Q2 2023 Financial Performance - Revenue was $183.9 million[6,8,9] - GAAP gross margin was 55.9%[6,8,28] - Non-GAAP gross margin was 61.0%[6,9,28] - GAAP operating margin was (3.2)%[6,8,28] - Non-GAAP operating margin was 16.2%[6,9,28] - GAAP loss per share was $(0.05)[6,8] - Non-GAAP earnings per share was $0.34[6,9] - Cash generated from operations was approximately $31 million[6] Q2 2023 Business Highlights - Infrastructure revenue increased by 6% sequentially and 37% year-over-year[7] Q3 2023 Guidance - Revenue is expected to be between $125 million and $155 million[11] - GAAP gross margin is projected to be between 53.0% and 56.0%[11] - Non-GAAP gross margin is projected to be between 59.5% and 62.5%[11] - GAAP operating expenses are estimated to be between $104 million and $110 million[11] - Non-GAAP operating expenses are estimated to be between $75 million and $81 million[11]

Financial Data and Key Metrics Changes - Total revenue for Q2 2023 was $183.9 million, down 26% sequentially and down 34% year-over-year [58] - Broadband revenue decreased to $54 million, down 34% versus Q1 and down 62% year-over-year [58] - Connectivity revenue was $38 million, down 43% sequentially and down 33% year-over-year [58] - Infrastructure revenue increased to $49 million, up 6% sequentially and 37% year-over-year [58] - Industrial and multimarket revenue was $43 million, down 20% sequentially and 11% year-over-year [58] - Non-GAAP gross margin was 61%, while GAAP gross margin was approximately 55.9% [59][67] Business Line Data and Key Metrics Changes - Wireless infrastructure growth was primarily driven by 5G rollouts, particularly outside North America and China [8] - The broadband access segment faced challenges due to excess customer inventories and the cyclical semiconductor downturn [70] - PON access revenue showed strong growth, indicating a multiyear growth cycle as the industry transitions to 10-gigabit PON [71] - The Wave700 product family for WiFi7 is expected to drive significant ASP growth starting in 2024 [72] Market Data and Key Metrics Changes - The North American wireless infrastructure market is experiencing a slowdown, but the impact on the company is not pronounced due to a smaller revenue base [16] - The overall market for wireless telco carrier spending is expected to slow down, but the company is not significantly impacted due to its growth trajectory [16] Company Strategy and Development Direction - The company is focused on broadening and diversifying revenues, aiming for a transformation to achieve $1 billion to $2 billion in revenues [18] - There is a strong emphasis on operational efficiency, fiscal discipline, and shareholder value as the company navigates a dynamic environment [62] - The company is strategically positioned in the optical market with its 5-nanometer CMOS 400-gigabit and 800-gigabit PAM4 solutions [69] Management's Comments on Operating Environment and Future Outlook - Management noted that the current environment is challenging due to inventory corrections and low booking visibility, but they expect a recovery in Q4 2023 [81] - The company anticipates modest improvements in Q4, with a focus on cash flow generation and working capital management [124] - There is confidence that the downturn is cyclical rather than structural, with ongoing investments in new products and markets [108] Other Important Information - The company terminated its merger agreement with Silicon Motion, exercising its contractual right without incurring a breakup fee [97] - Cash flow from operating activities was $30.6 million, with approximately $246 million in cash and short-term investments at the end of Q2 [77] Q&A Session Summary Question: What is the outlook for inventory correction and demand recovery? - Management acknowledged that inventory correction has pushed into the second half of the year, with expectations of a bottoming out in Q3, albeit at lower levels than previously anticipated [81][82] Question: How does the company view the impact of the current downturn? - Management believes the downturn is cyclical, with ongoing investments in new products and a strong pipeline for future growth [108] Question: What are the expectations for revenue growth in Q4? - Management expects modest improvement in Q4, with a focus on monitoring inventory burn and customer investment in new platforms [124]

PART I — FINANCIAL INFORMATION This section provides MaxLinear, Inc.'s unaudited consolidated financial statements and management's discussion and analysis for the quarter ended June 30, 2023, along with market risk disclosures and controls [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=Item%201.%20Financial%20Statements%20%28unaudited%29) This section presents MaxLinear, Inc.'s unaudited consolidated financial statements for the quarter ended June 30, 2023, including balance sheets, statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, along with detailed notes explaining significant accounting policies, business combinations, restructuring activities, and other financial details [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets%20as%20of%20June%2030%2C%202023%20and%20December%2031%2C%202022) This section provides a snapshot of MaxLinear's financial position, detailing assets, liabilities, and equity as of June 30, 2023, and December 31, 2022 | Metric | June 30, 2023 (in thousands) | December 31, 2022 (in thousands) | | :-------------------------------- | :----------------------------- | :------------------------------- | | **Assets** | | | | Total current assets | $554,491 | $563,124 | | Total assets | $1,161,480 | $1,180,025 | | **Liabilities & Equity** | | | | Total current liabilities | $241,729 | $341,086 | | Total liabilities | $415,433 | $503,640 | | Total stockholders' equity | $746,047 | $676,385 | - Total current assets decreased by **$8.6 million**, and total current liabilities decreased by **$99.3 million** from December 31, 2022, to June 30, 2023, primarily due to reductions in accounts payable, accrued price protection liability, and accrued compensation[10](index=10&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) This section outlines MaxLinear's financial performance, including net revenue, gross profit, and net income (loss) for the three and six months ended June 30, 2023 and 2022 | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net revenue | $183,938 | $280,009 | $432,380 | $543,936 | | Gross profit | $102,873 | $164,351 | $243,180 | $318,941 | | Income (loss) from operations | $(5,937) | $39,007 | $21,340 | $87,134 | | Net income (loss) | $(4,351) | $31,966 | $5,182 | $65,552 | | Basic EPS | $(0.05) | $0.41 | $0.06 | $0.85 | | Diluted EPS | $(0.05) | $0.40 | $0.06 | $0.81 | - Net revenue decreased significantly by **34%** for the three months ended June 30, 2023, and by **21%** for the six months ended June 30, 2023, compared to the same periods in 2022. The company reported a net loss of **$4.351 million** for the three months ended June 30, 2023, a substantial decline from a net income of **$31.966 million** in the prior year period[12](index=12&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20%28Loss%29%20for%20the%20Three%20and%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) This section details MaxLinear's comprehensive income (loss), including net income (loss) and other comprehensive loss, for the three and six months ended June 30, 2023 and 2022 | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) | $(4,351) | $31,966 | $5,182 | $65,552 | | Other comprehensive loss | $(1,078) | $(3,988) | $(1,270) | $(5,063) | | Total comprehensive income (loss) | $(5,429) | $27,978 | $3,912 | $60,489 | - Total comprehensive income shifted from a gain of **$27.978 million** in Q2 2022 to a loss of **$5.429 million** in Q2 2023, primarily driven by the net loss and foreign currency translation adjustments[15](index=15&type=chunk) [Consolidated Statements of Stockholders' Equity](index=7&type=section&id=Consolidated%20Statements%20of%20Stockholders%27%20Equity%20for%20the%20Fiscal%20Quarters%20Ended%20June%2030%2C%202023%20and%202022) This section presents changes in MaxLinear's stockholders' equity, including additional paid-in capital and accumulated deficit, for the fiscal quarters ended June 30, 2023 and 2022 | Metric (in thousands) | Dec 31, 2022 | Mar 31, 2023 | Jun 30, 2023 | | :-------------------- | :----------- | :----------- | :----------- | | Total Stockholders' Equity | $676,385 | $734,112 | $746,047 | | Additional Paid-In Capital | $722,778 | $771,164 | $788,528 | | Accumulated Deficit | $(45,380) | $(35,847) | $(40,198) | - Total stockholders' equity increased from **$676.385 million** at December 31, 2022, to **$746.047 million** at June 30, 2023, primarily due to increases in additional paid-in capital from equity awards and stock-based compensation, despite a net loss in Q2 2023[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) This section summarizes MaxLinear's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2023 and 2022 | Activity (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :---------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $72,737 | $257,603 | | Net cash used in investing activities | $(28,161) | $(59,035) | | Net cash used in financing activities | $(6,062) | $(116,525) | | Increase in cash, cash equivalents and restricted cash | $37,286 | $80,681 | | Cash, cash equivalents and restricted cash at end of period | $225,643 | $212,419 | - Net cash provided by operating activities decreased significantly from **$257.603 million** in H1 2022 to **$72.737 million** in H1 2023, primarily due to lower net income and changes in operating assets and liabilities, including a substantial decrease in accrued price protection liability[23](index=23&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures regarding MaxLinear's accounting policies, business transactions, and financial statement line items [1. Organization and Summary of Significant Accounting Policies](index=10&type=section&id=1.%20Organization%20and%20Summary%20of%20Significant%20Accounting%20Policies) MaxLinear, Inc. is a fabless integrated circuit design company providing communications systems-on-chip (SoC) solutions. The financial statements are unaudited and prepared in accordance with GAAP for interim information, with no significant changes to accounting policies in H1 2023. The company adopted ASU No. 2021-08 in fiscal year 2023 for business combinations - MaxLinear, Inc. is a fabless integrated circuit design company specializing in communications systems-on-chip (SoC) solutions for broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications[24](index=24&type=chunk) - The company's unaudited consolidated interim financial statements are prepared in accordance with GAAP for interim financial information and include normal recurring accruals[25](index=25&type=chunk)[26](index=26&type=chunk) - MaxLinear adopted ASU No. 2021-08 in fiscal year 2023, which provides specific guidance on recognizing and measuring acquired contract assets and liabilities from customer contracts in business combinations[32](index=32&type=chunk) [2. Net Income Per Share](index=11&type=section&id=2.%20Net%20Income%20Per%20Share) The company calculates basic and diluted EPS, excluding anti-dilutive common stock equivalents in periods of net loss. For Q2 2023, both basic and diluted EPS were $(0.05), reflecting a net loss, compared to $0.41 and $0.40 respectively in Q2 2022 | Metric | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Net income (loss) (in thousands) | $(4,351) | $31,966 | $5,182 | $65,552 | | Weighted average common shares outstanding—basic (in thousands) | 80,446 | 77,858 | 79,961 | 77,527 | | Dilutive common stock equivalents (in thousands) | — | 2,421 | 1,559 | 2,935 | | Net income (loss) per share: Basic | $(0.05) | $0.41 | $0.06 | $0.85 | | Net income (loss) per share: Diluted | $(0.05) | $0.40 | $0.06 | $0.81 | - For the three months ended June 30, 2023, **5.4 million** potentially dilutive securities were excluded from diluted EPS calculation due to their anti-dilutive nature, compared to **1.0 million** in the same period of 2022[34](index=34&type=chunk) [3. Business Combinations](index=12&type=section&id=3.%20Business%20Combinations) MaxLinear terminated its Merger Agreement with Silicon Motion on July 26, 2023, citing unfulfilled conditions and material breaches, without incurring a break-up fee. Separately, the company completed the acquisition of Company Y, an engineering design services provider, for $9.7 million in cash and up to $2.6 million in contingent consideration, recognizing $11.7 million in goodwill - MaxLinear terminated the Merger Agreement with Silicon Motion on July 26, 2023, due to unfulfilled closing conditions, a Material Adverse Effect on Silicon Motion, and material breaches by Silicon Motion. MaxLinear is not required to pay a break-up fee[38](index=38&type=chunk)[155](index=155&type=chunk) - On January 17, 2023, MaxLinear acquired Company Y, an engineering design services provider, for **$9.7 million** in cash and up to **$2.6 million** in contingent consideration, which is subject to personnel objectives by June 17, 2024[45](index=45&type=chunk)[47](index=47&type=chunk) - The acquisition of Company Y resulted in the recognition of **$11.7 million** in goodwill, primarily attributable to the acquired workforce[49](index=49&type=chunk)[52](index=52&type=chunk) [4. Restructuring Activity](index=14&type=section&id=4.%20Restructuring%20Activity) MaxLinear initiated a restructuring plan in Q1 2023 to reduce its workforce and save costs, incurring $4.4 million in charges for Q2 2023 and $9.1 million for H1 2023, primarily for employee separation expenses. The restructuring liability at June 30, 2023, was $5.489 million - MaxLinear initiated a restructuring plan in Q1 2023 to reduce its workforce and achieve cost savings, incurring additional costs in Q2 2023 due to statutory requirements[53](index=53&type=chunk) Restructuring Charges | Expense Type (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Employee separation expenses | $4,287 | $— | $8,876 | $— | | Lease related charges | $34 | $462 | $42 | $462 | | Other | $115 | $— | $166 | $— | | Total Restructuring Charges | $4,436 | $462 | $9,084 | $462 | - The restructuring liability as of June 30, 2023, was **$5.489 million**, primarily for employee separation expenses[55](index=55&type=chunk) [5. Goodwill and Intangible Assets](index=15&type=section&id=5.%20Goodwill%20and%20Intangible%20Assets) Goodwill increased by $11.7 million in H1 2023 due to the acquisition of Company Y, reaching $318.456 million. Finite-lived intangible assets, primarily developed technology, decreased to $91.203 million at June 30, 2023, from $109.316 million at December 31, 2022, due to amortization and impairment losses of $2.4 million on licensed technology Goodwill Balance | Metric (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | | Beginning goodwill balance | $306,739 | $306,668 | | Acquisitions (Note 3) | $11,717 | $— | | Ending goodwill balance | $318,456 | $306,739 | Intangible Assets Net Carrying Amount | Intangible Asset (in thousands) | June 30, 2023 Net Carrying Amount | December 31, 2022 Net Carrying Amount | | :------------------------------ | :---------------------------------- | :------------------------------------ | | Licensed technology | $18,366 | $21,184 | | Developed technology | $64,291 | $82,729 | | Trademarks and trade names | $595 | $1,339 | | Customer relationships | $3,223 | $3,993 | | Backlog | $61 | $71 | | Patents | $4,667 | $— | | Total | $91,203 | $109,316 | - Impairment losses of **$2.4 million** related to finite-lived intangible assets were recognized during the six months ended June 30, 2023, attributable to certain purchased licensed technology[63](index=63&type=chunk) [6. Financial Instruments](index=17&type=section&id=6.%20Financial%20Instruments) MaxLinear's financial instruments include marketable equity investments and contingent consideration liabilities. Marketable equity investments had a fair value of $20.5 million at June 30, 2023, with a net unrealized gain of $0.5 million. Contingent consideration liabilities, primarily from the Company Y acquisition, were $2.620 million, classified as Level 3 due to unobservable inputs Financial Instrument Fair Values | Financial Instrument (in thousands) | June 30, 2023 Fair Value | December 31, 2022 Fair Value | | :-------------------------------- | :----------------------- | :--------------------------- | | Marketable equity investments | $20,488 | $18,529 | | Contingent consideration liability | $2,620 | $2,941 | - Marketable equity investments held by the Company are classified as Level 1 and had a net unrealized gain of **$0.5 million** as of June 30, 2023, recorded in other income (expense), net[66](index=66&type=chunk)[70](index=70&type=chunk) - The contingent consideration liability, primarily from the acquisition of Company Y, is classified as a Level 3 financial instrument, with its fair value based on Monte Carlo simulation and probability-based methodologies using unobservable inputs[72](index=72&type=chunk)[73](index=73&type=chunk) [7. Balance Sheet Details](index=19&type=section&id=7.%20Balance%20Sheet%20Details) Cash, cash equivalents, and restricted cash totaled $225.6 million at June 30, 2023, up from $188.4 million at December 31, 2022. Inventory decreased to $126.2 million, while property and equipment, net, slightly decreased to $73.8 million. Accrued price protection liability significantly decreased to $80.1 million from $113.3 million, reflecting payments and reductions in revenue Selected Balance Sheet Metrics | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $224,579 | $187,353 | | Total cash, cash equivalents and restricted cash | $225,643 | $188,357 | | Inventory | $126,152 | $160,544 | | Property and equipment, net | $73,845 | $79,018 | | Accrued price protection liability | $80,133 | $113,274 | | Accrued expenses and other current liabilities | $90,693 | $100,155 | - Cash and cash equivalents increased to **$224.6 million** at June 30, 2023, from **$187.4 million** at December 31, 2022, with money market funds comprising a significant portion[78](index=78&type=chunk) - Accrued price protection liability decreased by **$33.1 million** during the six months ended June 30, 2023, due to payments and charges as a reduction of revenue[82](index=82&type=chunk) [8. Debt](index=21&type=section&id=8.%20Debt) MaxLinear's long-term debt remained at a principal balance of $125.0 million at June 30, 2023, under the June 23, 2021 Credit Agreement, with a weighted average effective interest rate of 7.2%. The company also has an undrawn $100.0 million revolving credit facility. The commitment letters for the Silicon Motion merger financing were terminated Debt Metrics | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Principal balance | $125,000 | $125,000 | | Net carrying amount of long-term debt | $122,064 | $121,757 | | Weighted average effective interest rate | 7.2% | 3.8% | - The company's long-term debt principal balance remained at **$125.0 million**, due in full on June 23, 2028, with a significant increase in the weighted average effective interest rate from **3.8% to 7.2%** YoY[84](index=84&type=chunk)[86](index=86&type=chunk) - The **$100.0 million** senior secured revolving credit facility under the June 23, 2021 Credit Agreement remained undrawn as of June 30, 2023. The financing commitments for the Silicon Motion merger were terminated[87](index=87&type=chunk)[156](index=156&type=chunk) [9. Stock-Based Compensation](index=23&type=section&id=9.%20Stock-Based%20Compensation) MaxLinear recognized $17.2 million in stock-based compensation expense for Q2 2023 and $33.6 million for H1 2023. Unrecognized compensation cost for unvested restricted stock units was $168.5 million (2.73 years weighted average vesting) and $9.5 million for performance-based restricted stock units (1.62 years weighted average vesting) as of June 30, 2023 Stock-Based Compensation Expense | Expense Category (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :------------------------------ | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Cost of net revenue | $246 | $162 | $456 | $325 | | Research and development | $12,237 | $9,983 | $23,692 | $19,659 | | Selling, general and administrative | $4,714 | $9,324 | $9,497 | $18,039 | | Total Stock-Based Compensation | $17,197 | $19,469 | $33,645 | $38,023 | - Total unrecognized compensation cost for unvested restricted stock units was **$168.5 million** as of June 30, 2023, with a weighted average vesting period of **2.73 years**[99](index=99&type=chunk) - For performance-based restricted stock units, unrecognized compensation cost was **$9.5 million**, with a weighted average vesting period of **1.62 years**, based on expected achievement of net sales and non-GAAP diluted EPS metrics[100](index=100&type=chunk)[105](index=105&type=chunk) [10. Income Taxes](index=26&type=section&id=10.%20Income%20Taxes) MaxLinear recorded an income tax benefit of $0.4 million for Q2 2023, a significant change from a $11.9 million provision in Q2 2022. For H1 2023, the income tax provision was $15.2 million, down from $23.3 million in H1 2022. The effective tax rate differs from the U.S. federal statutory rate due to jurisdictional income mix, permanent tax items, and the capitalization of R&D costs - The company recorded an income tax benefit of **$0.4 million** for the three months ended June 30, 2023, compared to an income tax provision of **$11.9 million** for the same period in 2022[114](index=114&type=chunk) - For the six months ended June 30, 2023, the income tax provision was **$15.2 million**, down from **$23.3 million** in the prior year period[114](index=114&type=chunk) - The difference between the effective tax rate and the **21.0%** U.S. federal statutory rate is primarily due to the mix of pre-tax income among jurisdictions, permanent tax items (including global intangible low-taxed income), stock-based compensation, and the capitalization of research and experimentation costs[115](index=115&type=chunk)[116](index=116&type=chunk) [11. Concentration of Credit Risk, Significant Customers and Geographic Information](index=27&type=section&id=11.%20Concentration%20of%20Credit%20Risk%2C%20Significant%20Customers%20and%20Geographic%20Information) MaxLinear's revenue concentration shows one customer accounted for 11% of net revenue in H1 2023, and its top ten customers collectively accounted for 58%. Geographically, Asia remained the largest revenue source at 74% in H1 2023, with Hong Kong and China being significant contributors. The company relies on a few key suppliers for inventory purchases, with Vendor B and Vendor A being the largest Customer Revenue Concentration | Customer | 3 Months Ended June 30, 2023 (% of total net revenue) | 3 Months Ended June 30, 2022 (% of total net revenue) | 6 Months Ended June 30, 2023 (% of total net revenue) | 6 Months Ended June 30, 2022 (% of total net revenue) | | :--------- | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | :---------------------------------------------------- | | Customer A | * | 18% | * | 17% | | Customer B | * | 11% | 11% | 11% | Geographic Revenue Distribution | Geographic Area (in thousands) | 6 Months Ended June 30, 2023 Amount | 6 Months Ended June 30, 2023 % of total net revenue | 6 Months Ended June 30, 2022 Amount | 6 Months Ended June 30, 2022 % of total net revenue | | :----------------------------- | :---------------------------------- | :------------------------------------- | :---------------------------------- | :------------------------------------- | | Asia | $320,831 | 74% | $439,320 | 81% | | Europe | $85,172 | 20% | $76,974 | 14% | | United States | $21,090 | 5% | $18,552 | 3% | | Rest of world | $5,287 | 1% | $9,090 | 2% | | Total | $432,380 | 100% | $543,936 | 100% | Supplier Inventory Purchase Concentration | Supplier | 3 Months Ended June 30, 2023 (% of total inventory purchases) | 3 Months Ended June 30, 2022 (% of total inventory purchases) | 6 Months Ended June 30, 2023 (% of total inventory purchases) | 6 Months Ended June 30, 2022 (% of total inventory purchases) | | :--------- | :---------------------------------------------------------- | :---------------------------------------------------------- | :---------------------------------------------------------- | :---------------------------------------------------------- | | Vendor A | 11% | 30% | 19% | 29% | | Vendor B | 29% | 23% | 26% | 25% | | Vendor C | * | 13% | * | 12% | | Vendor D | 12% | * | 11% | * | [12. Revenue from Contracts with Customers](index=29&type=section&id=12.%20Revenue%20from%20Contracts%20with%20Customers) MaxLinear's net revenue decreased across most markets in Q2 and H1 2023 compared to 2022, with Broadband revenue declining significantly by 62% and 51% respectively. Infrastructure revenue, however, increased by 37% and 38%. Sales through distributors accounted for 53% of net revenue in Q2 2023. Customer contract liabilities and obligations for price adjustments remained notable Net Revenue by Market | Market (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------- | :--------------------------- | :--------------------------- | :--------------------------- | :--------------------------- | | Broadband | $53,549 (29%) | $139,098 (50%) | $135,230 (31%) | $273,654 (50%) | | Connectivity | $37,939 (21%) | $56,400 (20%) | $104,207 (24%) | $116,579 (21%) | | Infrastructure | $49,262 (27%) | $35,889 (13%) | $95,564 (22%) | $69,070 (13%) | | Industrial and multi-market | $43,188 (23%) | $48,622 (17%) | $97,379 (23%) | $84,633 (16%) | | Total net revenue | $183,938 (100%) | $280,009 (100%) | $432,380 (100%) | $543,936 (100%) | - Sales through distributors accounted for **53%** of net revenue for the three months ended June 30, 2023, and **47%** for the six months ended June 30, 2023[130](index=130&type=chunk)[131](index=131&type=chunk) - Obligations to customers for price protection rights totaled **$80.1 million** at June 30, 2023, a decrease from **$113.3 million** at December 31, 2022[134](index=134&type=chunk) [13. Leases](index=30&type=section&id=13.%20Leases) MaxLinear's operating lease liabilities totaled $39.6 million at June 30, 2023, with a weighted average remaining lease term of 4.3 years and a weighted average discount rate of 4.6%. Operating lease costs were $2.5 million for Q2 2023 and $5.4 million for H1 2023 Lease Metrics | Lease Metric | June 30, 2023 | | :-------------------------------- | :------------ | | Total lease liabilities (in thousands) | $39,622 | | Weighted average discount rate | 4.6% | | Weighted average remaining lease term | 4.3 years | - Operating lease cost was **$2.5 million** for the three months ended June 30, 2023, and **$5.4 million** for the six months ended June 30, 2023[139](index=139&type=chunk)[140](index=140&type=chunk) [14. Employee Retirement Plans](index=30&type=section&id=14.%20Employee%20Retirement%20Plans) MaxLinear offers a 401(k) defined contribution plan but does not contribute to it. The company maintains defined benefit retirement plans in certain foreign jurisdictions, with a defined benefit obligation of $1.1 million at June 30, 2023. Net periodic benefit costs were $0.1 million for Q2 2023 and $0.1 million for H1 2023 - MaxLinear has a 401(k) defined contribution retirement plan for eligible employees but does not contribute to it[142](index=142&type=chunk)[143](index=143&type=chunk) - The defined benefit obligation for foreign retirement plans was **$1.1 million** at June 30, 2023, decreasing from **$1.7 million** at December 31, 2022[144](index=144&type=chunk) - Net periodic benefit costs were **$0.1 million** for both the three and six months ended June 30, 2023, recorded in research and development expenses[145](index=145&type=chunk) [15. Commitments and Contingencies](index=31&type=section&id=15.%20Commitments%20and%20Contingencies) MaxLinear has future minimum payments of $121.6 million under inventory purchase and other contractual obligations. The company settled patent infringement litigation with Bell Semiconductor in March 2023, granting MaxLinear a license to certain patents. No material loss contingencies were accrued for other legal matters as of June 30, 2023 Contractual Obligations | Obligation Type (in thousands) | Total Payments Due | | :----------------------------- | :----------------- | | Inventory Purchase Obligations | $46,637 | | Other Obligations | $74,958 | | Total | $121,595 | - MaxLinear settled patent infringement litigation with Bell Semiconductor in March 2023 through a Settlement and Patent License Agreement, which grants MaxLinear a license to certain listed patents[151](index=151&type=chunk) - As of June 30, 2023, no material loss contingencies have been accrued for other legal proceedings[152](index=152&type=chunk) [16. Stock Repurchases](index=32&type=section&id=16.%20Stock%20Repurchases) MaxLinear's $100 million stock repurchase program, authorized in February 2021, has been temporarily suspended since July 2022 due to the previously pending Silicon Motion merger. As of June 30, 2023, approximately $45.0 million remained available under the program, with no repurchases made in H1 2023 - MaxLinear's **$100 million** stock repurchase program, authorized in February 2021, has been temporarily suspended since July 2022 due to the previously pending merger with Silicon Motion[153](index=153&type=chunk) - As of June 30, 2023, approximately **$45.0 million** remained available for repurchase under the program, and no shares were repurchased during the six months ended June 30, 2023[154](index=154&type=chunk) [17. Subsequent Events](index=32&type=section&id=17.%20Subsequent%20Events) On July 26, 2023, MaxLinear terminated its Merger Agreement with Silicon Motion, citing unfulfilled conditions and material breaches, and is relieved of its obligations without a break-up fee. Concurrently, the associated debt financing commitment letters were also terminated - On July 26, 2023, MaxLinear terminated the Merger Agreement with Silicon Motion, citing unfulfilled closing conditions, a Material Adverse Effect on Silicon Motion, and material breaches by Silicon Motion[155](index=155&type=chunk) - Under the terms of the Merger Agreement, MaxLinear is not required to pay a break-up fee or other fee as a result of the termination[155](index=155&type=chunk) - In connection with the termination of the merger agreement, the second amended and restated commitment letter with Wells Fargo Bank and other lenders for financing was also terminated[156](index=156&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on MaxLinear's financial condition and operational results for the quarter ended June 30, 2023. It highlights a significant decline in net revenue due to macroeconomic conditions and excess channel inventory, details the termination of the Silicon Motion merger, and discusses key financial line items, critical accounting policies, and liquidity [Overview](index=33&type=section&id=Overview) This overview introduces MaxLinear as a fabless integrated circuit design company, highlighting its product focus, geographic revenue distribution, and reliance on competitive design wins - MaxLinear is a fabless integrated circuit design company providing communications systems-on-chip (SoC) solutions for broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications[159](index=159&type=chunk) - In the six months ended June 30, 2023, **74%** of net revenue was derived from products shipped to Asia, including **31%** from Hong Kong and **14%** from mainland China[162](index=162&type=chunk) - The company's business relies on winning competitive design bids, which involve lengthy sales cycles and significant design and development expenditures without guaranteed revenue[164](index=164&type=chunk) [Impact of the Global Economic Downturn](index=34&type=section&id=Impact%20of%20the%20Global%20Economic%20Downturn) This section discusses the anticipated continued volatility in MaxLinear's sales and revenues due to ongoing inflation, uncertain customer demand, and channel inventory oversupply - MaxLinear expects continued volatility in sales and revenues due to ongoing inflation, uncertainty in customer demand, and inventory oversupply in the channel, which could lead to inventory write-downs[165](index=165&type=chunk) - As customer lead times improve, visibility into customer demand is reducing, and the company is closely monitoring channel inventory[165](index=165&type=chunk) [Silicon Motion Merger](index=34&type=section&id=Silicon%20Motion%20Merger) This section details the termination of MaxLinear's Merger Agreement with Silicon Motion, including the reasons for termination and the implications for associated debt financing - MaxLinear terminated the Merger Agreement with Silicon Motion on July 26, 2023, citing unfulfilled closing conditions, a Material Adverse Effect on Silicon Motion, and material breaches by Silicon Motion[167](index=167&type=chunk) - The termination means MaxLinear is relieved of its obligations to close the merger and is not required to pay a break-up fee[167](index=167&type=chunk) - The previously committed debt financing of up to **$3.5 billion** from Wells Fargo Bank and other lenders for the merger was terminated in connection with the merger agreement's termination[172](index=172&type=chunk) [Acquisition of Company Y](index=35&type=section&id=Acquisition%20of%20Company%20Y) This section describes MaxLinear's acquisition of Company Y, an engineering design services provider, including the cash consideration and potential contingent payments - On January 17, 2023, MaxLinear acquired Company Y, an engineering design services provider based in Bangalore, India, for **$9.7 million** in cash[173](index=173&type=chunk)[174](index=174&type=chunk) - The acquisition also includes potential contingent consideration of up to **$2.6 million**, subject to Company Y satisfying certain personnel objectives by June 17, 2024[173](index=173&type=chunk) [Critical Accounting Policies and Estimates](index=35&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights the key accounting policies and estimates that require significant management judgment, such as business combinations, revenue recognition, and asset valuations - Management's discussion and analysis relies on estimates and judgments, particularly for business combinations, revenue recognition, inventory valuation, goodwill and other intangible assets, and income taxes[175](index=175&type=chunk) - There have been no material changes to the company's critical accounting policies and estimates during the six months ended June 30, 2023[177](index=177&type=chunk) [Recently Issued Accounting Pronouncements](index=36&type=section&id=Recently%20Issued%20Accounting%20Pronouncements) This section refers to the notes to the consolidated financial statements for details on new accounting pronouncements that have been issued but not yet adopted by the company - The company refers to Note 1 of its consolidated financial statements for details on recently issued accounting pronouncements not yet adopted[178](index=178&type=chunk) [Results of Operations](index=36&type=section&id=Results%20of%20Operations) This section provides a detailed analysis of MaxLinear's financial performance, examining key revenue and expense line items for the three and six months ended June 30, 2023 and 2022 [Net Revenue](index=37&type=section&id=Net%20Revenue) This section analyzes MaxLinear's net revenue performance across different market segments, highlighting significant declines in Broadband and overall revenue, alongside growth in Infrastructure | Market (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Broadband | $53,549 | $139,098 | (62)% | $135,230 | $273,654 | (51)% | | Connectivity | $37,939 | $56,400 | (33)% | $104,207 | $116,579 | (11)% | | Infrastructure | $49,262 | $35,889 | 37% | $95,564 | $69,070 | 38% | | Industrial and multi market | $43,188 | $48,622 | (11)% | $97,379 | $84,633 | 15% | | Total net revenue | $183,938 | $280,009 | (34)% | $432,380 | $543,936 | (21)% | - Net revenue decreased by **$96.1 million (34%)** for Q2 2023 and **$111.6 million (21%)** for H1 2023, primarily due to macroeconomic conditions and excess channel inventory[187](index=187&type=chunk)[189](index=189&type=chunk) - Broadband net revenue saw the largest decline, decreasing by **62%** in Q2 2023 and **51%** in H1 2023, mainly from gateway and cable revenues. In contrast, infrastructure revenues increased by **37%** and **38%** respectively, driven by wireless backhaul product shipments[187](index=187&type=chunk)[189](index=189&type=chunk) [Cost of Net Revenue and Gross Profit](index=38&type=section&id=Cost%20of%20Net%20Revenue%20and%20Gross%20Profit) This section analyzes the changes in MaxLinear's cost of net revenue and gross profit, highlighting the impact of lower sales, revenue mix, and intangible asset amortization on profitability | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Cost of net revenue | $81,065 | $115,658 | (30)% | $189,200 | $224,995 | (16)% | | Gross profit | $102,873 | $164,351 | (37)% | $243,180 | $318,941 | (24)% | | % of net revenue (Gross profit) | 56% | 59% | -3 ppts | 56% | 59% | -3 ppts | - Cost of net revenue decreased by **30%** for Q2 2023 and **16%** for H1 2023, primarily due to lower sales and expenses[191](index=191&type=chunk)[192](index=192&type=chunk) - Gross profit percentage declined by **3 percentage points** for both the three and six months ended June 30, 2023, compared to the same periods in 2022, mainly due to revenue mix and decreased absorption of intangible asset amortization[191](index=191&type=chunk)[192](index=192&type=chunk) [Research and Development](index=38&type=section&id=Research%20and%20Development) This section examines MaxLinear's research and development expenses, noting a decrease in absolute spending due to headcount reductions, but an increase as a percentage of net revenue | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Research and development expense | $70,657 | $80,395 | (12)% | $137,948 | $146,281 | (6)% | | % of net revenue | 38% | 29% | +9 ppts | 32% | 27% | +5 ppts | - Research and development expense decreased by **$9.7 million (12%)** for Q2 2023 and **$8.3 million (6%)** for H1 2023, primarily due to a reduction in headcount[194](index=194&type=chunk)[195](index=195&type=chunk) - Despite the absolute decrease, R&D expense as a percentage of net revenue increased significantly from **29% to 38%** in Q2 2023 and from **27% to 32%** in H1 2023, reflecting the larger decline in net revenue[186](index=186&type=chunk)[194](index=194&type=chunk) [Selling, General and Administrative](index=39&type=section&id=Selling%2C%20General%20and%20Administrative) This section analyzes the changes in MaxLinear's selling, general and administrative expenses, noting a decrease primarily due to reduced amortization of intangibles and stock-based compensation | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Selling, general and administrative expense | $33,717 | $44,487 | (24)% | $72,370 | $85,064 | (15)% | | % of net revenue | 18% | 16% | +2 ppts | 17% | 16% | +1 ppts | - Selling, general and administrative expense decreased by **$10.8 million (24%)** for Q2 2023 and **$12.7 million (15%)** for H1 2023, primarily due to decreased amortization of intangibles and stock-based compensation expenses[197](index=197&type=chunk)[198](index=198&type=chunk) [Impairment losses](index=39&type=section&id=Impairment%20losses) This section reports the impairment losses recognized by MaxLinear during the period, specifically related to the abandonment of certain intellectual property licenses | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Impairment losses | $— | $— | N/A | $2,438 | $— | N/A | - Impairment losses of **$2.4 million** were recognized in the six months ended June 30, 2023, related to the abandonment of certain intellectual property licenses[200](index=200&type=chunk) [Restructuring Charges](index=39&type=section&id=Restructuring%20Charges) This section details the significant increase in MaxLinear's restructuring charges, primarily driven by employee severance expenses resulting from a workforce reduction | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Restructuring charges | $4,436 | $462 | 860% | $9,084 | $462 | 1,866% | - Restructuring charges increased significantly by **$4.0 million (860%)** for Q2 2023 and **$8.6 million (1,866%)** for H1 2023, primarily due to **$4.3 million** and **$8.9 million**, respectively, in employee severance-related charges from a reduction in force[201](index=201&type=chunk)[202](index=202&type=chunk) [Interest and Other Income (Expense)](index=40&type=section&id=Interest%20and%20Other%20Income%20%28Expense%29) This section analyzes the changes in MaxLinear's net interest and other income (expense), highlighting the impact of decreased unrealized gains on equity securities, foreign currency fluctuations, and increased interest income | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Interest and other income (expense), net | $1,177 | $4,845 | (76)% | $(1,001) | $1,757 | (157)% | - Interest and other income (expense), net, decreased by **$3.7 million (76%)** for Q2 2023 and shifted to an expense of **$1.0 million** for H1 2023, compared to income of **$1.8 million** in H1 2022[204](index=204&type=chunk)[206](index=206&type=chunk) - This change was primarily driven by a **$5.3 million** decrease in other income (expense), net, for Q2 2023, mainly due to a **$3.0 million** decrease in unrealized holding gain on equity securities and a **$2.1 million** impact from foreign currency fluctuations, partially offset by a **$1.8 million** increase in interest income due to higher interest rates[205](index=205&type=chunk)[207](index=207&type=chunk) [Income Tax Provision (Benefit)](index=40&type=section&id=Income%20Tax%20Provision%20%28Benefit%29) This section details the changes in MaxLinear's income tax provision (benefit), explaining the factors contributing to the difference between the effective tax rate and the U.S. federal statutory rate | Metric (in thousands) | 3 Months Ended June 30, 2023 | 3 Months Ended June 30, 2022 | % Change (YoY) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | % Change (YoY) | | :-------------------- | :--------------------------- | :--------------------------- | :------------- | :--------------------------- | :--------------------------- | :------------- | | Income tax provision (benefit) | $(409) | $11,886 | (103)% | $15,157 | $23,339 | (35)% | - The company recorded an income tax benefit of **$0.4 million** for Q2 2023, a significant shift from a **$11.9 million** provision in Q2 2022. For H1 2023, the income tax provision decreased by **35%** to **$15.2 million**[208](index=208&type=chunk)[209](index=209&type=chunk) - The effective tax rate differs from the **21.0%** U.S. federal statutory rate due to the mix of pre-tax income among jurisdictions, permanent tax items (including global intangible low-taxed income), stock-based compensation, and the capitalization of research and experimentation costs[210](index=210&type=chunk)[211](index=211&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) This section assesses MaxLinear's ability to meet its financial obligations, detailing changes in cash, working capital, and cash flows from operating, investing, and financing activities Liquidity Metrics | Metric (in thousands) | June 30, 2023 | December 31, 2022 | | :-------------------- | :------------ | :---------------- | | Cash and cash equivalents | $224,579 | $187,353 | | Working capital | $312,762 | $222,038 | | Total cash, cash equivalents, and restricted cash | $225,643 | $188,357 | - MaxLinear's cash and cash equivalents increased to **$224.6 million** at June 30, 2023, from **$187.4 million** at December 31, 2022, and working capital improved to **$312.8 million** from **$222.0 million**[215](index=215&type=chunk)[226](index=226&type=chunk) Cash Flow Activities | Cash Flow Activity (in thousands) | 6 Months Ended June 30, 2023 | 6 Months Ended June 30, 2022 | | :-------------------------------- | :--------------------------- | :--------------------------- | | Net cash provided by operating activities | $72,737 | $257,603 | | Net cash used in investing activities | $(28,161) | $(59,035) | | Net cash used in financing activities | $(6,062) | $(116,525) | [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=44&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) MaxLinear's market risk exposure primarily stems from foreign currency exchange rates and interest rates. The company has limited foreign currency exposure as most agreements are USD-denominated and does not hedge. It is subject to variable interest rates on its debt, but believes operating cash is sufficient to cover obligations, with a 10% LIBOR rate increase having an immaterial impact - MaxLinear's market risk exposure is primarily due to fluctuations in foreign currency exchange rates and interest rates[235](index=235&type=chunk) - The company has limited exposure to foreign currency risk as international customer and vendor agreements are mostly USD-denominated, and it does not enter into foreign currency hedging transactions[237](index=237&type=chunk) - MaxLinear is subject to variable interest rates on its credit agreements; however, a hypothetical **10%** increase in LIBOR interest rates during H1 2023 would have resulted in an immaterial increase to interest expense[238](index=238&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=45&type=section&id=Item%204.%20Controls%20and%20Procedures) MaxLinear's management, including its principal executive and financial officers, concluded that the company's disclosure controls and procedures were effective as of June 30, 2023, providing reasonable assurance for timely and accurate financial reporting. No material changes in internal control over financial reporting were identified during the quarter - MaxLinear maintains disclosure controls and procedures designed to ensure timely and accurate reporting of information required by the SEC[239](index=239&type=chunk) - As of June 30, 2023, the principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective to provide reasonable assurance[240](index=240&type=chunk) - No changes in internal control over financial reporting were identified during the fiscal quarter ended June 30, 2023, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[241](index=241&type=chunk) PART II — OTHER INFORMATION This section covers MaxLinear's legal proceedings, comprehensive risk factors, equity security sales, defaults, mine safety disclosures, other information, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=46&type=section&id=Item%201.%20Legal%20Proceedings) MaxLinear settled multiple patent infringement lawsuits with Bell Semiconductor in March 2023 through a Settlement and Patent License Agreement. The company is subject to other litigation in the ordinary course of business but has not accrued material loss contingencies for such matters as of June 30, 2023 - MaxLinear was involved in multiple patent infringement lawsuits filed by Bell Semiconductor LLC in the Southern District of California and before the U.S. International Trade Commission[243](index=243&type=chunk)[244](index=244&type=chunk)[245](index=245&type=chunk) - On March 10, 2023, MaxLinear and Bell Semiconductor entered into a Settlement and Patent License Agreement, resolving all claims and granting MaxLinear a license to certain listed patents[246](index=246&type=chunk) - As of June 30, 2023, no material loss contingencies have been accrued for legal proceedings in the company's financial statements[247](index=247&type=chunk) [ITEM 1A. RISK FACTORS](index=47&type=section&id=Item%201A.%20Risk%20Factors) This section outlines material risks and uncertainties that could adversely affect MaxLinear's business, financial condition, and results of operations. Key risks include those related to the terminated Silicon Motion merger, intense competition, global economic conditions, supply chain dependencies, intellectual property, and the volatility of the company's stock price [Risks Relating to the Previously Pending Merger with Silicon Motion](index=49&type=section&id=Risks%20Relating%20to%20the%20Previously%20Pending%20Merger%20with%20Silicon%20Motion) This section details the risks associated with the terminated merger agreement with Silicon Motion, including potential challenges to termination, financing difficulties, and negative market reactions - Despite termination, Silicon Motion could challenge the validity of MaxLinear's termination, potentially requiring MaxLinear to consummate the merger or pay substantial costs[257](index=257&type=chunk)[258](index=258&type=chunk) - If the merger were required to be consummated, MaxLinear would need to secure new debt and/or equity financing, which may not be available given the termination of prior commitments, leading to increased indebtedness and potential dilution[270](index=270&type=chunk)[271](index=271&type=chunk) - The termination of the merger could lead to negative reactions from financial markets, suppliers, customers, and employees, and any future litigation related to the merger could incur substantial costs and divert management's attention[260](index=260&type=chunk)[274](index=274&type=chunk) [Risks Related to Our Business](index=55&type=section&id=Risks%20Related%20to%20Our%20Business) This section addresses various business-specific risks, including intense competition, global economic downturns, and the impact of declining revenue and excess channel inventory on financial results - MaxLinear faces intense and increasing competition in the semiconductor market, which could adversely affect revenue growth, market share, and profitability due to industry consolidation and aggressive pricing[289](index=289&type=chunk)[290](index=290&type=chunk) - Global economic conditions, including high inflation and recession, have caused and are expected to continue causing volatility in sales and revenues, impacting customer demand and potentially leading to inventory write-downs[293](index=293&type=chunk)[294](index=294&type=chunk) - The company's net revenue declined by **34%** in Q2 2023 and **21%** in H1 2023, and continued uncertainty in customer demand and excess channel inventory could lead to further volatility and impact financial results[297](index=297&type=chunk)[298](index=298&type=chunk) [Risks Relating to Intellectual Property](index=72&type=section&id=Risks%20Relating%20to%20Intellectual%20Property) This section outlines risks concerning MaxLinear's intellectual property, including potential infringement claims, challenges in protecting proprietary technology, and risks associated with open source software usage - MaxLinear has faced and may continue to face intellectual property infringement claims, which are costly to defend, divert management attention, and could result in substantial damages or licensing fees[392](index=392&type=chunk)[393](index=393&type=chunk)[394](index=394&type=chunk) - The company's success depends on its ability to protect its intellectual property (patents, copyrights, trademarks, trade secrets), but there is no guarantee that these protections will be effective or enforceable in all jurisdictions[396](index=396&type=chunk)[397](index=397&type=chunk) - The use of open source software in products may expose MaxLinear to risks, including requirements to publicly disclose proprietary source code, which could harm its intellectual property position[407](index=407&type=chunk)[409](index=409&type=chunk) [Risks Relating to Reliance on Third Parties](index=75&type=section&id=Risks%20Relating%20to%20Reliance%20on%20Third%20Parties) This section details the risks associated with MaxLinear's dependence on a limited number of third-party manufacturers and distributors, including supply chain disruptions, quality issues, and inventory management challenges - MaxLinear relies on a limited number of third-party foundries (e.g., ASE, TSMC, UMC) and assembly/test contractors, primarily in the Pacific Rim, for manufacturing, posing risks of capacity shortages, quality issues, and supply disruptions from natural disasters or geopolitical events[410](index=410&type=chunk)[411](index=411&type=chunk)[413](index=413&type=chunk) - The company's dependence on distributors for a large portion of sales (**47%** in H1 2023) exposes it to risks if distributors fail to sell inventory or reduce purchases, potentially impacting revenue and requiring adjustments to reserve estimates[414](index=414&type=chunk)[415](index=415&type=chunk) - Lack of long-term supply contracts with most third-party vendors means MaxLinear makes purchases on a purchase order basis, risking inadequate or costly capacity if demand forecasts are inaccurate[417](index=417&type=chunk) [Risks Relating to Our Common Stock](index=77&type=section&id=Risks%20Relating%20to%20Our%20Common%20Stock) This section outlines risks pertinent to MaxLinear's common stock, including management's discretion over capital, anti-takeover provisions, and the inherent volatility of the stock's trading price - MaxLinear's management has considerable discretion in using cash and cash equivalents, which may not always align with stockholder interests or yield a return[421](index=421&type=chunk)[422](index=422&type=chunk) - Anti-takeover provisions in the company's charter documents and Delaware law could make an acquisition more difficult and limit stockholders' ability to replace management[423](index=423&type=chunk)[426](index=426&type=chunk) - The trading price of MaxLinear's common stock is highly volatile, influenced by factors such as financial results, market conditions, geopolitical changes, and analyst reports, potentially leading to significant fluctuations[427](index=427&type=chunk)[429](index=429&type=chunk) [General Risk Factors](index=80&type=section&id=General%20Risk%20Factors) This section covers broad risks that could impact MaxLinear's operations, including catastrophic events, potential impairment of goodwill and intangible assets, and changes in tax laws or obligations - Catastrophic losses to facilities or distribution systems due to natural disasters (e.g., earthquakes, typhoons in the Pacific Rim) or man-made events could seriously harm operations, delay production, and result in significant expenses[439](index=439&type=chunk) - Goodwill and other acquired intangible assets, totaling **$318.5 million** and **$91.2 million** respectively at June 30, 2023, could become impaired, leading to material charges and adversely affecting future operating results and stock price[440](index=440&type=chunk) - Unanticipated changes in tax rates or obligations, including new laws like the Tax Cuts and Jobs Act's R&D capitalization requirement, could affect future results and lead to volatility in tax expenses and liabilities[441](index=441&type=chunk)[442](index=442&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS](index=82&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) MaxLinear reported no unregistered sales of equity securities and no recent repurchases of equity securities during the period covered by this report - There were no unregistered sales of equity securities during the period[450](index=450&type=chunk) - There were no recent repurchases of equity securities during the period[451](index=451&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=82&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) MaxLinear reported no defaults upon senior securities during the period - There were no defaults upon senior securities during the period[452](index=452&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=82&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to MaxLinear - Mine Safety Disclosures are not applicable to MaxLinear[453](index=453&type=chunk) [ITEM 5. OTHER INFORMATION](index=82&type=section&id=Item%205.%20Other%20Information) MaxLinear reported that no director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement during the last fiscal quarter[454](index=454&type=chunk) [ITEM 6. EXHIBITS](index=83&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Form 10-Q, including amendments to the certificate of incorporation, credit agreement amendments, officer certifications (302 and 906), and Inline XBRL documents - The exhibits include a Certificate of Amendment to the Fifth Amended and Restated Certificate of Incorporation and Amendment No. 1 to the Credit Agreement[455](index=455&type=chunk) - Officer certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002 are included[455](index=455&type=chunk) - Inline XBRL Instance Document and Taxonomy Extension Documents are provided for interactive data filing[455](index=455&type=chunk) [Signatures](index=84&type=section&id=Signatures) The report is duly signed on behalf of MaxLinear, Inc. by Steven G. Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer, on July 26, 2023 - The report was signed by Steven G. Litchfield, Chief Financial Officer and Chief Corporate Strategy Officer, on behalf of MaxLinear, Inc. on July 26, 2023[459](index=459&type=chunk)

MaxLinear, Inc. (NASDAQ:MXL) Q1 2023 Results Conference Call April 26, 2023 4:30 PM ET Company Participants Leslie Green - Investor Relations Kishore Seendripu - CEO Steve Litchfield - CFO and Chief Corporate Strategy Officer Conference Call Participants Quinn Bolton - Needham & Company Ananda Baruah - Loop Capital Ross Seymore - Deutsche Bank Tore Svanberg - Stifel David Williams - Benchmark Company Christopher Rolland - SIG Karl Ackerman - BNP Paribas Ashley McCurry - Wells Fargo Suji Desilva - ROTH Capit ...

Part I [Part I - Financial Information](index=3&type=section&id=Part%20I%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and management's discussion and analysis for the quarter ended March 31, 2023 [Financial Statements (unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(unaudited)) This section presents the unaudited consolidated financial statements for MaxLinear, Inc. as of March 31, 2023, and for the three months ended March 31, 2023 and 2022, including balance sheets, income statements, and cash flow statements [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 (unaudited) | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $207,850 | $187,353 | | Accounts receivable, net | $188,733 | $170,971 | | Inventory | $149,585 | $160,544 | | Goodwill | $318,910 | $306,739 | | **Total assets** | **$1,198,478** | **$1,180,025** | | **Liabilities & Equity** | | | | Total current liabilities | $300,162 | $341,086 | | Long-term debt | $121,910 | $121,757 | | **Total liabilities** | **$464,366** | **$503,640** | | **Total stockholders' equity** | **$734,112** | **$676,385** | [Consolidated Statements of Income](index=6&type=section&id=Consolidated%20Statements%20of%20Income) Consolidated Statements of Income (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net revenue | $248,442 | $263,927 | | Gross profit | $140,307 | $154,590 | | Income from operations | $27,277 | $48,127 | | **Net income** | **$9,533** | **$33,586** | | **Diluted EPS** | **$0.12** | **$0.42** | - The company experienced a significant decrease in net income, falling to **$9.5 million** in Q1 2023 from **$33.6 million** in Q1 2022. This was driven by a **6% decline in revenue** and increased operating expenses, including **$4.6 million in restructuring charges** and **$2.4 million in impairment losses** not present in the prior year[14](index=14&type=chunk) [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statements of Cash Flows Highlights (in thousands) | Cash Flow Activity | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $42,159 | $134,166 | | Net cash used in investing activities | ($15,511) | ($42,762) | | Net cash used in financing activities | ($6,170) | ($70,659) | | **Increase in cash, cash equivalents and restricted cash** | **$20,479** | **$20,515** | - Cash from operating activities decreased significantly to **$42.2 million** in Q1 2023 from **$134.2 million** in Q1 2022, primarily due to lower net income and changes in operating assets and liabilities. Cash used in financing activities decreased substantially, mainly because there were no stock repurchases in Q1 2023, compared to **$26.3 million** in repurchases in Q1 2022[25](index=25&type=chunk)[207](index=207&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - On May 5, 2022, MaxLinear entered into an agreement to acquire Silicon Motion Technology Corporation for approximately **$4.3 billion**. The transaction is pending antitrust approval in China[37](index=37&type=chunk)[38](index=38&type=chunk)[39](index=39&type=chunk) - On January 17, 2023, the Company acquired 'Company Y', a provider of engineering design services in India, for **$9.7 million** in cash plus up to **$2.6 million** in contingent consideration. This resulted in an increase of **$12.2 million in goodwill**[42](index=42&type=chunk)[43](index=43&type=chunk)[54](index=54&type=chunk) - In Q1 2023, the company initiated a restructuring plan to reduce its workforce, resulting in **$4.6 million in restructuring charges**, primarily for employee separation expenses[50](index=50&type=chunk) Net Revenue by Market (in thousands) | Market | Q1 2023 | Q1 2022 | | :--- | :--- | :--- | | Broadband | $81,681 | $134,556 | | Connectivity | $66,268 | $60,179 | | Infrastructure | $46,302 | $33,181 | | Industrial and multi-market | $54,191 | $36,011 | | **Total** | **$248,442** | **$263,927** | - On March 10, 2023, the company settled all outstanding litigation with Bell Semiconductor LLC by entering into a Settlement and Patent License Agreement. The settlement amount was not material[141](index=141&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance for the quarter ended March 31, 2023, covering revenue trends, profitability, operating expenses, and the impact of macroeconomic conditions, along with liquidity and capital resources [Results of Operations](index=35&type=section&id=MD%26A_Results_of_Operations) - Net revenue decreased by **$15.5 million (6%) YoY**, primarily due to a **$52.9 million (39%) decline** in the Broadband market, which was impacted by adverse macroeconomic conditions. This was partially offset by growth in Connectivity (**+10%**), Infrastructure (**+40%**), and Industrial and multi-market (**+50%**)[174](index=174&type=chunk) - Gross profit margin decreased from **59%** in Q1 2022 to **56%** in Q1 2023. The decline was attributed to changes in revenue mix and lower absorption of intangible asset amortization[177](index=177&type=chunk) - Operating expenses increased as a percentage of revenue from **40% to 45% YoY**. This was driven by new restructuring charges of **$4.6 million** and impairment losses of **$2.4 million** in Q1 2023[173](index=173&type=chunk)[183](index=183&type=chunk) - The income tax provision increased to **$15.6 million** from **$11.5 million YoY**, despite lower pre-tax income. The effective tax rate was influenced by the geographic mix of income, taxes on global intangible low-taxed income (GILTI), and recent legislative changes requiring capitalization of R&D costs[187](index=187&type=chunk)[188](index=188&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=MD%26A_Liquidity_and_Capital_Resources) - As of March 31, 2023, the company had **$207.9 million** in cash and cash equivalents and **$293.4 million** in working capital[192](index=192&type=chunk) - The company has **$125.0 million** of principal outstanding under its term loan as of March 31, 2023. A revolving credit facility of up to **$100.0 million** remained undrawn[194](index=194&type=chunk)[195](index=195&type=chunk) - The pending acquisition of Silicon Motion will be funded with cash on hand and up to **$3.5 billion** in committed debt financing. A portion of these proceeds will be used to repay the company's existing debt in full[193](index=193&type=chunk) Material Cash Requirements as of March 31, 2023 (in thousands) | Obligation Type | Total | Less than 1 year | 2-3 years | 4-5 years | More than 5 years | | :--- | :--- | :--- | :--- | :--- | :--- | | Long-term debt obligations | $125,000 | $— | $— | $— | $125,000 | | Operating lease obligations | $33,379 | $8,444 | $15,619 | $8,745 | $571 | | Inventory purchase obligations | $92,414 | $92,387 | $27 | $— | $— | | Other obligations | $33,346 | $20,820 | $12,526 | $— | $— | | **Total** | **$284,139** | **$121,651** | **$28,172** | **$8,745** | **$125,571** | [Quantitative and Qualitative Disclosures about Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) This section outlines the company's exposure to market risks, primarily from fluctuations in foreign currency exchange rates and interest rates - The company has limited exposure to foreign currency risk as international customer and vendor agreements are mostly denominated in U.S. dollars[212](index=212&type=chunk) - The company is subject to interest rate risk on its variable-rate credit agreements. A hypothetical **10% increase** in LIBOR rates during Q1 2023 would have had an immaterial impact on interest expense[213](index=213&type=chunk) [Controls and Procedures](index=44&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated the company's disclosure controls and procedures, concluding they were effective as of March 31, 2023, with no material changes to internal control over financial reporting - The Principal Executive Officer and Principal Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[215](index=215&type=chunk) - There were no changes in the company's internal control over financial reporting during the quarter ended March 31, 2023, that materially affected, or are reasonably likely to materially affect, internal controls[216](index=216&type=chunk) Part II [Part II - Other Information](index=45&type=section&id=Part%20II%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, equity security sales, and other significant corporate information [Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section details the company's recent legal activities, including a patent infringement settlement with Bell Semiconductor LLC - On March 10, 2023, MaxLinear and Bell Semiconductor entered into a Settlement and Patent License Agreement, resolving all patent infringement claims filed by Bell Semiconductor in 2022[221](index=221&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section outlines material risks and uncertainties that could adversely affect the company's business, financial condition, and results of operations - **Merger Risks:** Key risks associated with the Silicon Motion merger include failure to successfully integrate, disruption to business relationships, difficulty retaining key personnel, potential for a **$160 million termination fee**, and a material increase in indebtedness up to **$3.5 billion**[228](index=228&type=chunk)[237](index=237&type=chunk)[246](index=246&type=chunk) - **Business Risks:** The company faces intense competition, cyclicality of the semiconductor industry, and risks from global economic conditions like inflation. A substantial portion of revenue comes from a limited number of customers and is concentrated in Asia (**77% of net revenue** in Q1 2023)[264](index=264&type=chunk)[270](index=270&type=chunk)[296](index=296&type=chunk) - **Third-Party Reliance Risks:** MaxLinear operates a fabless model, relying on a limited number of third-party foundries (like SMIC, TSMC, UMC) primarily in Asia. This exposes the company to capacity shortages, quality control issues, and geopolitical risks[383](index=383&type=chunk)[384](index=384&type=chunk) - **Regulatory and IP Risks:** The business is subject to complex export control laws, particularly regarding China. The company faces risks of intellectual property infringement claims and must protect its own IP. A voluntary self-disclosure of a potential EAR violation was submitted to BIS on March 3, 2023[278](index=278&type=chunk)[286](index=286&type=chunk)[365](index=365&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=81&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports that there were no unregistered sales of equity securities or share repurchases during the period due to the pending merger - There were no unregistered sales of equity securities in the quarter[424](index=424&type=chunk) - The company did not repurchase any of its equity securities during the quarter[425](index=425&type=chunk) [Other Information](index=81&type=section&id=Item%205.%20Other%20Information) This section discloses a workforce reduction completed in April 2023 to align operational needs with macroeconomic conditions, incurring restructuring costs - In April 2023, the company completed a workforce reduction to reduce operating expenses in response to macroeconomic conditions[428](index=428&type=chunk) - As a result of the workforce reduction, the company incurred **~$4.6 million** in restructuring costs in Q1 2023 and estimates an additional **$4 million to $5 million** in costs for the remainder of 2023[429](index=429&type=chunk) [Exhibits](index=83&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications by the Principal Executive Officer and Principal Financial Officer - The exhibits filed with this report include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act, as well as XBRL data files[433](index=433&type=chunk)

Inventory $160.5 $166.0 $131.7 Other assets $537.9 $552.6 $585.4 Q1'23 Guidance Appendix | --- | --- | --- | --- | |--------------------------------------------------------|-------------------|---------------------------------------|-------------------| | | December 31, 2022 | Three Months Ended September 30, 2022 | December 31, 2021 | | GAAP impairment losses | 2,811 | — | — | | Impairment losses | (2,811) | — | — | | Non-GAAP impairment losses | — | — | — | | GAAP restructuring expenses | 1,172 | 631 | — ...

Financial Data and Key Metrics Changes - The company's Q4 2022 revenue was $290.6 million, up 2% sequentially and 17% year-on-year, marking a record revenue milestone of over $1 billion for the fiscal year 2022 [113][132] - Non-GAAP gross margin for Q4 was 59.6%, while GAAP gross margin was approximately 56.2%, with a decline attributed to a mix shift in end market revenues [118][113] - Cash flow from operating activities in Q4 was $69.4 million, with total operating cash flow for the year exceeding $389 million, more than double compared to 2021 [17][113] Business Line Data and Key Metrics Changes - Broadband revenue in Q4 was $99 million, down 17% sequentially and 23% year-on-year, reflecting a normalization of demand and excess channel inventory [132][129] - Connectivity revenue reached $105 million in Q4, up 27% sequentially and 99% year-on-year, driven by strong demand for Wi-Fi 6 and 6E solutions [40][128] - Infrastructure revenue was $32 million, down 11% versus the prior quarter but flat year-on-year, impacted by substrate supply constraints [40][132] Market Data and Key Metrics Changes - The fiber access revenue increased more than four times from 2021, with strong design win momentum entering 2023 [115][129] - The company is experiencing strong demand for wireless infrastructure products, with expectations for growth despite previous supply chain challenges [130][39] - The market for PON (Passive Optical Network) is identified as a particular area of strength globally, with government incentives for fiber upgrades beginning to roll out [115][39] Company Strategy and Development Direction - The company is focused on maintaining a conservative stance in planning its annual operating plan and investments, emphasizing disciplined management [7] - There is optimism regarding the growth potential in Wi-Fi infrastructure and fiber broadband access, with expectations for significant growth in the coming years [5][12] - The company is excited about the pending acquisition of Silicon Motion, which is expected to enhance growth opportunities and product offerings [41][117] Management's Comments on Operating Environment and Future Outlook - Management acknowledges a challenging operating environment with low visibility but remains optimistic about a recovery in the second half of 2023 [4][5] - The company expects to navigate through inventory corrections, with hopes for improvements in Q3 and Q4 [6][5] - Management emphasizes the importance of operational efficiencies and disciplined spending in the current market conditions [90][72] Other Important Information - The company has made a $50 million prepayment against its long-term debt, which currently stands at approximately $120 million [133] - The company is actively working to optimize its debt structure to lower expected costs of capital related to the acquisition [41][72] - The company is engaged in ongoing qualifications for its optical products, with expectations for meaningful revenue growth in data centers over the next two years [15][39] Q&A Session Summary Question: What is the outlook for the broadband business? - Management indicated that the broadband business is expected to see a decline of 30% to 40% from its peak, with hopes for stabilization in 2024 [94][132] Question: Can you provide an update on backlog trends? - Management noted that while backlog remains strong, there have been instances of customers requesting shipment push-outs or cancellations [19][20] Question: What is the status of the SAMR approval process for the acquisition? - Management remains optimistic about closing the acquisition by mid-2023, although they did not provide specific details on the dialogue with SAMR [41][45] Question: How is the company managing operating expenses in the current environment? - Management plans to reduce operating expenses throughout the year, acknowledging the uncertain revenue environment [90][89] Question: What are the expectations for Wi-Fi 7 and design win share? - Management expressed confidence in capturing a significant share of the Wi-Fi 7 market, with design wins expected to ramp up later in the year [141][13]

Part I [Business](index=5&type=section&id=Item%201.%20Business) MaxLinear is a fabless semiconductor company providing SoC solutions for broadband, infrastructure, data center, and industrial markets, leveraging CMOS technology and relying on third-party foundries - MaxLinear provides communications systems-on-chip (SoC) solutions for various markets, operating on a **fabless manufacturing model**[22](index=22&type=chunk) - Products are manufactured using **low-cost CMOS process technology**, enabling high integration and reduced power consumption[23](index=23&type=chunk)[24](index=24&type=chunk) Customer and Geographic Revenue Concentration (FY 2022) | Metric | Percentage of Net Revenue | | :--- | :--- | | Top 10 Customers | 65% | | Top 2 Customers | 31% | | Shipments to Asia | 82% | | Shipments to Hong Kong | 43% | | Shipments to China | 16% | - As of December 31, 2022, MaxLinear had **1,844 full-time employees**, with **1,368 in Research & Development**[88](index=88&type=chunk) [Risk Factors](index=17&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from its pending merger, increased indebtedness, intense competition, adverse economic conditions, customer concentration, reliance on third-party manufacturers, export controls, and litigation - The pending merger with Silicon Motion poses significant risks, including integration failure, customer relationship disruption, and key personnel retention challenges[97](index=97&type=chunk)[106](index=106&type=chunk)[107](index=107&type=chunk) - The merger will incur material indebtedness of up to **$3.5 billion**, impacting operating results and cash flows, and requires **SAMR approval in China**[112](index=112&type=chunk)[115](index=115&type=chunk) - The company faces intense competition from large semiconductor firms like Broadcom and Qualcomm, with increasing competitive pressure from industry consolidation[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk) - Global economic conditions, including high inflation and potential recession, could adversely affect revenues and operating results by causing customers to delay or reduce spending[138](index=138&type=chunk) - The business is subject to U.S. export control laws, specifically new BIS rules from October 2022 impacting business with certain entities in China[146](index=146&type=chunk)[147](index=147&type=chunk)[149](index=149&type=chunk) - MaxLinear relies on a limited number of third-party foundries (SMIC, TSMC, UMC) and contractors, primarily in Asia, posing risks of capacity shortages, quality control, and geopolitical instability[249](index=249&type=chunk)[250](index=250&type=chunk)[253](index=253&type=chunk) [Unresolved Staff Comments](index=50&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments - None[286](index=286&type=chunk) [Properties](index=50&type=section&id=Item%202.%20Properties) The company's corporate headquarters are in Carlsbad, California, with additional leased facilities globally, deemed adequate for current operations - The corporate headquarters is in Carlsbad, California, occupying approximately **68,000 square feet** under a lease expiring in December 2023[287](index=287&type=chunk) - MaxLinear maintains additional leased facilities across North America, Asia, and Europe[287](index=287&type=chunk) [Legal Proceedings](index=51&type=section&id=Item%203.%20Legal%20Proceedings) MaxLinear is involved in multiple patent infringement lawsuits by Bell Semiconductor LLC, with trials tentatively scheduled for February 2024, and an ITC determination by March 2024 - Bell Semiconductor LLC filed multiple patent infringement lawsuits against MaxLinear in 2022, with trials tentatively scheduled for **February 2024**[289](index=289&type=chunk)[290](index=290&type=chunk)[291](index=291&type=chunk) - Bell Semiconductor also filed an ITC suit, with an initial determination expected in **November 2023** and a final determination by **March 2024**[292](index=292&type=chunk) [Mine Safety Disclosures](index=52&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[294](index=294&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=53&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) MaxLinear's common stock trades on Nasdaq (MXL), has never paid dividends, and its stock repurchase program is suspended due to the pending Silicon Motion merger - The company's common stock is traded on the Nasdaq Stock Market LLC under the symbol **MXL**[297](index=297&type=chunk) - MaxLinear has never declared or paid cash dividends and intends to retain future earnings for business operations[298](index=298&type=chunk) Stock Repurchase Activity (FY 2022) | Metric | Value | | :--- | :--- | | Total Shares Repurchased | 564,449 | | Average Price Paid Per Share | ~$55.80 (calculated) | | Total Cost | ~$31.5 million (calculated) | | Remaining Authorization | ~$45.0 million | | Program Status | Suspended since July 2022 | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=54&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) In FY2022, MaxLinear's net revenue grew 26% to $1.12 billion, with net income increasing to $125.0 million, while the company is pursuing a $4.3 billion acquisition of Silicon Motion - The company agreed to acquire Silicon Motion for approximately **$4.3 billion**, pending regulatory approval in China and funded by cash and up to **$3.5 billion in debt financing**[314](index=314&type=chunk)[315](index=315&type=chunk) Results of Operations (FY 2022 vs. FY 2021) | Metric | 2022 | 2021 | % Change | | :--- | :--- | :--- | :--- | | Net Revenue | $1,120.3 M | $892.4 M | 26% | | Gross Profit | $649.8 M | $495.8 M | 31% | | Gross Margin | 58% | 56% | +200 bps | | Income from Operations | $180.2 M | $65.2 M | 176% | | Net Income | $125.0 M | $42.0 M | 198% | Net Revenue by Market (FY 2022 vs. FY 2021) | Market | 2022 Revenue | 2021 Revenue | % Change | | :--- | :--- | :--- | :--- | | Broadband | $493.2 M | $492.5 M | 0% | | Connectivity | $303.9 M | $149.3 M | 104% | | Infrastructure | $136.3 M | $119.4 M | 14% | | Industrial and multi-market | $186.8 M | $131.2 M | 42% | | **Total** | **$1,120.3 M** | **$892.4 M** | **26%** | - As of December 31, 2022, the company held **$187.4 million in cash and cash equivalents** and had **$125.0 million in outstanding long-term debt principal**[358](index=358&type=chunk)[360](index=360&type=chunk) - Net cash provided by operating activities significantly increased to **$388.7 million** in 2022 from **$168.2 million** in the prior year[367](index=367&type=chunk)[368](index=368&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=67&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risks are foreign currency and interest rates, with foreign currency risk limited and interest rate risk mitigated by debt prepayments - Foreign currency risk is limited as most international agreements are denominated in **U.S. dollars**[378](index=378&type=chunk) - The company is subject to interest rate risk from variable-rate credit agreements, mitigated by principal prepayments on indebtedness[380](index=380&type=chunk) [Financial Statements and Supplementary Data](index=68&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents the company's audited consolidated financial statements for FY2022, including balance sheets, income statements, and cash flows, with an unqualified audit opinion [Consolidated Balance Sheets](index=83&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Data (as of Dec 31) | Account | 2022 | 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $187.4 M | $130.6 M | | Accounts receivable, net | $171.0 M | $119.7 M | | Inventory | $160.5 M | $131.7 M | | Goodwill | $306.7 M | $306.7 M | | Intangible assets, net | $109.3 M | $152.5 M | | **Total Assets** | **$1,180.0 M** | **$1,050.4 M** | | **Liabilities & Equity** | | | | Accounts payable | $68.6 M | $53.0 M | | Long-term debt | $121.8 M | $306.2 M | | **Total Liabilities** | **$503.6 M** | **$561.2 M** | | **Total Stockholders' Equity** | **$676.4 M** | **$489.2 M** | | **Total Liabilities & Equity** | **$1,180.0 M** | **$1,050.4 M** | [Consolidated Statements of Operations](index=84&type=section&id=Consolidated%20Statements%20of%20Operations) Consolidated Statement of Operations (Year Ended Dec 31) | Metric | 2022 | 2021 | 2020 | | :--- | :--- | :--- | :--- | | Net Revenue | $1,120.3 M | $892.4 M | $478.6 M | | Gross Profit | $649.8 M | $495.8 M | $212.8 M | | R&D Expense | $296.4 M | $278.4 M | $180.0 M | | SG&A Expense | $168.0 M | $149.9 M | $130.0 M | | Income (Loss) from Operations | $180.2 M | $65.2 M | $(101.1) M | | Net Income (Loss) | $125.0 M | $42.0 M | $(98.6) M | | Diluted EPS | $1.55 | $0.53 | $(1.35) | [Consolidated Statements of Cash Flows](index=87&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Consolidated Statement of Cash Flows (Year Ended Dec 31) | Cash Flow Category | 2022 | 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $388.7 M | $168.2 M | | Net cash used in investing activities | $(91.8) M | $(91.8) M | | Net cash used in financing activities | $(240.4) M | $(91.9) M | | **Increase (decrease) in cash** | **$56.6 M** | **$(18.3) M** | [Controls and Procedures](index=68&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2022, with an unqualified auditor opinion - The principal executive and financial officers concluded that disclosure controls and procedures were **effective** as of the report period end[384](index=384&type=chunk) - Management concluded that internal control over financial reporting was **effective** as of December 31, 2022[385](index=385&type=chunk) - Grant Thornton LLP issued an **unqualified opinion** on the effectiveness of internal control over financial reporting[391](index=391&type=chunk) Part III [Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters](index=72&type=section&id=Items%2010-14) Information for Items 10-14, covering governance, compensation, and related matters, is incorporated by reference from the company's 2023 Proxy Statement - Information for Items 10-14, including Directors, Executive Officers, Corporate Governance, Executive Compensation, Security Ownership, Related Transactions, and Principal Accountant Fees, is incorporated by reference from the company's **2023 Proxy Statement**[402](index=402&type=chunk)[407](index=407&type=chunk)[408](index=408&type=chunk)[409](index=409&type=chunk)[410](index=410&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=73&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists all documents filed as part of the Form 10-K, including financial statements, schedules, and various exhibits - This section contains the list of financial statements, financial statement schedules, and exhibits filed with the **Form 10-K**[413](index=413&type=chunk) Schedule II – Valuation and Qualifying Accounts (in thousands) | Classification | Balance at Dec 31, 2021 | Additions charged to expenses | (Deductions) | Balance at Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Warranty reserves | $774 | $358 | $(659) | $473 | | Valuation allowance for deferred tax assets | $68,151 | $4,169 | $(6,047) | $66,273 |

MaxLinear, Inc. (NASDAQ:MXL) Q3 2022 Earnings Conference Call October 25, 2022 4:30 PM ET Company Participants Leslie Green - Investor Relations Kishore Seendripu - Chief Executive Officer Steve Litchfield - Chief Financial Officer & Chief Corporate Strategy Officer Conference Call Participants Quinn Bolton - Needham & Co. Tore Svanberg - Stifel Gary Mobley - Wells Fargo Securities Alessandra Vecchi - William Blair David Williams - Benchmark Christopher Rolland - Susquehanna Financial Group Ananda Baruah - ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended September 30, 2022 OR ☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period From to Commission file number: 001-34666 MaxLinear Inc. (Exact name of Registrant as specified in its charter) Delaware 14-1896129 (State or other jurisdiction of incorpo ...