production mask impairment losses relate to our abandonment of IPR&D technology assets during the third quarter 2016 and capitalized costs for masks that have no future use.

Restructuring charges incurred are related to our restructuring plan which addresses issues primarily relating to the integration of the Company and Entropic businesses. Severance charges incurred relate primarily to our exit of research and development activities in Shanghai, China, and other non-recurring charges related to the termination of employees and transitional employees from the Entropic acquisition in 2015.

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

The acquisitions of Entropic and Physpeed resulted in a net deferred tax liability, which led to the release of valuation allowance and a benefit for income taxes.

The tax impact of total non-GAAP measures at the effective tax rate that would be in effect considering the non-GAAP measures is included in non-GAAP income tax expense and non-GAAP net income.  The amounts presented for non-GAAP income tax expense, non-GAAP net income, and non-GAAP basic and diluted earnings per share for the three and nine months ended September 30, 2015 and for the three months ended June 30, 2016 have been adjusted to conform with current period presentation.

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 fourth quarter 2016.

About MaxLinear, Inc.

MaxLinear, Inc. (NYSE:MXL) is a leading provider of radio frequency (RF) and mixed-signal integrated circuits for cable and satellite broadband communications, the connected home, data center, metro, long-haul fiber networks, and wireless infrastructure markets.  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 INCOME
(in thousands, except per share data)
 
 Three Months Ended
 September 30, 2016(1) June 30, 2016 September 30, 2015
Net revenue$96,324  $101,687  $95,191 
Cost of net revenue40,820  38,774  44,141 
Gross profit55,504  62,913  51,050 
Operating expenses:     
Research and development25,921  24,037  23,491 
Selling, general and administrative17,619  16,505  25,457 
IPR&D impairment losses1,300     
Restructuring charges    425 
Total operating expenses44,840  40,542  49,373 
Income from operations10,664  22,371  1,677 
Interest income89  167  47 
Other income, net10  124  407 
Income before income taxes10,763  22,662  2,131 
Provision for income taxes1,084  78  549 
Net income$9,679  $22,584  $1,582 
Net income per share:     
Basic$0.15  $0.36  $0.03 
Diluted$0.14  $0.33  $0.03 
Shares used to compute net income per share:     
Basic64,241  63,470  60,644 
Diluted67,832  67,520  63,209 

___________________________________________

(1) We adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting in the second quarter of 2016, and included excess tax benefits in the provision for income taxes instead of in additional paid-in capital. As a result, when computing diluted EPS using the treasury stock method, fewer hypothetical shares can be repurchased resulting in a greater number of incremental shares being issued upon the exercise of share-based payment awards. The impact of adoption for the three months ended September 30, 2016 was a reduction to the provision for income taxes and increase to net income of $0.9 million and increases to basic earnings per share of $0.01 and diluted earnings per share of $0.01.  Diluted earnings per share for the three months ended September 30, 2016 was also impacted by an increase of 833,000 shares in the number of incremental shares used in computing diluted EPS.

 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
 Nine Months Ended
 September 30, 2016(1) September 30, 2015 (2)
Net revenue$300,696  $201,411 
Cost of net revenue121,109  101,748 
Gross profit179,587  99,663 
Operating expenses:   
Research and development73,710  62,765 
Selling, general and administrative47,734  60,021 
IPR&D impairment losses1,300   
Restructuring charges2,106  11,814 
Total operating expenses124,850  134,600 
Income (loss) from operations54,737  (34,937)
Interest income426  168 
Other income (expense), net(64) 351 
Income (loss) before income taxes55,099  (34,418)
Provision (benefit) for income taxes2,155  (631)
Net income (loss)$52,944  $(33,787)
Net income (loss) per share:   
Basic$0.83  $(0.67)
Diluted$0.79  $(0.67)
Shares used to compute net income (loss) per share:   
Basic63,454  50,528 
Diluted67,354  50,528 

___________________________________________

(1) We adopted ASU No. 2016-09, Improvements to Employee Share-Based Payment Accounting in the second quarter of 2016, and included excess tax benefits in the provision for income taxes instead of additional paid-in capital.  As a result, when computing diluted EPS using the treasury stock method, fewer hypothetical shares can be repurchased resulting in a greater number of incremental shares being issued upon the exercise of share-based payment awards. The impact of adoption for the nine months ended September 30, 2016 was a reduction to the provision for income taxes and increase to net income of $6.0 million and increase to basic earnings per share of $0.09 and diluted earnings per share of $0.08.  Diluted earnings per share for the nine months ended September 30, 2016 was also impacted by an increase of 856,000 shares in the number of incremental shares used in computing diluted EPS.

(2) Includes five months of Entropic operations.

 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 Three Months Ended
 September 30, 2016 June 30, 2016 September 30, 2015
Operating Activities     
Net income$9,679  22,584  1,582 
Adjustments to reconcile net income to cash provided by operating activities:     
Amortization and depreciation8,808  4,163  17,296 
Impairment of IPR&D assets1,300     
Provision for losses on accounts receivable87     
Provision for inventory reserves  (29)  
Amortization (reduction in) of investment premiums, net12  (66) 57 
Amortization of inventory step-up2,653  336  958 
Stock-based compensation6,264  5,102  5,032 
Deferred income taxes82  (100) 251 
(Gain) loss on disposal of property and equipment  48  (39)
(Gain) loss on sale of available-for-sale securities  (50) 21 
(Gain) loss on foreign currency112  (170)  
Excess tax benefits on stock-based awards(928) (3,549)  
Change in fair value of contingent consideration
99  24  9 
Impairment of long-lived assets    153 
Impairment of leases    568 
Changes in operating assets and liabilities:     
Accounts receivable(5,419) (3,300) (205)
Inventory(454) 4,425  1,581 
Prepaid expenses and other assets440  1,611  (2,684)
Accounts payable, accrued expenses and other current liabilities(2,470) 1,887  (9,256)
Accrued compensation(183) 309  3,342 
Deferred revenue and deferred profit(504) (725) 3 
Accrued price protection liability(1,158) (173) 3,925 
Other long-term liabilities(5) 18  (513)
Net cash provided by operating activities18,415  32,345  22,081 
Investing Activities     
Purchases of property and equipment(2,118) (1,488) (20)
Purchases of intangible assets  (390) (100)
Cash used in acquisition, net of cash acquired(80,000) (21,000)  
Purchases of available-for-sale securities(32,986) (9,504) (25,712)
Maturities of available-for-sale securities7,700  70,711  4,400 
Net cash provided by (used in) investing activities(107,404) 38,329  (21,432)
Financing Activities     
Net proceeds from issuance of common stock165  2,558  2,891 
Minimum tax withholding paid on behalf of employees for restricted stock units(2,591) (2,501) (1,367)
Net cash provided by (used in) financing activities(2,426) 57  1,524 
Effect of exchange rate changes on cash and cash equivalents(91) 11  (755)
Increase (decrease) in cash and cash equivalents(91,506) 70,742  1,418 
Cash and cash equivalents at beginning of period147,582  76,840  56,731 
Cash and cash equivalents at end of period$56,076  $147,582  $58,149 


 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
 Nine Months Ended
 September 30, 2016 September 30, 2015 (1)
Operating Activities   
Net income (loss)$52,944  $(33,787)
Adjustments to reconcile net income (loss) to cash provided by operating activities:   
Amortization and depreciation18,743  31,162 
Impairment of IPR&D assets1,300   
Provision for losses on accounts receivable87   
Provision for inventory reserves9   
Amortization of investment premiums, net95  261 
Amortization of inventory step-up2,989  14,244 
Stock-based compensation16,475  15,052 
Deferred income taxes215  (1,709)
(Gain) loss on disposal of property and equipment48  (39)
(Gain) loss on sale of available-for-sale securities(50) 21 
Change in fair value of contingent consideration209  (123)
Impairment of leases  6,161 
Loss on foreign currency66   
Excess tax benefits on stock-based awards
(6,042)  
Impairment of long-lived assets  153 
Changes in operating assets and liabilities:   
Accounts receivable(7,360) 5,971 
Inventory6,955  (10,069)
Prepaid and other assets(365) 700 
Accounts payable, accrued expenses and other current liabilities2,497  (8,822)
Accrued compensation3,357  4,845 
Deferred revenue and deferred profit1,228  526 
Accrued price protection liability(2,914) 6,200 
Other long-term liabilities(772) (264)
Net cash provided by operating activities89,714  30,483 
Investing Activities   
Purchases of property and equipment(6,828) (1,480)
Purchases of intangible assets(390) (100)
Cash used in acquisition, net of cash acquired(101,000) (3,615)
Purchases of available-for-sale securities(80,263) (45,680)
Maturities of available-for-sale securities88,711  57,508 
Net cash provided by (used in) investing activities(99,770) 6,633 
Financing Activities   
Repurchases of common stock(3) (101)
Net proceeds from issuance of common stock4,450  6,346 
Minimum tax withholding paid on behalf of employees for restricted stock units(6,184) (4,528)
Equity issuance costs  (705)
Net cash provided by (used in) financing activities(1,737) 1,012 
Effect of exchange rate changes on cash and cash equivalents(87) (675)
Increase (decrease) in cash and cash equivalents(11,880) 37,453 
Cash and cash equivalents at beginning of period67,956  20,696 
Cash and cash equivalents at end of period$56,076  $58,149 

___________________________________________
(1) Includes five months of Entropic cash flows.

 
MAXLINEAR, INC.
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
 September 30, 2016 June 30, 2016 September 30, 2015
Assets     
Current assets:     
Cash and cash equivalents$56,076  $147,582  $58,149 
Short-term investments, available-for-sale42,146  28,899  26,797 
Accounts receivable, net49,672  44,340  41,766 
Inventory32,119  25,604  36,265 
Prepaid expenses and other current assets6,831  4,982  4,500 
Total current assets186,844  251,407  167,477 
Property and equipment, net21,950  21,134  20,543 
Long-term investments, available-for-sale12,020    19,847 
Intangible assets, net109,885  60,675  79,655 
Goodwill75,794  56,714  49,373 
Other long-term assets1,883  1,982  5,715 
Total assets$408,376  $391,912  $342,610 
      
Liabilities and stockholders’ equity     
Current liabilities$54,491  $55,620  $67,485 
Other long-term liabilities15,182  15,104  10,597 
Total stockholders’ equity338,703  321,188  264,528 
Total liabilities and stockholders’ equity$408,376  $391,912  $342,610 


 
MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
 
 Three Months Ended
 September 30, 2016 June 30, 2016 September 30, 2015
GAAP cost of net revenue$40,820  $38,774  $44,141 
Stock-based compensation(57) (51) (73)
Performance based equity(23) 165  (148)
Amortization of inventory step-up(2,653) (336) (958)
Amortization of purchased intangible assets(2,571) (1,787) (1,572)
Impairment of production masks    (153)
Non-GAAP cost of net revenue35,516  36,765  41,237 
      
GAAP R&D expenses25,921  24,037  23,491 
Stock-based compensation(4,163) (3,136) (3,496)
Incentive award compensation(169) (168)  
Performance based equity(838) (1,555) (1,182)
Amortization of purchased intangible assets(45) (148) (97)
Severance charges    (173)
Restricted merger proceeds and contingent consideration(243) (208) (209)
Non-GAAP R&D expenses20,463  18,822  18,334 
      
GAAP SG&A expenses17,619  16,505  25,457 
Stock-based compensation(1,857) (1,696) (1,442)
Incentive award compensation(18) (51)  
Performance based equity(896) (787) (753)
Amortization of purchased intangible assets(3,080) (662) (12,066)
Acquisition and integration costs(590) (1,338) (32)
Restricted merger proceeds and contingent consideration(99) (24) (9)
Severance charges    (270)
IP litigation costs, net(12) (197) (144)
Non-GAAP SG&A expenses11,067  11,750  10,741 
      
GAAP IPR&D impairment losses1,300     
IPR&D impairment losses(1,300)    
Non-GAAP IPR&D impairment losses     
      
GAAP restructuring expenses    425 
Restructuring charges    (425)
Non-GAAP restructuring expenses     
      
GAAP income before income taxes10,763  22,662  2,131 
Total non-GAAP adjustments18,614  11,979  23,202 
Non-GAAP income before income taxes29,377  34,641  25,333 
      
GAAP income tax expense1,084  78  549 
Tax impact of non-GAAP adjustments(537) 670  131 
Release of valuation allowance due to net deferred tax liability acquired    (341)
Non-GAAP income tax expense547  748  339 
      
GAAP net income (loss)$9,679  $22,584  $1,582 
Total non-GAAP adjustments before income taxes18,614  11,979  23,202 
Total tax adjustments(537) 670  (210)
Non-GAAP net income$28,830  $33,893  $24,994 
      
Shares used in computing non-GAAP basic net income per share64,241  63,470  60,644 
Shares used in computing non-GAAP diluted net income per share67,832  67,520  63,209 
Non-GAAP basic net income per share$0.45  $0.53  $0.41 
Non-GAAP diluted net income per share$0.43  $0.50  $0.40 


 
MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
 
 Nine Months Ended
 September 30, 2016 September 30, 2015
GAAP cost of net revenue$121,109  $101,748 
Stock-based compensation(151) (169)
Performance based equity41  (159)
Amortization of inventory step-up(2,989) (14,244)
Amortization of purchased intangible assets(5,940) (2,624)
Impairment of production masks  (153)
Non-GAAP cost of net revenue112,070  84,399 
    
GAAP R&D expenses73,710  62,765 
Stock-based compensation(10,362) (8,889)
Incentive award compensation(553)  
Performance based equity(3,574) (2,974)
Amortization of purchased intangible assets(289) (309)
Severance charges  (838)
Restricted merger proceeds and contingent consideration(659) (625)
Non-GAAP R&D expenses58,273  49,130 
    
GAAP SG&A expenses47,734  60,021 
Stock-based compensation(5,290) (4,466)
Incentive award compensation(119)  
Performance based equity(2,278) (1,655)
Amortization of purchased intangible assets(4,038) (20,051)
Acquisition and integration costs(1,852) (5,349)
Restricted merger proceeds and contingent consideration(209)  
Change in fair value of contingent consideration  122 
Severance charges  (315)
IP litigation costs, net(671) (1,135)
Non-GAAP SG&A expenses33,277  27,172 
    
GAAP impairment losses1,300   
Impairment losses(1,300)  
Non-GAAP impairment losses   
    
GAAP restructuring expenses2,106  11,814 
Restructuring charges(2,106) (11,814)
Non-GAAP restructuring expenses   
    
GAAP income (loss) before income taxes55,099  (34,418)
Total non-GAAP adjustments42,339  75,647 
Non-GAAP income before income taxes97,438  41,229 
    
GAAP income tax expense (benefit)2,155  (631)
Tax impact of non-GAAP adjustments(138) (409)
Record valuation allowance due to net deferred liability acquired  1,592 
Non-GAAP income tax expense2,017  552 
    
GAAP net income (loss)$52,944  $(33,787)
Total non-GAAP adjustments before income taxes42,339  75,647 
Total tax adjustments(138) 1,183 
Non-GAAP net income$95,421  $40,677 
    
Shares used in computing non-GAAP basic net income per share63,454  50,528 
Shares used in computing GAAP diluted net income (loss) per share67,354  50,528 
Dilutive common stock equivalents  2,376 
Shares used in computing non-GAAP diluted net income per share67,354  52,904 
Non-GAAP basic net income per share$1.50  $0.81 
Non-GAAP diluted net income per share$1.42  $0.77 


 
MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
 
 Three Months Ended
 September 30, 2016 June 30, 2016 September 30, 2015
GAAP cost of net revenue42.4% 38.1% 46.4%
Stock-based compensation(0.1)% (0.1)% (0.1)%
Performance based equity% 0.2% (0.2)%
Amortization of inventory step-up(2.7)% (0.3)% (1.0)%
Amortization of purchased intangible assets(2.7)% (1.7)% (1.6)%
Impairment of production masks% % (0.2)%
Non-GAAP cost of net revenue36.9% 36.2% 43.3%
         
GAAP R&D expenses26.9% 23.6% 24.7%
Stock-based compensation(4.3)% (3.1)% (3.7)%
Incentive award compensation(0.2)% (0.2)% %
Performance based equity(0.9)% (1.5)% (1.2)%
Amortization of purchased intangible assets% (0.1)% (0.1)%
Severance charges% % (0.2)%
Restricted merger proceeds and contingent consideration(0.3)% (0.2)% (0.2)%
Non-GAAP R&D expenses21.2% 18.5% 19.3%
         
GAAP SG&A expenses18.3% 16.2% 26.7%
Stock-based compensation(1.9)% (1.7)% (1.5)%
Incentive award compensation% % %
Performance based equity(1.0)% (0.8)% (0.8)%
Amortization of purchased intangible assets(3.2)% (0.6)% (12.6)%
Acquisition and integration costs(0.6)% (1.3)% %
Restricted merger proceeds and contingent consideration(0.1)% % %
Severance charges% % (0.3)%
IP litigation costs, net% (0.2)% (0.2)%
Non-GAAP SG&A expenses11.5% 11.6% 11.3%
         
GAAP impairment losses1.3% % %
Impairment Losses(1.3)% % %
Non-GAAP impairment losses% % %
         
GAAP restructuring expenses% % 0.4%
Restructuring Charges% % (0.4)%
Non-GAAP restructuring expenses% % %
         
GAAP income (loss) before income taxes11.2% 22.3% 2.2%
Total non-GAAP adjustments before income taxes19.3% 11.8% 24.4%
Non-GAAP income before income taxes30.5% 34.1% 26.6%
         
GAAP income tax expense (benefit)1.1% 0.1% 0.6%
Tax impact of non-GAAP adjustments(0.6)% 0.7% 0.1%
Record valuation allowance due to net deferred liability acquired% % (0.4)%
Non-GAAP income tax expense (benefit)0.5% 0.8% 0.3%
         
GAAP net income (loss)10.0% 22.2% 1.7%
Total non-GAAP adjustments before income taxes19.3% 11.8% 24.4%
Total tax adjustments(0.6)% 0.7% (0.2)%
Non-GAAP net income29.9% 33.3% 26.3%


 
MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
 
 Nine Months Ended
 September 30, 2016 September 30, 2015
GAAP cost of net revenue40.3% 50.5%
Stock-based compensation(0.1)% (0.1)%
Performance based equity% (0.1)%
Amortization of inventory step-up(1.0)% (7.0)%
Amortization of purchased intangible assets(1.9)% (1.3)%
Impairment of production masks% (0.1)%
Non-GAAP cost of net revenue37.3% 41.9%
      
GAAP R&D expenses24.5% 31.2%
Stock-based compensation(3.4)% (4.4)%
Incentive award compensation(0.2)% %
Performance based equity(1.2)% (1.5)%
Amortization of purchased intangible assets(0.1)% (0.2)%
Severance charges% (0.4)%
Restricted merger proceeds and contingent consideration(0.2)% (0.3)%
Non-GAAP R&D expenses19.4% 24.4%
      
GAAP SG&A expenses15.9% 29.8%
Stock-based compensation(1.8)% (2.2)%
Incentive award compensation% %
Performance based equity(0.8)% (0.8)%
Amortization of purchased intangible assets(1.3)% (10.0)%
Acquisition and integration costs(0.6)% (2.6)%
Restricted merger proceeds and contingent consideration(0.1)% %
Change in fair value of contingent consideration% 0.1%
Severance charges% (0.2)%
IP litigation costs, net(0.2)% (0.6)%
Non-GAAP SG&A expenses11.1% 13.5%
      
GAAP impairment losses0.4% %
Impairment Losses(0.4)% %
Non-GAAP impairment losses% %
      
GAAP restructuring expenses0.7% 5.9%
Restructuring Charges(0.7)% (5.9)%
Non-GAAP restructuring expenses% %
      
GAAP income (loss) before income taxes18.3% (17.1)%
Total non-GAAP adjustments before income taxes14.1% 37.6%
Non-GAAP income before income taxes32.4% 20.5%
      
GAAP income tax expense (benefit)0.7% (0.3)%
Tax impact of non-GAAP adjustments% (0.2)%
Record valuation allowance due to net deferred liability acquired% 0.8%
Non-GAAP income tax expense (benefit)0.7% 0.3%
      
GAAP net income (loss)17.6% (16.8)%
Total non-GAAP adjustments before income taxes14.1% 37.6%
Total tax adjustments% 0.6%
Non-GAAP net income31.7% 20.2%

 

MaxLinear, Inc. Investor Relations Contact:
Gideon Massey
Investor Relations Specialist
Tel: 949-333-0056
gmassey@maxlinear.com

MaxLinear, Inc. Corporate Contact:
Adam Spice
Chief Financial Officer
Tel: 949-333-0092

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