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MaxLinear, Inc. Announces Fourth Quarter 2017 Financial Results

Fourth Quarter 2017 GAAP Net Revenue of $113.7 million,
GAAP Diluted Loss per Share of $0.29,
and Non-GAAP Diluted Earnings per Share of $0.38

CARLSBAD, Calif., Feb. 13, 2018 (GLOBE NEWSWIRE) -- MaxLinear, Inc. (NYSE:MXL), a leading provider of radio-frequency, mixed-signal and high-performance analog integrated circuits for the connected home, wired and wireless infrastructure, and industrial and multi-market applications, today announced financial results for the fourth quarter ended December 31, 2017.

Management Commentary

“We are pleased to announce the financial results of fourth quarter 2017, which brings to close a very eventful 2017. In the fourth quarter, we delivered GAAP net revenue of $113.7 million and generated $21.7 million of net cash flow from operating activities. These strong cash flows enabled a further $20.0 million in debt repayment in the quarter. As a result, our 2017 total debt repayment stands at $70.0 million since the closing of the Exar acquisition in May 2017, which is consistent with our stated objective of using net cash generation to aggressively deleverage. Our ability to find efficiencies in our combined operations has enabled MaxLinear to maintain its aggressive pace of new technology platform innovations that will yield benefits to MaxLinear shareholders well into the future.

“In 2017, we recorded another year of record revenue with total GAAP net revenue of $420.3 million, or 8% sequential growth, in the face of legacy Entropic product declines in analog channel-stacking solutions and video SoCs, and persistent China macro optical fiber headwinds. We were able to weather these challenges due to revenue strength in our broadband franchise, revenue contributions from our Exar acquisition and the acquisition of Marvell’s G.hn business, as well as contributions from our expanding portfolio of network infrastructure solutions.

“Most excitingly, 2017 was undoubtedly the most significant year for the company from an engineering execution and market expansion perspective. In 2017, we started mass production of the industry’s first 28nm CMOS RF transceiver spanning the 5-45Ghz frequency for the wireless backhaul market. We also completed the tape-out of the industry’s first 400Gbps PAM-4 SerDes device for the hyperscale data-center market. For the cable infrastructure market, we completed the tape-out of the industry's first Full-Duplex (FDX) DOCSIS cable fiber node infrastructure remote PHY system-on-chip device. We also successfully integrated two strategic technology platform acquisitions in the form of Exar Corporation and Marvell's G.hn home networking business. We are very excited by our expanding technology footprint, which addresses some of the most complex analog and mixed-signal communications platforms in the industry. As a result, we continue to expand our existing TAM and solidify our position as one of the industry’s leading providers of CMOS mixed-signal ICs,” commented Kishore Seendripu, Ph.D., Chairman and CEO.

Fourth Quarter 2017 Business Highlights

  • Demonstrated industry-first 400Gbps pulse-amplitude-modulation digital signal processing systems-on-a-chip solutions with integrated laser drivers to address the high-speed optical interconnect needs of mega-scale cloud data centers and network enterprises.
  • G.hn Wave-2 networking chipset selected by Comtrend for new carrier-grade Wi-Fi connectivity extender solution in the North American service provider market.
  • Demonstrated NetAerial cord cutter ATSC TV distribution system, which incorporates MaxLinear's ATSC TV tuners and G.hn chipsets, to stream live TV to connected smart devices with Geniatech.
  • Announced plans to introduce G.hn connectivity solutions for the automotive, industrial, security and utility markets for use in vehicles, industrial products, security cameras, smart meters and other smart grid applications.
  • Announced collaboration with Airgain Inc. to demonstrate more than 2 Gbps data transfer through low-emissivity glass windows for 5G fixed wireless access with MaxLinear's AirPHY™ wireless modem technology and Airgain's broadband, near-field antenna module.
  • Commenced shipments of digital satellite low-noise block downconverters and channel stacking ICs to Telefónica with ProBrand International for two South American countries.

Fourth Quarter Financial Highlights

GAAP basis:

The fourth quarter 2017 results continue to be influenced by the acquisitions and related purchase price accounting impacts of Marvell’s G.hn business in April 2017 and Exar in May 2017, and interest on the term loan related to the Exar transaction.

  • Net revenue was $113.7 million, flat sequentially, and up 31% year-on-year.
  • GAAP gross margin was 45.8%, compared to 45.6% in the prior quarter, and 57.8% in the year-ago quarter.
  • GAAP operating expenses were $57.8 million in the fourth quarter 2017, or 51% of net revenue, compared to $62.5 million in the prior quarter, and $42.1 million in the year-ago quarter.
  • GAAP loss from operations was 5% of revenue, compared to loss from operations of 9% in the prior quarter, and income from operations of 10% in the year-ago quarter.
  • Net cash flow provided by operating activities of $21.7 million, compared to cash flow provided by operations of $37.7 million in the prior quarter and cash flow provided by operating activities of $27.6 million in the year-ago quarter.
  • GAAP pre-tax losses were 9% of revenue, compared to pre-tax losses that were 14% of revenue in the prior quarter, and pre-tax income that was 10% of revenue in the year-ago quarter.
  • GAAP income tax provision was 85% of pre-tax loss, including approximately $16.5 million of income tax expense for the recently enacted Tax Cuts and Jobs Act, or Tax Act, primarily associated with reducing the federal tax rate on certain deferred tax assets from 35% to 21%, compared to an income tax benefit of 41% of pre-tax loss in the prior quarter, and income tax provision of 3% of pre-tax income in the year-ago quarter. Excluding the effects of the Tax Act, we would have recorded a tax benefit of approximately 72% of the pre-tax loss for the quarter.
  • GAAP net loss was $19.4 million, compared to net loss of $9.2 million in the prior quarter, and net income of $8.3 million in the year-ago quarter.
  • GAAP diluted loss per share was $0.29, compared to loss per share of $0.14 in the prior quarter, and earnings per share of $0.12 in the year-ago quarter.

Non-GAAP basis:

  • Non-GAAP gross margin was 62.0%. This compares to 62.5% in the prior quarter (62.1% when calculated to adjust for the prior quarter's $0.8 million of deferred revenue eliminated under Exar acquisition purchase accounting), and 63.9% in the year-ago quarter.
  • Non-GAAP operating expenses were $38.3 million, or 34% of revenue, compared to $37.9 million or 33% of revenue in the prior quarter, and $30.1 million and 35% of revenue in the year-ago quarter.
  • Non-GAAP income from operations was 28% of revenue, compared to 29% in the prior quarter, and 29% in the year-ago quarter.
  • Non-GAAP pre-tax margin was 24% of revenue, compared to 25% in the prior quarter, and 30% in the year-ago quarter.
  • Non-GAAP effective tax rate was 4% of non-GAAP pre-tax income, compared to 4% in the prior quarter, and 1% in the year-ago quarter. Current quarter non-GAAP effective tax rate is based on year-to-date effective tax rate of 7% of non-GAAP pre-tax income. Effects of the Tax Act were excluded from Non-GAAP effective tax rate.
  • Non-GAAP net income was $26.3 million, compared to $27.1 million in the prior quarter, and $25.7 million in the year-ago quarter.
  • Non-GAAP diluted earnings per share was $0.38, compared to diluted earnings per share of $0.39 in the prior quarter, and diluted earnings per share of $0.38 in the year-ago quarter.

First Quarter 2018 Business Outlook
The company expects revenue in the first quarter 2018 to be in the range of $110 million to $114 million, and also estimates the following:

  • GAAP and non-GAAP gross margin of approximately 55% and 63%, respectively.
  • GAAP and non-GAAP operating expenses of approximately $57.5 million and $39.5 million, respectively.
  • GAAP and non-GAAP interest and other expenses of approximately $4.2 million.
  • GAAP tax expense of approximately $0.5 million and non-GAAP cash tax rate of approximately 7%.

Webcast and Conference Call
MaxLinear will host its fourth quarter financial results conference call today, February 13, 2018 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). To access this call, dial US toll free: 1-877-407-3109 / International: 1-201-493-6798. 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 February 27, 2018. A replay of the conference call will also be available until February 27, 2018 by dialing US toll free: 1-877-660-6853 / International: 1-201-612-7415 and Conference ID#: 13653123.

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 first quarter 2018 revenue, gross margins, operating expenses, interest expenses, and tax rates). 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. In particular, our future operating results are substantially dependent on our assumptions about market trends and conditions and our expectations with respect to recently completed acquisitions. With respect to recently completed acquisitions, Exar’s target markets and business operations differ substantially from those of MaxLinear, and we may be unable to realize anticipated strategic, financial, and operating synergies to the same relative extent as we were able to achieve in other recent acquisitions. In addition, our decisions with respect to all our acquisitions were based on management’s current expectations with respect to the size of the available markets and growth opportunities presented by these acquisitions, all of which are subject to material risks and uncertainties. In connection with the acquisition of Exar, we incurred substantial acquisition-related indebtedness, which materially changed our financial profile and presents specific risks relating to our ability to service interest and principal payments and limitations on our operating flexibility based on operating covenants in the applicable term loan agreements, including (without limitation) debt covenant restrictions that limit our ability to obtain additional financing, issue guarantees, create liens, make certain restricted payments or repay certain obligations or to pursue future acquisitions. Additional risks and uncertainties arising from our operations generally and our recently completed acquisitions 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; indemnification obligations of Exar arising from a recent divestiture; the impact on our financial condition of the incurred acquisition indebtedness and cash usage arising from the Exar transaction; 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. Our forward-looking GAAP income tax rate includes preliminary assumptions regarding the Tax Act, whereas our forward-looking non-GAAP income tax rate excludes impacts of the Tax Act. The final impact of the Tax Act on our income taxes may differ from our estimates, possibly materially, due to, among other things, changes in interpretations and assumptions made, additional guidance that may be issued, and actions taken by MaxLinear as a result of the Tax Act. 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 Quarterly Report on Form 10-Q for the quarter ended September 30, 2017 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 Annual Report on Form 10-K for the year ended December 31, 2017, which we expect to file in the next week. All forward-looking statements are based on the estimates, projections and assumptions of management as of February 13, 2018, 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, pre-tax margins, effective tax rate, net income and diluted earnings per share. These supplemental measures include the gross margin impact of Exar's deferred profit eliminated in purchase price accounting and exclude the effects of (i) stock-based compensation expense; (ii) an accrual related to our performance based bonus plan for 2017, which we currently intend to settle in shares of our common stock; (iii) accruals related to our performance based bonus plan for 2016, which we settled in shares of our class A common stock in 2016 and 2017; (iv) amortization of purchased intangible assets and inventory step up; (v) depreciation of fixed assets 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 impairment losses; (x) severance and other restructuring charges; and (xi) non-cash income tax benefits and expenses and effects of the Tax Act. 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 2016 performance periods were settled through the issuance of shares of Class A common stock under our equity incentive plans in August 2016 and February 2017, respectively. We currently expect that bonus awards under our fiscal 2017 program will be settled in common stock in the first quarter of fiscal 2018. 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.

Expenses incurred in relation to acquisitions include amortization of purchased intangible assets and step-up of inventory to fair value, depreciation of step-up of property and equipment to fair value, acquisition and integration costs primarily consisting of professional and consulting fees, incentive awards, and restricted merger proceeds which represent the change in fair value of contingent consideration related to a 2014 acquisition and one-time impact on gross margin from elimination of Exar's deferred profit in purchase price accounting.

IPR&D impairment losses relate to our abandonment of IPR&D technology assets.

Restructuring charges incurred are related to our restructuring plans which address issues primarily relating to the integration of the Company and acquired businesses or internal operations 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.

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 2018.

About MaxLinear, Inc.

MaxLinear, Inc. (NYSE:MXL) is a leading provider of radio frequency (RF) and mixed-signal and high-performance analog 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. Investor Relations Contact:
Gideon Massey
Investor Relations Specialist
Tel: 949-333-0056
gmassey@maxlinear.com

MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
Net revenue$113,721 $113,581 $87,136
Cost of net revenue61,628 61,739 36,733
Gross profit52,093 51,842 50,403
Operating expenses:
Research and development30,116 29,270 24,035
Selling, general and administrative26,843 29,037 16,720
IPR&D impairment losses 2,000
Restructuring charges800 2,178 1,326
Total operating expenses57,759 62,485 42,081
Income (loss) from operations(5,666) (10,643) 8,322
Interest income14 1 146
Interest expense(4,044) (4,133) (7)
Other income (expense), net(793) (668) 130
Total interest and other income (expense), net(4,823) (4,800) 269
Income (loss) before income taxes(10,489) (15,443) 8,591
Income tax provision (benefit)8,959 (6,276) 243
Net income (loss)$(19,448) $(9,167) $8,348
Net income (loss) per share:
Basic$(0.29) $(0.14) $0.13
Diluted$(0.29) $(0.14) $0.12
Shares used to compute net income (loss) per share:
Basic67,147 66,712 64,752
Diluted67,147 66,712 68,421


MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Years Ended
December 31, 2017 December 31, 2016
Net revenue$420,318 $387,832
Cost of net revenue212,355 157,842
Gross profit207,963 229,990
Operating expenses:
Research and development112,279 97,745
Selling, general and administrative105,831 64,454
IPR&D impairment losses2,000 1,300
Restructuring charges9,524 3,432
Total operating expenses229,634 166,931
Income (loss) from operations(21,671) 63,059
Interest income274 572
Interest expense(10,378) (104)
Other income (expense), net(2,223) 163
Total interest and other income (expense), net(12,327) 631
Income (loss) before income taxes(33,998) 63,690
Income tax provision (benefit)(24,811) 2,398
Net income (loss)$(9,187) $61,292
Net income (loss) per share:
Basic$(0.14) $0.96
Diluted$(0.14) $0.91
Shares used to compute net income (loss) per share:
Basic66,252 63,781
Diluted66,252 67,653


MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
Operating Activities
Net income (loss)$(19,448) $(9,167) $8,348
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Amortization and depreciation20,236 21,342 7,960
Impairment of IPR&D assets 2,000
Provision for losses on accounts receivable 46
Amortization of investment premiums, net 74
Amortization of inventory step-up9,715 10,207 2,652
Amortization of debt issuance costs287 301
Stock-based compensation7,770 7,796 5,290
Deferred income taxes16,650 (1,163) (114)
(Gain) loss on disposal of property and equipment(33) 286 318
(Gain) loss on foreign currency738 733 (282)
Excess tax benefits on stock-based awards(1,961) (841) (2,249)
Change in fair value of contingent consideration 11
Impairment of leases 388
Changes in operating assets and liabilities:
Accounts receivable9,492 7,063 (815)
Inventory543 5,060 2,882
Prepaid expenses and other assets(424) 2,374 767
Accounts payable, accrued expenses and other current liabilities(2,494) (17,453) 752
Accrued compensation1,351 1,498 2,252
Deferred revenue and deferred profit(12,862) 3,907 697
Accrued price protection liability(6,658) 3,606 (1,936)
Other long-term liabilities(1,159) 144 608
Net cash provided by operating activities21,743 37,739 27,603
Investing Activities
Purchases of property and equipment(3,070) (2,500) (1,684)
Proceeds from sale of property and equipment30
Purchases of intangible assets (53)
Purchases of available-for-sale securities (10,044)
Maturities of available-for-sale securities 10,185
Net cash used in investing activities(3,040) (2,553) (1,543)
Financing Activities
Net proceeds from issuance of common stock2,960 1,074 2,199
Minimum tax withholding paid on behalf of employees for restricted stock units(1,718) (1,426) (1,132)
Repayment of debt(20,000) (50,000)
Net cash provided by (used in) financing activities(18,758) (50,352) 1,067
Effect of exchange rate changes on cash and cash equivalents371 (829) (307)
Increase (decrease) in cash, cash equivalents and restricted cash316 (15,995) 26,820
Cash, cash equivalents and restricted cash at beginning of period74,096 90,091 56,076
Cash, cash equivalents and restricted cash at end of period$74,412 $74,096 $82,896


MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
Years Ended
December 31, 2017 December 31, 2016
Operating Activities
Net income (loss)$(9,187) $61,292
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Amortization and depreciation66,738 26,703
Impairment of IPR&D assets2,000 1,300
Provision for losses on accounts receivable133 87
Amortization (accretion) of investment premiums (discount), net(60) 169
Amortization of inventory step-up25,557 5,641
Amortization of debt issuance costs763
Stock-based compensation32,668 21,765
Deferred income taxes(31,767) 101
Loss on disposal of property and equipment168 366
(Gain) loss on sale of available-for-sale securities38 (50)
(Gain) loss on foreign currency2,153 (216)
Excess tax benefits on stock-based awards(8,559) (8,291)
Change in fair value of contingent consideration 220
Impairment of leases 388
Changes in operating assets and liabilities:
Accounts receivable(4,377) (8,175)
Inventory(1,788) 9,846
Prepaid expenses and other assets1,272 402
Accounts payable, accrued expenses and other current liabilities(1,918) 3,249
Accrued compensation1,567 5,609
Deferred revenue and deferred profit(1,629) 1,925
Accrued price protection liability6,395 (4,850)
Other long-term liabilities(5,103) (164)
Net cash provided by operating activities75,064 117,317
Investing Activities
Purchases of property and equipment(7,468) (8,512)
Proceeds from sale of property and equipment30
Purchases of intangible assets(5,378) (390)
Cash used in acquisition, net of cash acquired(473,304) (101,000)
Purchases of available-for-sale securities(30,577) (90,307)
Maturities of available-for-sale securities84,546 98,896
Net cash used in investing activities(432,151) (101,313)
Financing Activities
Repurchases of common stock(334) (3)
Net proceeds from issuance of common stock12,052 6,649
Minimum tax withholding paid on behalf of employees for restricted stock units(11,543) (7,316)
Proceeds from issuance of debt416,846
Repayment of debt(70,000)
Net cash provided by (used in) financing activities347,021 (670)
Effect of exchange rate changes on cash and cash equivalents1,582 (394)
Increase (decrease) in cash, cash equivalents and restricted cash(8,484) 14,940
Cash, cash equivalents and restricted cash at beginning of period82,896 67,956
Cash, cash equivalents and restricted cash at end of period$74,412 $82,896



MAXLINEAR, INC.
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
December 31, 2017 September 30, 2017 December 31, 2016
Assets
Current assets:
Cash and cash equivalents$71,872 $71,576 $81,086
Short-term restricted cash1,476 615 614
Short-term investments, available-for-sale 47,918
Accounts receivable, net66,099 75,618 50,487
Inventory53,434 63,692 26,583
Prepaid expenses and other current assets8,423 7,917 6,159
Total current assets201,304 219,418 212,847
Long-term restricted cash1,064 1,905 1,196
Property and equipment, net22,658 23,336 20,549
Long-term investments, available-for-sale 5,991
Intangible assets, net315,045 332,409 104,261
Goodwill237,992 239,673 76,015
Deferred tax assets39,878 53,985 116
Other long-term assets6,921 6,288 1,677
Total assets$824,862 $877,014 $422,652
Liabilities and stockholders’ equity
Current liabilities$76,386 $98,381 $54,543
Long-term debt347,609 367,322
Other long-term liabilities13,443 14,663 15,685
Total stockholders’ equity387,424 396,648 352,424
Total liabilities and stockholders’ equity$824,862 $877,014 $422,652



MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
GAAP gross profit$52,093 $51,842 $50,403
Stock-based compensation101 93 59
Performance based equity35 34 31
Amortization of inventory step-up9,715 10,207 2,652
Amortization of purchased intangible assets8,465 7,907 2,572
Depreciation of fixed asset step-up112 113
Deferred profit eliminated in purchase price accounting 810
Non-GAAP gross profit70,521 71,006 55,717
GAAP R&D expenses30,116 29,270 24,035
Stock-based compensation(4,349) (4,337) (3,319)
Incentive award compensation (169)
Performance based equity(1,031) (961) (1,133)
Amortization of purchased intangible assets(97) (96) (97)
Depreciation of fixed asset step-up(297) (561)
Restricted merger proceeds and contingent consideration (35)
Non-GAAP R&D expenses24,342 23,315 19,282
GAAP SG&A expenses26,843 29,037 16,720
Stock-based compensation(3,105) (2,965) (1,724)
Incentive award compensation (18)
Performance based equity(937) (517) (673)
Amortization of purchased intangible assets(8,760) (9,924) (2,914)
Depreciation of fixed asset step-up(20) (30)
Acquisition and integration costs(54) (1,005) (572)
Restricted merger proceeds and contingent consideration (11)
IP litigation costs, net(38) (4) (28)
Non-GAAP SG&A expenses13,929 14,592 10,780
GAAP IPR&D impairment losses 2,000
IPR&D impairment losses (2,000)
Non-GAAP IPR&D impairment losses
GAAP restructuring expenses800 2,178 1,326
Restructuring charges(800) (2,178) (1,326)
Non-GAAP restructuring expenses
GAAP income (loss) from operations(5,666) (10,643) 8,322
Total non-GAAP adjustments37,916 43,742 17,333
Non-GAAP income from operations32,250 33,099 25,655
GAAP and non-GAAP interest and other income (expense), net(4,823) (4,800) 269
GAAP income (loss) before income taxes(10,489) (15,443) 8,591
Total non-GAAP adjustments37,916 43,742 17,333
Non-GAAP income before income taxes27,427 28,299 25,924
GAAP income tax provision (benefit)8,959 (6,276) 243
Adjustment for non-cash tax benefits/expenses and effects of the Tax Act(7,853) 7,476 (13)
Non-GAAP income tax provision1,106 1,200 230
GAAP net income (loss)(19,448) (9,167) 8,348
Total non-GAAP adjustments before income taxes37,916 43,742 17,333
Less: total tax adjustments(7,853) 7,476 (13)
Non-GAAP net income$26,321 $27,099 $25,694
Shares used in computing non-GAAP basic net income per share67,147 66,712 64,752
Shares used in computing non-GAAP diluted net income per share70,175 69,668 68,421
Non-GAAP basic net income per share$0.39 $0.41 $0.40
Non-GAAP diluted net income per share$0.38 $0.39 $0.38


MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
Years Ended
December 31, 2017 December 31, 2016
GAAP gross profit$207,963 $229,990
Stock-based compensation332 210
Performance based equity139 (10)
Amortization of inventory step-up25,557 5,641
Amortization of purchased intangible assets25,316 8,512
Depreciation of fixed asset step-up337
Deferred profit eliminated in purchase price accounting4,682
Non-GAAP gross profit264,326 244,343
GAAP R&D expenses112,279 97,745
Stock-based compensation(16,190) (13,681)
Incentive award compensation (722)
Performance based equity(4,001) (4,707)
Amortization of purchased intangible assets(386) (386)
Depreciation of fixed asset step-up(1,618)
Restricted merger proceeds and contingent consideration (694)
Non-GAAP R&D expenses90,084 77,555
GAAP SG&A expenses105,831 64,454
Stock-based compensation(11,016) (7,014)
Incentive award compensation (137)
Performance based equity(2,514) (2,951)
Amortization of purchased intangible assets(28,827) (6,952)
Depreciation of fixed asset step-up(106)
Acquisition and integration costs(10,062) (2,424)
Restricted merger proceeds and contingent consideration (220)
IP litigation costs, net(272) (699)
Non-GAAP SG&A expenses53,034 44,057
GAAP IPR&D impairment losses2,000 1,300
IPR&D impairment losses(2,000) (1,300)
Non-GAAP IPR&D impairment losses
GAAP restructuring expenses9,524 3,432
Restructuring charges(9,524) (3,432)
Non-GAAP restructuring expenses
GAAP income (loss) from operations(21,671) 63,059
Total non-GAAP adjustments142,879 59,672
Non-GAAP income from operations121,208 122,731
GAAP and non-GAAP interest and other income (expense), net(12,327) 631
GAAP income (loss) before income taxes(33,998) 63,690
Total non-GAAP adjustments142,879 59,672
Non-GAAP income before income taxes108,881 123,362
GAAP income tax provision (benefit)(24,811) 2,398
Adjustment for non-cash tax benefits/expenses and effects of the Tax Act32,433 (151)
Non-GAAP income tax provision7,622 2,247
GAAP net income (loss)(9,187) 61,292
Total non-GAAP adjustments before income taxes142,879 59,672
Less: total tax adjustments32,433 (151)
Non-GAAP net income$101,259 $121,115
Shares used in computing non-GAAP basic net income per share66,252 63,781
Shares used in computing non-GAAP diluted net income per share69,665 67,653
Non-GAAP basic net income per share$1.53 $1.90
Non-GAAP diluted net income per share$1.45 $1.79


MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
Three Months Ended
December 31, 2017 September 30, 2017 December 31, 2016
GAAP gross profit45.8% 45.6% 57.8%
Stock-based compensation0.1% 0.1% 0.1%
Performance based equity—% —% —%
Amortization of inventory step-up8.5% 9.0% 3.0%
Amortization of purchased intangible assets7.4% 7.0% 3.0%
Depreciation of fixed asset step-up0.2% 0.1% —%
Deferred profit eliminated in purchase price accounting—% 0.7% —%
Non-GAAP gross profit62.0% 62.5% 63.9%
GAAP R&D expenses26.5% 25.8% 27.6%
Stock-based compensation(3.8)% (3.8)% (3.9)%
Incentive award compensation—% —% (0.2)%
Performance based equity(1.0)% (0.9)% (1.3)%
Amortization of purchased intangible assets(0.1)% (0.1)% (0.1)%
Depreciation of fixed asset step-up(0.2)% (0.5)% —%
Restricted merger proceeds and contingent consideration—% —% —%
Non-GAAP R&D expenses21.4% 20.5% 22.1%
GAAP SG&A expenses23.6% 25.6% 19.2%
Stock-based compensation(2.7)% (2.6)% (2.0)%
Incentive award compensation—% —% —%
Performance based equity(1.0)% (0.5)% (0.8)%
Amortization of purchased intangible assets(7.7)% (8.7)% (3.3)%
Depreciation of fixed asset step-up—% (0.1)% —%
Acquisition and integration costs—% (0.9)% (0.7)%
Restricted merger proceeds and contingent consideration—% —% —%
IP litigation costs, net—% —% —%
Non-GAAP SG&A expenses12.2% 12.8% 12.4%
GAAP IPR&D impairment losses—% 1.8% —%
IPR&D impairment losses—% (1.8)% —%
Non-GAAP IPR&D impairment losses—% —% —%
GAAP restructuring expenses0.7% 1.9% 1.5%
Restructuring charges(0.7)% (1.9)% (1.5)%
Non-GAAP restructuring expenses—% —% —%
GAAP income (loss) from operations(5.0)% (9.4)% 9.7%
Total non-GAAP adjustments33.3% 38.5% 19.8%
Non-GAAP income from operations28.3% 29.1% 29.5%
GAAP and non-GAAP interest and other income (expense), net(4.2)% (4.2)% 0.3%
GAAP income (loss) before income taxes(9.2)% (13.6)% 9.9%
Total non-GAAP adjustments before income taxes33.3% 38.5% 19.8%
Non-GAAP income before income taxes24.1% 24.9% 29.7%
GAAP income tax provision (benefit)7.9% (5.5)% 0.3%
Adjustment for non-cash tax benefits/expenses and the effects of the Tax Act(7.0)% 6.5% —%
Non-GAAP income tax provision0.9% 1.1% 0.3%
GAAP net income (loss)(17.1)% (8.1)% 9.6%
Total non-GAAP adjustments before income taxes33.3% 38.5% 19.8%
Less: total tax adjustments(7.0)% 6.5% —%
Non-GAAP net income23.1% 23.9% 29.5%


MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF GAAP TO NON-GAAP FINANCIAL MEASURES
Years Ended
December 31, 2017 December 31, 2016
GAAP gross profit49.5% 59.3%
Stock-based compensation0.1% 0.1%
Performance based equity—% —%
Amortization of inventory step-up6.0% 1.5%
Amortization of purchased intangible assets6.0% 2.1%
Depreciation of fixed asset step-up0.2% —%
Deferred profit eliminated in purchase price accounting1.1% —%
Non-GAAP gross profit62.9% 63.0%
GAAP R&D expenses26.7% 25.2%
Stock-based compensation(3.9)% (3.5)%
Incentive award compensation—% (0.2)%
Performance based equity(1.0)% (1.2)%
Amortization of purchased intangible assets(0.1)% (0.1)%
Depreciation of fixed asset step-up(0.3)% —%
Restricted merger proceeds and contingent consideration—% (0.2)%
Non-GAAP R&D expenses21.4% 20.0%
GAAP SG&A expenses25.2% 16.6%
Stock-based compensation(2.6)% (1.8)%
Incentive award compensation—% —%
Performance based equity(0.6)% (0.7)%
Amortization of purchased intangible assets(6.9)% (1.8)%
Depreciation of fixed asset step-up—% —%
Acquisition and integration costs(2.4)% (0.6)%
Restricted merger proceeds and contingent consideration—% (0.1)%
IP litigation costs, net(0.1)% (0.2)%
Non-GAAP SG&A expenses12.6% 11.4%
GAAP IPR&D impairment losses0.5% 0.3%
IPR&D impairment losses(0.5)% (0.3)%
Non-GAAP IPR&D impairment losses—% —%
GAAP restructuring expenses2.3% 0.9%
Restructuring charges(2.3)% (0.9)%
Non-GAAP restructuring expenses—% —%
GAAP income (loss) from operations(5.2)% 16.2%
Total non-GAAP adjustments34.0% 15.4%
Non-GAAP income from operations28.8% 31.6%
GAAP and non-GAAP interest and other income (expense), net(2.9)% 0.2%
GAAP income (loss) before income taxes(8.1)% 16.4%
Total non-GAAP adjustments before income taxes34.0% 15.4%
Non-GAAP income before income taxes25.9% 31.8%
GAAP income tax provision (benefit)(5.9)% 0.6%
Adjustment for non-cash tax benefits/expenses and the effects of the Tax Act7.7% —%
Non-GAAP income tax provision1.8% 0.6%
GAAP net income (loss)(2.2)% 15.8%
Total non-GAAP adjustments before income taxes34.0% 15.4%
Less: total tax adjustments7.7% —%
Non-GAAP net income24.1% 31.2%

Source:MaxLinear, Inc

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