MaxLinear, Inc. Announces First Quarter 2020 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 most recent Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on February 5, 2020 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, 2020, which we expect to file shortly. All forward-looking statements are based on the estimates, projections and assumptions of management as of April 29, 2020, 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 2020, which we currently intend to settle in shares of our common stock; (iii) accruals related to our performance based bonus plan for 2019 which we settled in shares of common stock in 2020; (iv) amortization of purchased intangible assets; (v) depreciation of fixed assets step-up; (vi) acquisition costs related to our recently announced acquisition; (vii) professional fees and settlement costs related to IP and commercial litigation matters; (viii) severance and other restructuring charges; (ix) impairment losses on intangible assets; and (x) 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 2019 performance periods were settled through the issuance of shares of common stock under our equity incentive plans in March 2020. We currently expect that bonus awards under our fiscal 2020 program will be settled in common stock in the first quarter of fiscal 2021.

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 acquisition costs primarily consisting of professional and consulting fees.

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 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 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

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

Net revenue

$

 

62,027

 

 

 

$

 

70,018

 

 

 

$

 

84,635

 

 

Cost of net revenue

 

31,265

 

 

 

 

33,394

 

 

 

 

39,558

 

 

Gross profit

 

30,762

 

 

 

 

36,624

 

 

 

 

45,077

 

 

Operating expenses:

 

 

 

 

 

Research and development

 

25,689

 

 

 

 

23,467

 

 

 

 

27,399

 

 

Selling, general and administrative

 

24,632

 

 

 

 

20,924

 

 

 

 

23,591

 

 

Impairment losses

 

86

 

 

 

 

 

 

 

 

 

 

Restructuring charges

 

489

 

 

 

 

159

 

 

 

 

1,917

 

 

Total operating expenses

 

50,896

 

 

 

 

44,550

 

 

 

 

52,907

 

 

Loss from operations

 

(20,134

)

 

 

 

(7,926

)

 

 

 

(7,830

)

 

Interest income

 

225

 

 

 

 

222

 

 

 

 

147

 

 

Interest expense

 

(2,476

)

 

 

 

(2,587

)

 

 

 

(2,975

)

 

Other income (expense), net

 

180

 

 

 

 

(498

)

 

 

 

(655

)

 

Total interest and other income (expense), net

 

(2,071

)

 

 

 

(2,863

)

 

 

 

(3,483

)

 

Loss before income taxes

 

(22,205

)

 

 

 

(10,789

)

 

 

 

(11,313

)

 

Income tax benefit

 

(6,736

)

 

 

 

(2,685

)

 

 

 

(6,462

)

 

Net loss

$

 

(15,469

)

 

 

$

 

(8,104

)

 

 

$

 

(4,851

)

 

Net loss per share:

 

 

 

 

 

Basic

$

 

(0.21

)

 

 

$

 

(0.11

)

 

 

$

 

(0.07

)

 

Diluted

$

 

(0.21

)

 

 

$

 

(0.11

)

 

 

$

 

(0.07

)

 

Shares used to compute net loss per share:

 

 

 

 

 

Basic

 

72,039

 

 

 

 

71,746

 

 

 

 

69,968

 

 

Diluted

 

72,039

 

 

 

 

71,746

 

 

 

 

69,968

 

 

MAXLINEAR, INC.

UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

 

Three Months Ended

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

Operating Activities

 

 

 

 

 

Net loss

$

 

(15,469

)

 

 

$

 

(8,104

)

 

 

$

 

(4,851

)

 

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

Amortization and depreciation

 

16,733

 

 

 

 

16,473

 

 

 

 

16,863

 

 

Impairment losses

 

86

 

 

 

 

 

 

Amortization of debt issuance costs and accretion of discount on debt and leases

 

410

 

 

 

 

404

 

 

 

 

402

 

 

Stock-based compensation

 

6,827

 

 

 

 

7,747

 

 

 

 

7,747

 

 

Deferred income taxes

 

(6,208

)

 

 

 

(3,238

)

 

 

 

(6,476

)

 

Loss on disposal of property and equipment

 

 

 

 

 

35

 

 

Impairment of leasehold improvements

 

163

 

 

 

 

 

 

1,442

 

 

Impairment of leased right-of-use assets

 

44

 

 

 

 

7,058

 

 

 

 

2,182

 

 

Gain on extinguishment of lease liabilities

 

 

 

(7,557

)

 

 

 

(2,880

)

 

(Gain) loss on foreign currency

 

(246

)

 

 

 

430

 

 

 

 

567

 

 

Excess tax deficiencies (benefits) on stock-based awards

 

94

 

 

 

 

(192

)

 

 

 

(1,737

)

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

5,615

 

 

 

 

5,930

 

 

 

 

(142

)

 

Inventory

 

353

 

 

 

 

6,224

 

 

 

 

(1,015

)

 

Prepaid expenses and other assets

 

1,443

 

 

 

 

2,889

 

 

 

 

604

 

 

Leased right-of-use assets

 

640

 

 

 

 

109

 

 

 

 

645

 

 

Accounts payable, accrued expenses and other current liabilities

 

(785

)

 

 

 

2,692

 

 

 

 

1,921

 

 

Accrued compensation

 

3,361

 

 

 

 

607

 

 

 

 

893

 

 

Accrued price protection liability

 

(4,537

)

 

 

 

(1,097

)

 

 

 

2,489

 

 

Lease liabilities

 

(1,430

)

 

 

 

(1,655

)

 

 

 

(2,125

)

 

Other long-term liabilities

 

(446

)

 

 

 

(613

)

 

 

 

(519

)

 

Net cash provided by operating activities

 

6,648

 

 

 

 

28,107

 

 

 

 

16,045

 

 

Investing Activities

 

 

 

 

 

Purchases of property and equipment

 

(1,035

)

 

 

 

(2,989

)

 

 

 

(2,155

)

 

Net cash used in investing activities

 

(1,035

)

 

 

 

(2,989

)

 

 

 

(2,155

)

 

Financing Activities

 

 

 

 

 

Repayment of debt

 

 

 

 

 

(15,000

)

 

Net proceeds from issuance of common stock

 

488

 

 

 

 

2,382

 

 

 

 

2,628

 

 

Minimum tax withholding paid on behalf of employees for restricted stock units

 

(475

)

 

 

 

(820

)

 

 

 

(4,419

)

 

Net cash provided by (used in) financing activities

 

13

 

 

 

 

1,562

 

 

 

 

(16,791

)

 

Effect of exchange rate changes on cash, cash equivalents and restricted cash

 

(303

)

 

 

 

(87

)

 

 

 

577

 

 

Increase (decrease) in cash, cash equivalents and restricted cash

 

5,323

 

 

 

 

26,593

 

 

 

 

(2,324

)

 

Cash, cash equivalents and restricted cash at beginning of period

 

93,117

 

 

 

 

66,524

 

 

 

 

74,191

 

 

Cash, cash equivalents and restricted cash at end of period

$

 

98,440

 

 

 

$

 

93,117

 

 

 

$

 

71,867

 

 

MAXLINEAR, INC.

UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands)

 

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

98,373

 

 

$

92,708

 

 

$

71,102

 

Short-term restricted cash

10

 

 

349

 

 

347

 

Accounts receivable, net

44,796

 

 

50,411

 

 

59,639

 

Inventory

31,088

 

 

31,510

 

 

42,753

 

Prepaid expenses and other current assets

6,342

 

 

6,792

 

 

5,479

 

Total current assets

180,609

 

 

181,770

 

 

179,320

 

Long-term restricted cash

57

 

 

60

 

 

418

 

Property and equipment, net

15,751

 

 

16,613

 

 

16,987

 

Leased right-of-use assets

9,864

 

 

10,978

 

 

21,543

 

Intangible assets, net

173,570

 

 

187,971

 

 

230,634

 

Goodwill

238,330

 

 

238,330

 

 

238,330

 

Deferred tax assets

73,492

 

 

67,284

 

 

58,067

 

Other long-term assets

1,752

 

 

2,785

 

 

3,583

 

Total assets

$

693,425

 

 

$

705,791

 

 

$

748,882

 

 

 

 

 

 

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities

$

62,428

 

 

$

66,562

 

 

$

73,483

 

Long-term lease liabilities

8,029

 

 

9,335

 

 

18,132

 

Long-term debt

207,197

 

 

206,909

 

 

241,044

 

Other long-term liabilities

7,614

 

 

8,065

 

 

8,019

 

Stockholders’ equity

408,157

 

 

414,920

 

 

408,204

 

Total liabilities and stockholders’ equity

$

693,425

 

 

$

705,791

 

 

$

748,882

 

MAXLINEAR, INC.

UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS

(in thousands, except per share data)

 

 

Three Months Ended

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

GAAP gross profit

$

 

30,762

 

 

 

$

 

36,624

 

 

 

$

 

45,077

 

 

Stock-based compensation

 

148

 

 

 

 

149

 

 

 

 

130

 

 

Performance based equity

 

69

 

 

 

 

(21

)

 

 

 

73

 

 

Amortization of purchased intangible assets

 

8,581

 

 

 

 

8,513

 

 

 

 

8,424

 

 

Non-GAAP gross profit

 

39,560

 

 

 

 

45,265

 

 

 

 

53,704

 

 

 

 

 

 

 

 

GAAP R&D expenses

 

25,689

 

 

 

 

23,467

 

 

 

 

27,399

 

 

Stock-based compensation

 

(3,746

)

 

 

 

(3,955

)

 

 

 

(4,213

)

 

Performance based equity

 

(1,750

)

 

 

 

(421

)

 

 

 

(925

)

 

Depreciation of fixed asset step-up

 

 

 

 

 

 

 

 

 

(6

)

 

Non-GAAP R&D expenses

 

20,193

 

 

 

 

19,091

 

 

 

 

22,255

 

 

 

 

 

 

 

 

GAAP SG&A expenses

 

24,632

 

 

 

 

20,924

 

 

 

 

23,591

 

 

Stock-based compensation

 

(2,933

)

 

 

 

(3,643

)

 

 

 

(3,404

)

 

Performance based equity

 

(1,136

)

 

 

 

(604

)

 

 

 

(939

)

 

Amortization of purchased intangible assets

 

(5,723

)

 

 

 

(5,723

)

 

 

 

(5,798

)

 

Acquisition costs

 

(3,270

)

 

 

 

 

 

IP litigation costs, net

 

(60

)

 

 

 

3

 

 

 

 

Non-GAAP SG&A expenses

 

11,510

 

 

 

 

10,957

 

 

 

 

13,450

 

 

 

 

 

 

 

 

GAAP impairment losses

 

86

 

 

 

 

 

 

Impairment losses

 

(86

)

 

 

 

 

 

Non-GAAP impairment losses

 

 

 

 

 

 

 

 

 

 

 

GAAP restructuring expenses

 

489

 

 

 

 

159

 

 

 

 

1,917

 

 

Restructuring charges

 

(489

)

 

 

 

(159

)

 

 

 

(1,917

)

 

Non-GAAP restructuring expenses

 

 

 

 

 

 

 

 

 

 

 

GAAP loss from operations

 

(20,134

)

 

 

 

(7,926

)

 

 

 

(7,830

)

 

Total non-GAAP adjustments

 

27,991

 

 

 

 

23,143

 

 

 

 

25,829

 

 

Non-GAAP income from operations

 

7,857

 

 

 

 

15,217

 

 

 

 

17,999

 

 

 

 

 

 

 

 

GAAP and non-GAAP interest and other income (expense), net

 

(2,071

)

 

 

 

(2,863

)

 

 

 

(3,483

)

 

 

 

 

 

 

 

GAAP loss before income taxes

 

(22,205

)

 

 

 

(10,789

)

 

 

 

(11,313

)

 

Total non-GAAP adjustments

 

27,991

 

 

 

 

23,143

 

 

 

 

25,829

 

 

Non-GAAP income before income taxes

 

5,786

 

 

 

 

12,354

 

 

 

 

14,516

 

 

 

 

 

 

 

 

GAAP income tax benefit

 

(6,736

)

 

 

 

(2,685

)

 

 

 

(6,462

)

 

Adjustment for non-cash tax benefits/expenses

 

7,083

 

 

 

 

3,303

 

 

 

 

7,478

 

 

Non-GAAP income tax provision

 

347

 

 

 

 

618

 

 

 

 

1,016

 

 

 

 

 

 

 

 

GAAP net loss

 

(15,469

)

 

 

 

(8,104

)

 

 

 

(4,851

)

 

Total non-GAAP adjustments before income taxes

 

27,991

 

 

 

 

23,143

 

 

 

 

25,829

 

 

Less: total tax adjustments

 

7,083

 

 

 

 

3,303

 

 

 

 

7,478

 

 

Non-GAAP net income

$

 

5,439

 

 

 

$

 

11,736

 

 

 

$

 

13,500

 

 

 

 

 

 

 

 

Shares used in computing non-GAAP basic net income per share

 

72,039

 

 

 

 

71,746

 

 

 

 

69,968

 

 

Shares used in computing non-GAAP diluted net income per share

 

72,673

 

 

 

 

72,707

 

 

 

 

71,900

 

 

Non-GAAP basic net income per share

$

 

0.08

 

 

 

$

 

0.16

 

 

 

$

 

0.19

 

 

Non-GAAP diluted net income per share

$

 

0.07

 

 

 

$

 

0.16

 

 

 

$

 

0.19

 

 

MAXLINEAR, INC.

UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES

 

 

Three Months Ended

 

March 31, 2020

 

December 31, 2019

 

March 31, 2019

GAAP gross profit

49.6

%

 

52.3

%

 

53.3

%

Stock-based compensation

0.2

%

 

0.2

%

 

0.2

%

Performance based equity

0.1

%

 

%

 

0.1

%

Amortization of purchased intangible assets

13.8

%

 

12.2

%

 

10.0

%

Non-GAAP gross profit

63.8

%

 

64.6

%

 

63.5

%

 

 

 

 

 

 

GAAP R&D expenses

41.4

%

 

33.5

%

 

32.4

%

Stock-based compensation

(6.0

)%

 

(5.6

)%

 

(5.0

)%

Performance based equity

(2.8

)%

 

(0.6

)%

 

(1.1

)%

Depreciation of fixed asset step-up

%

 

%

 

%

Non-GAAP R&D expenses

32.6

%

 

27.3

%

 

26.3

%

 

 

 

 

 

 

GAAP SG&A expenses

39.7

%

 

29.9

%

 

27.9

%

Stock-based compensation

(4.7

)%

 

(5.2

)%

 

(4.0

)%

Performance based equity

(1.8

)%

 

(0.9

)%

 

(1.1

)%

Amortization of purchased intangible assets

(9.2

)%

 

(8.2

)%

 

(6.9

)%

Acquisition costs

(5.3

)%

 

%

 

%

IP litigation costs, net

(0.1

)%

 

%

 

%

Non-GAAP SG&A expenses

18.6

%

 

15.6

%

 

15.9

%

 

 

 

 

 

 

GAAP impairment losses

0.1

%

 

%

 

%

Impairment losses

(0.1

)%

 

%

 

%

Non-GAAP impairment losses

%

 

%

 

%

 

 

 

 

 

 

GAAP restructuring expenses

0.8

%

 

0.2

%

 

2.3

%

Restructuring charges

(0.8

)%

 

(0.2

)%

 

(2.3

)%

Non-GAAP restructuring expenses

%

 

%

 

%

 

 

 

 

 

 

GAAP loss from operations

(32.5

)%

 

(11.3

)%

 

(9.3

)%

Total non-GAAP adjustments

45.1

%

 

33.1

%

 

30.5

%

Non-GAAP income from operations

12.7

%

 

21.7

%

 

21.3

%

 

 

 

 

 

 

GAAP interest and other income (expense), net

(3.3

)%

 

(4.1

)%

 

(4.1

)%

 

 

 

 

 

 

GAAP loss before income taxes

(35.8

)%

 

(15.4

)%

 

(13.4

)%

Total non-GAAP adjustments before income taxes

45.1

%

 

33.1

%

 

30.5

%

Non-GAAP income before income taxes

9.3

%

 

17.6

%

 

17.2

%

 

 

 

 

 

 

GAAP income tax benefit

(10.9

)%

 

(3.8

)%

 

(7.6

)%

Adjustment for non-cash tax benefits/expenses

11.4

%

 

4.7

%

 

8.8

%

Non-GAAP income tax provision

0.6

%

 

0.9

%

 

1.2

%

 

 

 

 

 

 

GAAP net loss

(24.9

)%

 

(11.6

)%

 

(5.7

)%

Total non-GAAP adjustments before income taxes

45.1

%

 

33.1

%

 

30.5

%

Less: total tax adjustments

11.4

%

 

4.7

%

 

8.8

%

Non-GAAP net income

8.8

%

 

16.8

%

 

16.0

%





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