MaxLinear(US:MXL)2023-02-01 21:15Part I Business 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 model22 - Products are manufactured using low-cost CMOS process technology, enabling high integration and reduced power consumption2324 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 & Development88 Risk Factors 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 challenges97106107 - The merger will incur material indebtedness of up to $3.5 billion, impacting operating results and cash flows, and requires SAMR approval in China112115 - The company faces intense competition from large semiconductor firms like Broadcom and Qualcomm, with increasing competitive pressure from industry consolidation133134135 - Global economic conditions, including high inflation and potential recession, could adversely affect revenues and operating results by causing customers to delay or reduce spending138 - The business is subject to U.S. export control laws, specifically new BIS rules from October 2022 impacting business with certain entities in China146147149 - 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 instability249250253 Unresolved Staff Comments The company reports no unresolved staff comments - None286 Properties 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 2023287 - MaxLinear maintains additional leased facilities across North America, Asia, and Europe287 Legal Proceedings 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 2024289290291 - Bell Semiconductor also filed an ITC suit, with an initial determination expected in November 2023 and a final determination by March 2024292 Mine Safety Disclosures This item is not applicable to the company - Not applicable294 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 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 MXL297 - MaxLinear has never declared or paid cash dividends and intends to retain future earnings for business operations298 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 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 financing314315 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 principal358360 - Net cash provided by operating activities significantly increased to $388.7 million in 2022 from $168.2 million in the prior year367368 Quantitative and Qualitative Disclosures About Market Risk 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. dollars378 - The company is subject to interest rate risk from variable-rate credit agreements, mitigated by principal prepayments on indebtedness380 Financial Statements and Supplementary Data 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 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 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 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 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 end384 - Management concluded that internal control over financial reporting was effective as of December 31, 2022385 - Grant Thornton LLP issued an unqualified opinion on the effectiveness of internal control over financial reporting391 Part III Directors, Executive Officers, Corporate Governance, Executive Compensation, and Other Matters 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 Statement402407408409410 Part IV Exhibits and Financial Statement Schedules 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-K413 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 |