MaxLinear, Inc. Announces Fourth Quarter 2019 Financial Results

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 2018 performance periods were settled through the issuance of shares of common stock under our equity incentive plans in February 2019. We currently expect that bonus awards under our fiscal 2019 program will be settled in common stock in the first quarter of fiscal 2020.

Expenses incurred (gains recognized) in relation to acquisitions include amortization of purchased intangible assets, depreciation of step-up of property and equipment to fair value, and non-recurring gain on reversal of liability for an assumed indemnification obligation.

Restructuring charges incurred are related to our restructuring plans which eliminate redundancies and primarily include severance and restructuring costs related to exiting certain facilities.

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

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

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 2020.

About MaxLinear, Inc.

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

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

MAXLINEAR, INC. UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)

	Three Months Ended
	December 31, 2019			September 30, 2019			December 31, 2018
Net revenue	$	70,018		$	80,020		$	87,627
Cost of net revenue	33,394			38,116			41,727
Gross profit	36,624			41,904			45,900
Operating expenses:
Research and development	23,467			23,174			29,667
Selling, general and administrative	20,924			21,920			25,208
Restructuring charges	159			144			1,737
Total operating expenses	44,550			45,238			56,612
Loss from operations	(7,926		)	(3,334		)	(10,712		)
Interest income	222			214			24
Interest expense	(2,587		)	(2,718		)	(3,194		)
Other income (expense), net	(498		)	1,098			229
Total interest and other income (expense), net	(2,863		)	(1,406		)	(2,941		)
Loss before income taxes	(10,789		)	(4,740		)	(13,653		)
Income tax benefit	(2,685		)	(26		)	(13,964		)
Net income (loss)	$	(8,104	)	$	(4,714	)	$	311
Net income (loss) per share:
Basic	$	(0.11	)	$	(0.07	)	$	—
Diluted	$	(0.11	)	$	(0.07	)	$	—
Shares used to compute net income (loss) per share:
Basic	71,746			71,366			69,186
Diluted	71,746			71,366			71,267

MAXLINEAR, INC. UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except per share data)

	Twelve Months Ended
	December 31, 2019			December 31, 2018
Net revenue	$	317,180		$	384,997
Cost of net revenue	149,495			176,223
Gross profit	167,685			208,774
Operating expenses:
Research and development	98,344			120,046
Selling, general and administrative	88,762			101,789
Impairment losses	—			2,198
Restructuring charges	2,636			3,838
Total operating expenses	189,742			227,871
Loss from operations	(22,057		)	(19,097		)
Interest income	775			78
Interest expense	(11,133		)	(14,255		)
Other income (expense), net	(69		)	422
Total interest and other income (expense), net	(10,427		)	(13,755		)
Loss before income taxes	(32,484		)	(32,852		)
Income tax benefit	(12,586		)	(6,653		)
Net loss	$	(19,898	)	$	(26,199	)
Net loss per share:
Basic	$	(0.28	)	$	(0.38	)
Diluted	$	(0.28	)	$	(0.38	)
Shares used to compute net loss per share:
Basic	71,005			68,490
Diluted	71,005			68,490

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

	Three Months Ended
	December 31, 2019			September 30, 2019			December 31, 2018
Operating Activities
Net income (loss)	$	(8,104	)	$	(4,714	)	$	311
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation	16,473			16,419			19,125
Amortization of debt issuance costs and accretion of discount on debt and leases	404			380			287
Stock-based compensation	7,747			8,359			7,999
Deferred income taxes	(3,238		)	(1,379		)	(8,827		)
Loss on disposal of property and equipment	—			—			430
Impairment of leasehold improvements	—			—			35
Impairment of leased right-of-use assets	7,058			—			—
Gain on extinguishment of lease liabilities	(7,557		)	—			—
(Gain) loss on foreign currency	430			(183		)	(268		)
Excess tax benefits on stock-based awards	(192		)	(61		)	(820		)
Changes in operating assets and liabilities:
Accounts receivable	5,930			280			(867		)
Inventory	6,224			5,108			19
Prepaid expenses and other assets	2,889			960			(2,857		)
Leased right-of-use assets	109			1,309			—
Accounts payable, accrued expenses and other current liabilities	2,692			(6,313		)	5,410
Accrued compensation	607			730			2,387
Accrued price protection liability	(1,097		)	2,291			2,036
Lease liabilities	(1,655		)	(2,183		)	—
Other long-term liabilities	(613		)	749			(227		)
Net cash provided by operating activities	28,107			21,752			24,173
Investing Activities
Purchases of property and equipment	(2,989		)	(1,219		)	(1,412		)
Purchases of intangible assets	—			(86		)	—
Net cash used in investing activities	(2,989		)	(1,305		)	(1,412		)
Financing Activities
Repayment of debt	—			(20,000		)	(15,000		)
Net proceeds from issuance of common stock	2,382			288			2,732
Minimum tax withholding paid on behalf of employees for restricted stock units	(820		)	(1,339		)	(2,606		)
Net cash provided by (used in) financing activities	1,562			(21,051		)	(14,874		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(87		)	90			(1,939		)
Increase (decrease) in cash, cash equivalents and restricted cash	26,593			(514		)	5,948
Cash, cash equivalents and restricted cash at beginning of period	66,524			67,038			68,243
Cash, cash equivalents and restricted cash at end of period	$	93,117		$	66,524		$	74,191

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

	Twelve Months Ended
	December 31, 2019			December 31, 2018
Operating Activities
Net loss	$	(19,898	)	$	(26,199	)
Adjustments to reconcile net loss to cash provided by operating activities:
Amortization and depreciation	66,401			79,027
Impairment losses	—			2,198
Amortization of debt issuance costs and accretion of discount on debt and leases	1,577			1,148
Stock-based compensation	32,060			31,721
Deferred income taxes	(15,693		)	(12,144		)
Loss on disposal of property and equipment	46			430
Impairment of leasehold improvements	1,442			735
Impairment of long-lived assets	9,240			—
Gain on extinguishment of lease liabilities	(10,437		)	—
(Gain) loss on foreign currency	760			(809		)
Excess tax benefits on stock-based awards	(4,064		)	(2,028		)
Changes in operating assets and liabilities:
Accounts receivable	9,090			6,595
Inventory	10,195			11,696
Prepaid expenses and other assets	3,805			1,071
Leased right-of-use assets	3,044			—
Accounts payable, accrued expenses and other current liabilities	1,261			5,923
Accrued compensation	2,021			8,961
Deferred revenue and deferred profit	—			(138		)
Accrued price protection liability	(3,966		)	(5,117		)
Lease liabilities	(8,142		)	—
Other long-term liabilities	(394		)	(381		)
Net cash provided by operating activities	78,348			102,689
Investing Activities
Purchases of property and equipment	(6,887		)	(7,825		)
Purchases of intangible assets	(86		)	—
Net cash used in investing activities	(6,973		)	(7,825		)
Financing Activities
Repayment of debt	(50,000		)	(93,000		)
Net proceeds from issuance of common stock	8,603			6,839
Minimum tax withholding paid on behalf of employees for restricted stock units	(11,986		)	(7,623		)
Net cash used in financing activities	(53,383		)	(93,784		)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	934			(1,301		)
Increase (decrease) in cash, cash equivalents and restricted cash	18,926			(221		)
Cash, cash equivalents and restricted cash at beginning of period	74,191			74,412
Cash, cash equivalents and restricted cash at end of period	$	93,117		$	74,191

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

	December 31, 2019		September 30, 2019		December 31, 2018 ⁽¹⁾
Assets
Current assets:
Cash and cash equivalents	$	92,708	$	66,115	$	73,142
Short-term restricted cash	349		345		645
Accounts receivable, net	50,411		56,339		59,491
Inventory	31,510		37,642		41,738
Prepaid expenses and other current assets	6,792		4,679		10,357
Total current assets	181,770		165,120		185,373
Long-term restricted cash	60		64		404
Property and equipment, net	16,613		15,204		18,404
Leased right-of-use assets	10,978		18,719		—
Intangible assets, net	187,971		202,217		244,900
Goodwill	238,330		238,330		238,330
Deferred tax assets	67,284		64,046		51,518
Other long-term assets	2,785		3,065		4,664
Total assets	$	705,791	$	706,765	$	743,593

Liabilities and stockholders’ equity
Current liabilities	$	66,562	$	63,119	$	75,329
Long-term lease liabilities	9,335		14,995		4,097
Long-term debt	206,909		206,622		255,757
Other long-term liabilities	8,065		8,678		8,474
Stockholders’ equity	414,920		413,351		399,936
Total liabilities and stockholders’ equity	$	705,791	$	706,765	$	743,593

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