What changed in this filing

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Item 9A. Controls and Procedures

2021-02-11 compared with 2020-02-05 · 783 added, 438 removed, 1022 unchanged (54% of the section changed)

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We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed with the SEC is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure.

In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and no evaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

fraud, if any, within a company have been detected.

Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, prior to filing this Form 10-K, we carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure

controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act) as of the end of the period covered by this Form 10-K.

Based on their evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.

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Based upon that evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2020.

Management’s evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2020 did not include internal controls over financial reporting that had not yet been integrated for a portion of the Home Gateway Platform Division of Intel Corporation, which we refer to as the Wi-Fi and Broadband assets business, which we acquired in a business combination in July 2020, as described below.

Assessment of a recently acquired business may be omitted from management’s report on internal control over financial reporting in the year of acquisition under SEC guidelines.

The omitted portion of the Wi-Fi and Broadband assets business relates to certain sales and other transactions made on our behalf by Intel Corporation under the transition services agreement and comprised approximately 5% of our total assets and 3% of our total liabilities as of December 31, 2020 and approximately 23% of total revenues and 19% of cost of goods sold for the year ended December 31, 2020.

The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Grant Thornton LLP, an independent registered public accounting firm, and Grant Thornton LLP has issued a report on our internal control over financial reporting, which is included herein.

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An evaluation was performed under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, to determine whether any change in our internal control over financial reporting occurred during the fiscal quarter ended December 31, 2020 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

On July 31, 2020, we completed the acquisition of the Home Gateway Platform Division of Intel Corporation, which we refer to as the Wi-Fi and Broadband assets business.

On September 9, 2020, we completed the acquisition of NanoSemi, Inc.

We have completed the integration of NanoSemi into our existing system of internal control over financial reporting;

however, we are in the process of integrating the processes, systems, and controls relating to the Wi-Fi and Broadband assets business into our existing system of internal control over financial reporting in accordance with our integration plans through the fiscal quarter ended December 31, 2020.

We expect to complete the integration of the internal controls over financial reporting related to the Wi-Fi and Broadband assets business in 2021.

There were no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 of the Securities Exchange Act of 1934, as amended, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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We believe that our audit provides a reasonable basis for our opinion.

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting for the portion of the business not yet integrated from the acquisition of the Home Gateway Platform Division of Intel Corporation, which management refers to as the Wi-Fi and Broadband assets business.

The omitted portion of the Wi-Fi and Broadband assets business relates to certain sales and other transactions made on the Company's behalf by Intel Corporation under a transition services agreement and comprises approximately 5% of total assets, 3% of total liabilities, 23% of total revenues, and 19% of total cost of goods sold as of and for the year ended December 31, 2020.

As indicated in Management’s Report, the Wi-Fi and Broadband assets business was acquired during 2020.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded the internal control over financial reporting related to certain sales and other transactions as discussed.

Definition and limitations of internal control over financial reporting

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SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS (in thousands):

Classification

Balance at beginning of year

Additions (deductions) charged to expenses

Other Additions

Balance at end of year

Allowance for doubtful accounts

Classification Balance at beginning of year Additions (deductions) charged to expenses Other Additions (Deductions) Balance at end of year

Allowance for credit losses (previously, allowance for doubtful accounts)

2020 $ — $ — $ — $ — $ —

2019 46 — — ( 46 ) —

2018 73 — — ( 27 ) 46

Warranty reserves

2020 $ 553 $ 300 $ — $ ( 153 ) $ 700

2019 519 74 — ( 40 ) 553

2018 941 ( 414 ) — ( 8 ) 519

Valuation allowance for deferred tax assets

Exhibit Number

Exhibit Title

2020 $ 77,957 $ ( 7,385 ) $ 1,239 $ — $ 71,811

2019 79,196 ( 1,239 ) — — 77,957

2018 84,560 ( 5,761 ) 397 — 79,196

Exhibit Number Exhibit Title

2.1 Agreement and Plan of Merger and Reorganization, dated as of February 3, 2015, by and among MaxLinear, Inc., a Delaware corporation, Entropic Communications, Inc., a Delaware corporation, Excalibur Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of MaxLinear, and Excalibur Subsidiary, LLC, a Delaware limited liability company and wholly-owned subsidiary of MaxLinear (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on February 4, 2015 (File No.

2.2 Agreement and Plan of Merger, dated as of March 28, 2017, by and among MaxLinear, Inc., a Delaware corporation, Exar Corporation, a Delaware corporation, and Eagle Acquisition Corporation, a Delaware corporation and a wholly-owned subsidiary of MaxLinear (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on March 29, 2017 (File No.

2.3 Asset Purchase Agreement, dated as of April 5, 2020, by and among MaxLinear, Inc., a Delaware corporation, Intel Corporation, a Delaware corporation, and MaxLinear Asia Singapore Private Limited, a wholly-owned subsidiary of MaxLinear (incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K filed on April 6, 2020 (File No.

3.1 Registrant’s Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on March 29, 2010 (incorporated by reference to Exhibit 3.5 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No.

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333-162947)).

Exhibit Number Exhibit Title

†10.15 Sublease Agreement, dated May 9, 2009, between the Registrant and CVI Laser, LLC (incorporated by reference to Exhibit 10.15 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No.

333-162947)).

Exhibit Number

Exhibit Title

†10.16 Intellectual Property License Agreement, dated June 18, 2009, between the Registrant and Intel Corporation, (incorporated by reference to Exhibit 10.16 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No.

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10.34 Asset Purchase Agreement, by and between the Company and Microsemi, dated as of April 28, 2016 (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on April 28, 2016).

Exhibit Number Exhibit Title

10.35 Asset Purchase Agreement, dated as of May 9, 2016, by and between the Registrant and Broadcom (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on May 9, 2016).

Exhibit Number

Exhibit Title

Employment Offer Letter, dated December 21, 2015, between the Registrant and Dana McCarty (incorporated herein by reference to Exhibit 10.1 of the Registrant’s Current Report on Form 10-Q filed on May 9, 2016).

+10.36 Employment Promotion Letter, dated February 11, 2016, between the Registrant and Connie Kwong (incorporated herein by reference to Exhibit 10.2 of the Registrant’s Current Report on Form 10-Q filed on May 9, 2016).

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+†10.46 Form of Restricted Stock Unit Award Agreement for Performance-Based Awards under the 2010 Equity Incentive Plan (incorporated herein by reference to Exhibit 10.1 of the Registrant's Form 10-Q filed on July 25, 2019 (File No.

10.47 Debt Commitment Letter by and among MaxLinear, Inc., MUFG Union Bank, and Wells Fargo Bank, N.A.

dated as of April 5, 2020 (incorporated by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed on April 6, 2020 (File No.

10.48 Incremental Amendment No.

1, dated as of July 31, 2020, by and among MaxLinear, the guarantors party thereto, the lenders party thereto, MUFG Bank, Ltd., as administrative agent, and MUFG as collateral agent.

*11.1 Statement re computation of income (loss) per share (included in Part IV, Item 15 of this Form 10-K).

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Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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* Filed herewith.

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President and Chief Executive Officer

February 5, 2020

(Principal Executive Officer)

February 11, 2021 (Principal Executive Officer)

POWER OF ATTORNEY

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Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Signature Title Date

/s/ KISHORE SEENDRIPU, Ph.D.

President and Chief Executive Officer

February 5, 2020

President, Chief Executive Officer, and Director February 11, 2021

Kishore Seendripu, Ph.D.

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/s/ STEVEN G.

Chief Financial Officer and Chief Corporate Strategy Officer

February 5, 2020

(Principal Financial Officer)

/s/ CONNIE KWONG

Corporate Controller

February 5, 2020

(Principal Accounting Officer)

LITCHFIELD Chief Financial Officer and Chief Corporate Strategy Officer February 11, 2021

Litchfield (Principal Financial Officer)

/s/ CONNIE KWONG Corporate Controller February 11, 2021

Connie Kwong (Principal Accounting Officer)

/s/ THOMAS E.

Lead Director

February 5, 2020

PARDUN Lead Director February 11, 2021

/s/ DANIEL A.

February 5, 2020

ARTUSI Director February 11, 2021

/s/ CAROLYN D.

February 5, 2020

BEAVER Director February 11, 2021

/s/ GREGORY P.

DOUGHERTY Director February 11, 2021

/s/ ALBERT J.

February 5, 2020

MOYER Director February 11, 2021

/s/ DONALD E.

February 5, 2020

SCHROCK Director February 11, 2021

/s/ THEODORE TEWKSBURY, Ph.D.

February 5, 2020

Director February 11, 2021

Theodore Tewksbury, Ph.D.

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We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company's internal control over financial reporting as of December 31, 2020, based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated February 11, 2021 expressed an unqualified opinion.

Change in accounting principle

As discussed in Note 1 to the financial statements, the Company has changed its method of accounting for revenue from contracts with customers in 2018 due to the adoption of the new revenue standard using the modified retrospective method with an adjustment to accumulated deficit as of January 1, 2018 for the cumulative effect of adoption.

Periods prior to 2018 have not been adjusted to reflect the change in accounting principle.

Basis for opinion

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The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Business combinations - valuation of identifiable intangible assets

As discussed in Note 3 to the financial statements, the Company acquired the Home Gateway Platform Division, which the Company refers to as the Wi-Fi and Broadband Assets business, pursuant to an Asset Purchase Agreement with Intel Corporation on July 31, 2020 for a purchase consideration of $150.0 million, which resulted in identifiable intangible assets of $58.0 million.

Further, on September 9, 2020, the Company acquired NanoSemi, Inc.

for a total purchase price of $61.2 million, which resulted in identifiable intangible assets of $19.9 million.

Management estimated the fair value of identifiable intangible assets using available valuation methods.

We identified the valuation of identifiable intangible assets as a critical audit matter.

The principal consideration for our determination that valuation of identifiable intangible assets is a critical audit matter is that management’s judgments and estimates in selecting valuation methods, and determining significant assumptions and prospective financial information are subject to a high level of judgment and estimation uncertainty.

Therefore, subjective and complex auditor judgment is necessary to evaluate the reasonableness of management’s selections, judgments and assumptions since the application of alternative methods and assumptions can result in differing estimates of fair value and historical results may not be indicative of the future

due to uncertainties arising from technological advances, complexities in developing new products, industry consolidation and economic factors.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the financial statements.

These procedures included, among others:

• Utilizing a valuation specialist to assist in evaluating the appropriateness of the Company’s selection of valuation methods for the identifiable intangible assets and evaluating the reasonableness of significant assumptions used, including the discount rate, contributory asset charges, and long-term growth rates;

• Evaluating significant assumptions of prospective financial information used, such as growth rates, customer attrition rate, the technology obsolescence curve and margin percentages, were reasonable by considering past performance, industry data, current market forecasts, and whether such assumptions were consistent with evidence obtained in other areas of the audit;

• Testing the mathematical accuracy of the calculations;

• Testing the design and operating effectiveness of internal controls relating to the valuation reports and allocation of purchase price, which included management’s review of the preliminary valuation report for the completeness and mathematical accuracy of the data, evaluating the reasonableness of significant assumptions used in the calculations, such as assumed growth rates, customer attrition rate, margin percentages, discount rate, contributory asset charges and the long term growth rates as compared to industry and market data.

Inventory valuation

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We identified inventory valuation as a critical audit matter.

The principal consideration for our determination that inventory valuation is a critical audit matter is that management’s estimates of future demand and market conditions are subject to a high

level of estimation uncertainty.

The principal consideration for our determination that inventory valuation is a critical audit matter is that management’s estimates of future demand and market conditions are subject to a high level of estimation uncertainty.

Therefore, subjective and complex auditor judgment is necessary to evaluate the reasonableness of management’s judgments and assumptions since historical results may not be indicative of the future due to uncertainties arising from technological advances, complexities in developing new products, industry consolidation and economic factors.

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◦ The information was consistent with evidence obtained in other areas of the audit;

Evaluating the propriety of significant adjustments to the inventory valuation calculations, if any, by making inquiries of management and reviewing judgments, assumptions and documentation supporting such adjustments;

• Evaluating the propriety of significant adjustments to the inventory valuation calculations, by making inquiries of management and reviewing judgments, assumptions and documentation supporting such adjustments;

• Testing the completeness, accuracy, and relevance of underlying data used in the estimate of net realizable value of its inventories;

Testing the design and operating effectiveness of internal controls over the inventory valuation adjustments, including management’s review of the demand forecast.

• Testing the design and operating effectiveness of internal controls over the inventory valuation adjustments, including management’s review of the demand forecast and significant adjustments to the inventory valuation calculations.

Realizability of deferred tax assets

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We identified the realizability of deferred tax assets as a critical audit matter.

The principal consideration for our determination that the realizability of deferred tax assets is a critical audit matter is that the forecast of future taxable income is an accounting estimate subject to a high level of estimation.

The principal consideration for our determination that the realizability of deferred tax assets is a critical audit matter is that the forecast of future taxable income is an accounting

estimate subject to a high level of estimation.

There is inherent uncertainty and subjectivity related to management’s judgments and assumptions regarding the Company’s international tax structure and transfer pricing agreements, determination of the taxable income by jurisdiction, and the impacts of the Tax Act on future taxable income, which are complex in nature and require significant auditor judgment.

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◦ Forecasts of future information used in other areas, such as inventory valuation and impairment assessment of intangible assets, to evaluate completeness and consistency;

Reviewing the Company’s transfer pricing assumptions, including royalty rates and cost plus markups, regarding the arms-length nature of transactions carried out by the Company and its non-US subsidiaries;

• Reviewing the Company’s transfer pricing assumptions, including royalty rates and cost plus markups, applied by the Company and its non-US subsidiaries;

• Testing the design and operating effectiveness of management’s internal controls over the completeness and accuracy of the forecast of future taxable income and the proper application of relevant tax law to support the realizability of deferred tax assets.

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(in thousands, except par value amounts)

December 31, December 31,

Current assets:

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Accounts receivable, net 67,442 50,411

Inventory 97,839 31,510

Prepaid expenses and other current assets 47,421 6,792

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Intangible assets, net 207,266 187,971

Goodwill 302,828 238,330

Deferred tax assets 86,065 67,284

Other long-term assets 2,191 2,785

Total assets $ 1,022,442 $ 705,791

Liabilities and stockholders’ equity

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Additional paid-in capital

602,064 529,596

Accumulated other comprehensive income (loss) 1,435 ( 887 )

Accumulated deficit

( 212,389 ) ( 113,796 )

Total stockholders’ equity 391,117 414,920

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Years Ended December 31,

2020 2019 2018

Net revenue $ 478,596 $ 317,180 $ 384,997

Cost of net revenue 265,798 149,495 176,223

Gross profit 212,798 167,685 208,774

Operating expenses:

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Income tax benefit ( 16,259 ) ( 12,586 ) ( 6,653 )

Net loss $ ( 98,593 ) $ ( 19,898 ) $ ( 26,199 )

Net loss per share:

Basic $ ( 1.35 ) $ ( 0.28 ) $ ( 0.38 )

Diluted $ ( 1.35 ) $ ( 0.28 ) $ ( 0.38 )

Shares used to compute net loss per share:

Basic 73,133 71,005 68,490

Diluted 73,133 71,005 68,490

See accompanying notes.

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Years Ended December 31,

2020 2019 2018

Net loss $ ( 98,593 ) $ ( 19,898 ) $ ( 26,199 )

Other comprehensive income (loss), net of tax:

Unrealized loss on investments, net of tax of $0 in 2019, 2018, and 2017

Reclassification adjustments of unrealized loss, net of tax of $0 in 2019, 2018, and 2017

Unrealized gain on investments, net of tax

Foreign currency translation adjustments, net of tax expense of $136 in 2019, benefit of $200 in 2018, and benefit of $202 in 2017

Unrealized gain (loss) on interest rate swap, net of tax benefit of $341 in 2019, expense of $187 in 2018, and expense of $257 in 2017

Foreign currency translation adjustments, net of tax expense of $ 216 in 2020, expense of $ 136 in 2019 and benefit of $ 200 in 2018

1,010 160 ( 1,572 )

Net actuarial gain on pension and other defined benefit plans, net of tax expense of $ 0 in 2020

Unrealized gain (loss) on interest rate swap, net of tax expense of $ 8 in 2020, benefit of $ 341 in 2019 and expense of $ 187 in 2018

225 ( 1,319 ) 702

Reclassification adjustments of unrealized gain on interest rate swap, net of tax of $ 0 in 2020

Unrealized gain (loss) on interest rate swap, net of tax 140 ( 1,319 ) 702

Other comprehensive income (loss) 2,322 ( 1,159 ) ( 870 )

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CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands, except share amounts)

(in thousands)

Common Stock Additional

Capital Accumulated

Comprehensive

Income (Loss)

Income (Loss) Accumulated

Deficit Total

Stockholders’

Shares Amount

Balance at December 31, 2017 67,400 $ 7 $ 455,497 $ 1,039 $ ( 69,119 ) $ 387,424

Shares repurchased and cancelled

Conversion of Class B common stock to Class A common stock

Conversion of Class A and B common stock to common stock

Common stock issued pursuant to equity awards, net 1,875 — 1,761 — — 1,761

Vested stock-based awards assumed in acquisition

Employee stock purchase plan 276 — 4,452 — — 4,452

Stock-based compensation — — 31,734 — — 31,734

Other comprehensive income

Cumulative effect of adoption of new accounting principles — — ( 157 ) 103 1,688 1,634

Other comprehensive loss — — — ( 870 ) — ( 870 )

Net loss — — — — ( 26,199 ) ( 26,199 )

Balance at December 31, 2018 69,551 7 493,287 272 ( 93,630 ) 399,936

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Other comprehensive loss — — — ( 1,159 ) — ( 1,159 )

Net loss — — — — ( 19,898 ) ( 19,898 )

Balance at December 31, 2019 71,931 7 529,596 ( 887 ) ( 113,796 ) 414,920

Common stock issued pursuant to equity awards, net 1,515 — 3,997 — — 3,997

Common stock issued for merger, net 804 — 17,080 — — 17,080

Employee stock purchase plan 286 — 3,794 — — 3,794

Stock-based compensation — — 47,597 — — 47,597

Cumulative effect of adoption of new accounting principles

Other comprehensive loss

Other comprehensive income — — — 2,322 — 2,322

Net loss — — — — ( 98,593 ) ( 98,593 )

Balance at December 31, 2020 74,536 $ 7 $ 602,064 $ 1,435 $ ( 212,389 ) $ 391,117

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Years Ended December 31,

2020 2019 2018

Operating Activities

Net loss $ ( 98,593 ) $ ( 19,898 ) $ ( 26,199 )

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

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Impairment losses 86 — 2,198

Provision for losses on accounts receivable

Accretion of investment premiums

Amortization of inventory step-up

Inventory fair value adjustments 32,945 — —

Amortization of debt issuance costs and accretion of discount on debt and leases 2,201 1,577 1,148

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Loss on disposal of property and equipment — 46 430

Loss on sale of available-for-sale securities

Impairment of leasehold improvements 319 1,442 735

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Gain on extinguishment of lease liabilities — ( 10,437 ) —

(Gain) loss on foreign currency

(Gain) loss on foreign currency and other 1,289 760 ( 809 )

Excess tax benefits on stock-based awards ( 677 ) ( 4,064 ) ( 2,028 )

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Accounts receivable ( 16,856 ) 9,090 6,595

Inventory ( 31,837 ) 10,195 11,696

Prepaid expenses and other assets ( 38,954 ) 3,805 1,071

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Purchases of property and equipment ( 12,487 ) ( 6,887 ) ( 7,825 )

Proceeds from sale of property and equipment

Purchases of intangible assets ( 2,799 ) ( 86 ) —

Cash used in acquisitions, net of cash acquired ( 160,000 ) — —

Purchases of available-for-sale securities

Maturities of available-for-sale securities

Net cash used in investing activities ( 175,286 ) ( 6,973 ) ( 7,825 )

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Net proceeds from the issuance of debt 175,000 — —

Payment of debt issuance cost ( 2,696 ) — —

Repayment of debt ( 17,188 ) ( 50,000 ) ( 93,000 )

Repurchases of common stock

Net proceeds from issuance of common stock 8,068 8,603 6,839

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Effect of exchange rate changes on cash and cash equivalents ( 1,039 ) 934 ( 1,301 )

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

Increase in cash, cash equivalents and restricted cash 56,917 18,926 ( 221 )

Cash, cash equivalents and restricted cash at beginning of period 93,117 74,191 74,412

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Supplemental disclosures of non-cash investing and financing activities:

Common stock issued in acquisitions, at fair value $ 17,080 $ — $ —

Deferred payments of purchase price for acquisitions, at fair value $ 34,100 $ — $ —

Issuance of shares for payment of bonuses $ 3,258 $ 7,632 $ 6,997

Issuance of restricted stock units to Physpeed continuing employees

See accompanying notes.

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was incorporated in Delaware in September 2003.

MaxLinear, Inc., together with its wholly owned subsidiaries, collectively referred to as MaxLinear, or the Company, is a provider of radio-frequency, or RF, high-performance analog, and mixed-signal communications system-on-chip solutions for the connected home, wired and wireless infrastructure, and industrial and multi-market applications.

MaxLinear's customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in a wide range of electronic devices, including cable DOCSIS broadband modems and gateways, wireline connectivity devices for in-home networking applications, RF transceivers and modems for wireless carrier access and backhaul infrastructure, fiber-optic modules for data center, metro, and long-haul transport networks, video set-top boxes and gateways, hybrid analog and digital televisions, direct broadcast satellite outdoor and indoor units, and power management and interface products used in these and a range of other markets.

The Company is a fabless integrated circuit design company whose products integrate all or a substantial portion of a broadband communication system.

MaxLinear, Inc., together with its wholly owned subsidiaries, collectively referred to as MaxLinear, or the Company, is a provider of communications systems-on-chip (SoC) solutions used in broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications.

MaxLinear is a fabless integrated circuit design company whose products integrate all or substantial portions of a high-speed communication system, including radio frequency (RF), high-performance analog, mixed-signal, digital signal processing, security engines, data compression and networking layers, and power management.

MaxLinear’s customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in a wide range of electronic devices, including cable Data Over Cable Service Interface Specifications (DOCSIS), fiber and DSL broadband modems and gateways;

Wi-Fi and wireline routers for home networking;

radio transceivers and modems for 4G/5G base-station and backhaul infrastructure;

fiber-optic modules for data center, metro, and long-haul transport networks;

as well as power management and interface products used in these and many other markets.

Basis of Presentation and Principles of Consolidation

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All intercompany transactions and investments have been eliminated in consolidation.

Certain prior period amounts have been reclassified to conform with the current period presentation.

Such reclassifications include the separate presentation of long-term lease liabilities and movement of certain tax-related receivables to prepaid expenses and other current assets on the consolidated balance sheets.

The functional currency of certain foreign subsidiaries is the local currency.

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Foreign currency transaction gains and losses are included in the results of operations, and to date, have not been material.

Use of Estimates

Use of Estimates and Significant Risks and Uncertainties

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes of the consolidated financial statements.

Actual results could differ from those estimates.

In the year ended December 31, 2020, the Company’s revenues were impacted by the coronavirus disease, or COVID-19, pandemic.

In particular, the Company experienced some negative impact to its revenue and gross profits in the first half of 2020 due to several industry-wide dynamics related to COVID-19 including supply constraints as well as customer requests to temporarily delay shipments.

Although the Company has benefited from increased demand for certain of its products from the work-from-home environment in the second half of 2020, heightened volatility and uncertainty in customer demand and the worldwide economy in general has continued, and the Company may experience increased volatility in its sales and revenues in the near future.

However, the magnitude of such volatility on the Company’s business and its duration is uncertain and cannot be reasonably estimated at this time.

The Company also believes that its $ 148.9 million of cash and cash equivalents at December 31, 2020 will be sufficient to fund its projected operating requirements for at least the next twelve months.

A material adverse impact from COVID-19 could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if the Company pursues additional acquisitions.

The Company’s future capital requirements will depend on many factors, including the Company’s efforts to complete the integration of the acquired Wi-Fi and Broadband assets business and NanoSemi (Note 3), changes in revenue, the expansion of engineering, sales and marketing activities, the timing and extent of expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of the Company’s products and potential material investments in, or acquisitions of, complementary businesses, services or technologies.

Additional funds may not be available on terms favorable to the Company or at all.

If the Company is unable to raise additional funds when needed, it may not be able to sustain its operations or execute its strategic plans.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of February 11, 2021, the issuance date of this Annual Report on Form 10-K.

Actual results could differ from those estimates, particularly if the Company experiences material impacts from

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Business Combinations

The Company applies the provisions of ASC 805, Business Combinations , in accounting for its acquisitions.

It requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed, at the acquisition date fair values.

Goodwill as of the acquisition date is measured as the excess of consideration transferred over the acquisition date fair values of the net assets acquired and the liabilities assumed.

While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement.

As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill.

Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.

Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as termination and exit costs pursuant to ASC 420, Exit or Disposal Cost Obligations , and are accounted for separately from the business combination.

A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the consolidated statements of operations in the period in which the liability is incurred.

For a given acquisition, the Company may identify certain pre-acquisition contingencies as of the acquisition date and may extend its review, evaluation, and adjustment of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether the Company includes these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts.

A pre-acquisition contingency (non-income tax related) is only recognized as an asset or a liability if:

(i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated.

Subsequent to the measurement period, changes in estimates of such contingencies will affect earnings and could have a material effect on the Company's results of operations and financial position.

In addition, uncertain tax positions and tax-related valuation allowances assumed, if any, in connection with a business combination are initially estimated as of the acquisition date.

The Company re-evaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to the preliminary estimates being recorded to goodwill if identified within the measurement period.

Subsequent to the end of the measurement period or final determination of the estimated value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect the income tax provision (benefit) in the consolidated statements of operations and could have a material impact on the results of operations and financial position.

Cash and Cash Equivalents

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The Company performs ongoing credit evaluations of its customers and assesses each customer’s credit worthiness.

The Company monitors collections and payments from its customers and maintains an allowance for doubtful accounts based upon its historical experience, its anticipation of uncollectible accounts receivable, and any specific customer collection issues that the Company has identified.

The Company monitors collections and payments from its customers and maintains an allowance for doubtful accounts, which effective January 1, 2020, is based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions.

Delinquent account balances are written off after management has determined that the likelihood of collection is remote.

As of December 31, 2019 and 2018 , the Company had an allowance for doubtful accounts of $ 0 and $ 0.05 million , respectively.

The allowance for credit losses as of December 31, 2020 and the activity in this account, including the current-period provision for expected credit losses for the year ended December 31, 2020, were not material.

The Company assesses the recoverability of its inventory based on assumptions about demand and market conditions.

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Inventory is stated at the lower of cost or net realizable value.

Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis and net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

The Company reduces its inventory to its lower of cost or net realizable value on a part-by-part

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basis to account for its obsolescence or lack of marketability.

disposal and transportation.

The Company reduces its inventory to its lower of cost or net realizable value on a part-by-part basis to account for its obsolescence or lack of marketability.

Reductions are calculated as the difference between the cost of inventory and its net realizable value based upon assumptions about future demand, market conditions and costs.

1 unchanged sentence

Fair Value of Financial Instruments

The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and compensation are considered to be representative of their respective fair value because of the short-term nature of these accounts.

The interest rate swap is carried at fair value.

The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and compensation are considered to be representative of their respective fair values because of the short-term nature of these accounts.

The interest rate swap was carried at fair value prior to its expiration in 2020.

Property and Equipment

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Impairment of Goodwill and Long-Lived Assets

Goodwill is not amortized but is tested for impairment using either a qualitative assessment, and/or the two-step method as needed.

Step one is the identification of potential impairment.

This involves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill.

If the fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary.

If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any.

Goodwill is not amortized but is tested for impairment using either a qualitative assessment, and/or quantitative assessment, which effective with its October 31, 2020 impairment test, is based on comparing the fair value of a reporting unit with its carrying amount.

If the carrying amount of a reporting unit exceeds its fair value, a goodwill impairment loss is recorded.

The Company tests by reporting unit, goodwill and other indefinite-lived intangible assets for impairment as of October 31 each year or more frequently if it believes indicators of impairment exist.

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Once an IPR&D project is complete, it becomes a finite-lived intangible asset and is evaluated for impairment both immediately prior to its change in classification and thereafter in accordance with the Company's policy for long-lived assets.

The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the useful lives, to determine whether indicators of impairment may exist which warrant adjustments to carrying values

An impairment loss would be recognized when the sum of the expected future undiscounted net cash

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or estimated useful lives.

An impairment loss would be recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset.

flows is less than the carrying amount of the asset.

Should impairment exist, the impairment loss would be measured based on the excess of the carrying amount of the asset over the asset’s fair value.

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Revenue Recognition

On January 1, 2018, the Company adopted Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 606, Revenue from Contracts with Customers , or ASC 606, using the modified retrospective method and accordingly, modified its policy on revenue recognition as stated below.

The primary impact of adopting ASC 606 for the Company was to accelerate the timing of the Company’s revenue and related cost recognition on products sold via some of its distributors, which changed from recognition upon the sale to the distributors' end customers, or the sell-through method, to recognition upon the Company's sale to the distributor, or the sell-in method.

The Company is also required to estimate the effects of pricing credits to its distributors from contractual price protection and unit rebate provisions, as well as stock rotation rights and record such estimated credits upon the Company's sale to the distributor.

As a result of the adoption of ASC 606 as of January 1, 2018 using the modified retrospective method, prior period amounts were not adjusted to reflect the change in revenue recognition for such distributor sales.

Substantially all of the Company's revenue is generated from sales of the Company’s integrated circuits to electronics distributors, module makers, OEMs, and ODMs under individual customer purchase orders, some of which have underlying master sales agreements that specify terms governing the product sales.

Effective January 1, 2018, the Company adopted ASC 606 and recognizes revenue at the point in time when control of the products is transferred to the customer at the estimated net consideration for which collection is probable, taking into account the customer's rights to price protection, other pricing credits, unit rebates, and rights to return unsold product.

The Company's revenue is primarily generated from sales of the Company’s integrated circuits to electronics distributors, module makers, OEMs, and ODMs under individual customer purchase orders, some of which have underlying master sales agreements that specify terms governing the product sales.

Effective January 1, 2018, the Company adopted ASC 606 and recognizes such revenue at the point in time when control of the products is transferred to the customer at the estimated net consideration for which collection is probable, taking into account the customer's rights to price protection, other pricing credits, unit rebates, and rights to return unsold product.

Transfer of control occurs either when products are shipped to or received by the distributor or direct customer, based on the terms of the specific agreement with the customer, if the Company has a present right to payment and transfer of legal title and the risks and rewards of ownership to the customer has occurred.

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however, to the extent the Company collects and remits taxes on product sales from customers, it has elected to exclude from the measurement of transaction price such taxes.

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Each distinct promise to transfer products is considered to be an identified performance obligation for which revenue is recognized upon transfer of control of the products to the customer.

Although customers may place orders for products to be delivered on multiple dates that may be in different quarterly reporting periods, all of the orders are scheduled within 1 year from the order date.

Although customers may place orders for products to be delivered on multiple dates that may be in different quarterly reporting periods, all of the orders are scheduled within one year from the order date.

The Company has opted to not disclose the portion of revenues allocated to partially unsatisfied performance obligations, which represent products to be shipped within 12 months under open customer purchase orders, at the end of the current reporting period as allowed under ASC 606.

The Company has also elected to record sales commissions when incurred, pursuant to the practical expedient under ASC 340, as the period over which the sales commission asset that would have been recognized is less than one year.

Customer contract liabilities consist of obligations to deliver rebates to customers in the form of units of products which are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Other obligations to customers consist of estimates of price protection rights offered to the Company's end customers, which are included in accrued price protection liability in the consolidated balance sheets, as well as price adjustments expected to be claimed by the distributor upon sell-through of the products to their customers, and amounts expected to be returned by distributors under stock rotation rights, which are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Customer contract liabilities consist primarily of obligations to deliver rebates to customers in the form of units of products which are included in accrued expenses and other current liabilities in the consolidated balance sheets.

Other obligations to customers consist of estimates of price protection rights offered to the Company's end customers, which are

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included in accrued price protection liability in the consolidated balance sheets, as well as price adjustments expected to be claimed by the distributor upon sell-through of the products to their customers, and amounts expected to be returned by distributors under stock rotation rights, which are included in accrued expenses and other current liabilities in the consolidated balance sheets.

The Company also records a right of return asset, consisting of amounts representing the products the Company expects to receive from customers in returns, which is included in inventory in the consolidated balance sheets, and is typically settled within six months of transfer of control to the customer, or the period over which stock rotation rights are based.

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The Company uses the Black-Scholes valuation model to calculate the fair value of stock options and employee stock purchase rights granted to employees.

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compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period.

Stock-based compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period.

The Company recognizes compensation expense over the vesting period using the straight-line method and classifies these amounts in the consolidated statements of operations based on the department to which the related employee reports.

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Costs incurred in connection with the development of the Company’s technology and future products are charged to research and development expense as incurred.

On January 1, 2019, the Company adopted Financial Accounting Standards Board, or FASB, Accounting Standards Codification Topic 842, Leases , or ASC 842, using the modified retrospective transition method with a cumulative effect adjustment to accumulated deficit as of January 1, 2019, and accordingly, modified its policy on accounting for leases as stated below .

As described under “Recently Adopted Accounting Pronouncements,” below, the primary impact of adopting ASC 842 for the Company was the recognition in the consolidated balance sheet of certain lease-related assets and liabilities for operating leases with terms longer than 12 months.

Such amounts were not previously accounted for in the Company's consolidated balance sheets.

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The Company’s leases primarily consist of facility leases which are classified as operating leases.

The Company assesses whether an arrangement contains a lease at inception.

The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term.

Effective January 1, 2019, the Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term.

The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate since the implicit rate is unknown.

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Changes in certain terms of the hedged transactions, including the selection of interest rate from one-month LIBOR to another rate could cause ineffectiveness in the derivatives and result in reclassification of amounts in accumulated other comprehensive income (loss) into earnings.

Pension and Other Defined Benefit Retirement Obligations

The costs of pension and certain other defined benefit employee retirement benefits are required to be recognized based upon actuarial valuations.

The related net retirement benefit obligation is recognized as the excess of the projected benefit obligation over the fair value of the plan assets.

In measuring the retirement benefit obligation, the discount rate, expected long-term rate of return on plan assets, and long-term rate of salary increase are the most significant assumptions.

Retirement benefit costs primarily represent the increase in the actuarial present value of the retirement benefit obligation.

The Company provides for income taxes utilizing the asset and liability approach of accounting for income taxes.

Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and

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liabilities are recovered or paid.

Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid.

Deferred taxes are presented net as noncurrent.

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The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations.

The impact of an uncertain income tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority.

The impact of an uncertain income tax position is recognized at the largest amount that is “more likely than not” to be sustained

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upon audit by the relevant taxing authority.

An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained.

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Recently Adopted Accounting Pronouncements

In February 2016, the FASB issued ASU No.

2016-02, Leases (Topic 842) .

The amendments in this update require a lessee to recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset.

For leases less than twelve months, an entity is permitted to make an accounting policy election by class of underlying asset not to recognize right-of-use assets and lease liabilities.

If a lessee makes this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term.

The Company made this election.

Also, in July 2018, the FASB issued ASU No.

2018-11, Leases (Topic 842):

Targeted Improvements , to provide an additional transition method.

An entity can elect not to present comparative financial information under Topic 842 if it recognizes a cumulative-effect adjustment to retained earnings upon adoption.

The Company also made this election.

Further, in January 2019, the FASB issued ASU 2019-01, Leases (Topic 842):

Codification Improvements , which clarified that post-adoption interim transition disclosures normally required in the year of adoption for the effect of a change in accounting principle on an entity’s financial statements are not required for the adoption of ASC 842.

The amendments in these updates are effective for the Company for fiscal years beginning with 2019, including interim periods within those years, with early adoption permitted.

The Company has completed its assessment of the impact of the adoption of ASC 842.

Upon adoption, the Company recognized approximately $ 24.8 million of right-of-use assets and a net increase of $ 25.1 million in lease-related liabilities at January 1, 2019.

Also, the impact of the adoption of ASC 842 on the Company’s accumulated deficit

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and deferred tax assets at January 1, 2019 was not material.

Lastly, the impact of the adoption of ASC 842 on the Company's consolidated results of operations for the year ending December 31, 2019 was not material.

In July 2018, the FASB issued ASU No.

2018-10, Codification Improvements to Topic 842, Leases , to clarify how to apply certain aspects of the new lease accounting standard.

The amendments in this update, among other things, better articulates the requirement for a lessee’s reassessment of lease classification as of the effective date of a modification, clarifies that a change to an index or rate for variable lease payments does not constitute a resolution of a contingency that would result in the remeasurement of lease payments, and requires entities that apply Topic 842 retrospectively to each reporting period and do not adopt the practical expedients to write off any prior unamortized initial direct costs that do not meet the definition under Topic 842 to equity.

The amendments in this update have the same effective date and transition requirements as the new lease standard summarized above.

The Company has disclosed the impact of adoption of Topic 842 on the Company’s consolidated financial position and results of operations as stated above.

In July 2018, the FASB issued ASU No.

2018-09, Codification Improvements , to clarify the Codification and prevent unintended application of the guidance.

An amendment to ASC 718-740, Compensation—Stock Compensation—Income Taxes , clarifies that excess tax benefits should be recognized in the period in which the amount of the deduction is determined.

The transition and effective date guidance is based on the facts and circumstances of each amendment.

The amendment identified above became effective for the Company beginning with fiscal year 2019.

The adoption of the amendments in this update did not have a material impact on the Company's consolidated financial position and results of operations for the year ended December 31, 2019.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815) , which is intended to improve accounting for hedging activities by expanding and refining hedge accounting for both nonfinancial and financial risk components and aligning the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements.

The amendments in this update became effective for the Company beginning with fiscal year 2019.

The amendments in this update were required to be applied prospectively.

The adoption of the amendments in this update did not have a material impact on the Company's consolidated financial statements for the year ended December 31, 2019.

In July 2019, the FASB issued ASU No.

2019-07, Codification Updates to SEC Sections—Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10532, Disclosure Update and Simplification, and Nos.

33-10231 and 33-10442, Investment Company Reporting Modernization, and Miscellaneous Updates, to align the FASB's Accounting Standards Codification with requirements of certain already effective SEC final rules, which included requiring interim presentation of changes in stockholders’ equity and eliminating certain other disclosures.

The amendments in ASU No.

2019-07 were effective for the Company immediately in the third quarter 2019.

The Company previously adopted the related SEC final rules in its 2018 Annual Report and Form 10-Q for the three months ended March 31, 2019.

The adoption of the amendments in these updates did not have a material impact on the Company's consolidated financial position, results of operations, and disclosures.

Recently Issued Accounting Pronouncements

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments—Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , to require the use of an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset, replacing the current incurred loss methodology of recognizing credit losses that delays recognition until it is probable a loss has been incurred.

An entity with trade receivables will be required to use historical loss information, current conditions, and reasonable and supportable forecasts to determine expected lifetime credit losses.

Pooling of assets with similar risk characteristics is also required.

Measurement of Credit Losses on Financial Instruments , to replace the incurred loss methodology with an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset, including current conditions and reasonable and supportable forecasts in addition to historical loss information, to determine expected credit losses.

Pooling of assets with similar risk characteristics and the use of a loss model are also required.

Also, in April 2019, the FASB issued ASU No.

2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to clarify the inclusion of recoveries of trade receivables previously written off when estimating an allowance for credit losses.

The amendments in this update are required to be applied using the modified retrospective method with an adjustment to accumulated deficit and are effective for the Company beginning with fiscal year 2020, including interim periods.

The Company has performed an assessment of the impact of adoption of the amendments in these updates on the Company’s consolidated financial position and results of operations.

Based on that assessment, the adoption of the amendments in this update will not have a material impact on the Company’s accounts receivable, net and accumulated deficit as of January 1, 2020 and is also not expected to have a material impact on the Company’s results of operations for the year ending December 31, 2020.

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(in thousands, except per share amounts and percentage data)

The amendments in this update were required to be applied using the modified retrospective method with an adjustment to accumulated deficit and were effective for the Company beginning with fiscal year 2020, including interim periods.

The adoption of the amendments in this update as of January 1, 2020 did not have a material impact on the Company’s accounts receivable, net and accumulated deficit, as well as its results of operations for the year ended December 31, 2020.

In January 2017, the FASB issued ASU No.

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Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount.

The Board also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

The amendments in this update are effective for the Company beginning with fiscal year 2020, including interim periods, with early adoption permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017.

The adoption of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

The FASB also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test.

The amendments in this update are effective for the Company beginning with fiscal year 2020, including interim periods.

The adoption of the amendments in this update as of the Company’s October 31, 2020 goodwill impairment test date did not have a material impact on the Company’s consolidated financial position and results of operations as of and for the year ended December 31, 2020.

In August 2018, the FASB issued ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework— Changes to the Disclosure Requirements for Fair Value Measurement , to improve the fair value measurement reporting of financial instruments.

Disclosure Framework— Changes to the Disclosure Requirements for Fair Value Measurement , to improve the fair value measurement reporting of

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financial instruments.

The amendments in this update require, among other things, added disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements.

The amendments in this update eliminate, among other things, disclosure of the reasons for and amounts of transfers between Level 1 and Level 2 for assets and liabilities that are measured at fair value on a recurring basis and an entity's valuation processes for Level 3 fair value measurements.

The amendments in this update will be effective for the Company beginning with fiscal year 2020, with early adoption permitted.

The amendments in this update were effective for the Company beginning with fiscal year 2020.

Retrospective application is required for all amendments in this update except the added disclosures, which should be applied prospectively.

The adoption of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

The adoption of the amendments in this update did not have a material impact on the Company’s consolidated financial position and results of operations as of and for the year ended December 31, 2020.

In August 2018, the FASB issued ASU No.

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Capitalized implementation costs and amortization thereof are also required to be classified in the same line item in the statements of financial position, operations and cash flows associated with the hosting service fees.

The amendments in this update will be effective for the Company beginning with fiscal year 2020, with early adoption permitted.

The amendments in this update were effective for the Company beginning with fiscal year 2020.

Entities may select retrospective or prospective application to all implementation costs incurred after the adoption date.

The adoption of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

The Company has selected prospective application.

In August 2018, the FASB issued ASU No.

2018-14 Compensation—Retirement Benefits—Defined Benefit Plans—General (Subtopic 715-20) , to clarify disclosure requirements related to defined benefit pension plans.

The amendment adds a narrative description on the reasons for significant gains and losses affecting the benefit obligation and an explanation of any other significant changes in the benefit obligation or plan assets not otherwise apparent in other disclosures.

The amendment removes the disclosure of amounts in accumulated other comprehensive income expected to be recognized as part of net periodic benefit costs over the next year.

The amendments in this update are effective for the Company beginning with fiscal year 2021.

Entities are required to apply the amendments on a retrospective basis with early adoption permitted.

The Company selected to early adopt this update.

The adoption of the amendments in this update did not have a material impact on the Company's defined benefit plan disclosures and the Company's consolidated financial position and results of operations as of and for the year ended December 31, 2020.

In March 2020, the FASB issued ASU No.

2020-04 Reference Rate Reform (Topic 848)—Facilitation of the Effects of Reference Rate Reform on Financial Reporting , that provides optional relief to applying reference rate reform to contracts, hedging relationships, and other transactions that reference the London Interbank Offered Rate (LIBOR), which will be discontinued by the end of 2021.

Also, in January 2021, the FASB issued ASU No.

2021-01 Reference Rate Reform (Topic 848)—Scope , to clarify that cash flow hedges are eligible for certain optional expedients and exceptions for the application of subsequent assessment methods to assume perfect effectiveness as previously presented in ASU 2020-04.

The amendments in this update are effective immediately and may be applied through December 31, 2022.

The Company's LIBOR interest rate swap expired in October 2020 and was not impacted by reference rate reform.

Therefore, the adoption of the amendments in this update did not have a material impact on the Company’s accumulated other comprehensive loss or its results of operations as of and for the year ended December 31, 2020.

In May 2020, the SEC issued a final rule that amends the financial statement requirements for business acquisitions and related pro forma financial information.

The rule modifies the significance tests to replace total assets with aggregate worldwide market value of common equity in the investment test and to include a revenue component in the income test while requiring the use of absolute value to calculate average net income for the last five fiscal years.

The rule improves the presentation of pro forma financial information by replacing pro forma adjustments with transaction accounting adjustments and adds the optional disclosure of management’s adjustments related to synergies and dis-synergies.

The rule also reduces the number of acquiree annual financial statement periods required to a maximum of the two most recent fiscal years.

The final rule is effective for the Company beginning with fiscal year 2021, with early application permitted;

all applicable aspects of the rule are required to be applied upon adoption.

The Company has early adopted the rule in its filings related to the acquisition of the Wi-Fi and Broadband assets business.

The adoption of the rule did not have an impact on the Company’s consolidated financial position and results of operations as of and for the year ended December 31, 2020.

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Recently Issued Accounting Pronouncements

In December 2019, the FASB issued ASU No.

3 unchanged sentences

The adoption of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In October 2020, the FASB issued ASU No.

2020-10 Codification Improvements , to make incremental improvements to GAAP and address stakeholder suggestions, including, among other things, clarifying that the requirement to provide comparative information in the financial statements extends to the corresponding disclosures section.

The amendments in this update will be effective for the Company beginning with fiscal year 2021, with early adoption permitted.

The amendments in this update should be applied retrospectively and at the beginning of the period that includes the adoption date.

The adoption of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

Net Income (Loss) Per Share

Basic earnings per share, or EPS, is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents.

Basic earnings per share, or EPS, is calculated by dividing net loss by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents.

Diluted EPS is computed by dividing net income by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method.

1 unchanged sentence

In periods in which the Company has a net loss, dilutive common stock equivalents are excluded from the calculation of diluted EPS.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The table below presents the computation of basic and diluted earnings per share:

Years Ended December 31,

2020 2019 2018

(in thousands, except per share amounts)

Net loss $ ( 98,593 ) $ ( 19,898 ) $ ( 26,199 )

Weighted average common shares outstanding—basic 73,133 71,005 68,490

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Net loss per share:

Basic $ ( 1.35 ) $ ( 0.28 ) $ ( 0.38 )

Diluted $ ( 1.35 ) $ ( 0.28 ) $ ( 0.38 )

For the years ended December 31, 2020, 2019, and 2018, the Company incurred net losses and accordingly excluded common stock equivalents for outstanding stock-based awards, which represented all potentially dilutive securities, of 3.2 million, 2.5 million, and 3.7 million, respectively, from the calculation of diluted net loss per share due to their anti-dilutive nature.

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Business Combinations

Acquisition of Exar Corporation

On May 12, 2017, pursuant to the March 28, 2017 Agreement and Plan of Merger, Eagle Acquisition Corporation, a Delaware corporation and wholly-owned subsidiary of MaxLinear, merged with and into Exar Corporation, or Exar, with Exar surviving as a wholly owned subsidiary of MaxLinear.

Under this Agreement and Plan of Merger, the Company agreed to acquire all of Exar's outstanding common stock for $13.00 per share in cash.

MaxLinear also assumed certain of Exar's stock-based awards in the merger.

MaxLinear paid aggregate cash consideration of $ 688.1 million including $ 12.7 million of cash paid to settle certain stock-based awards that were not assumed by MaxLinear in the merger.

The Company funded the transaction with cash from the balance sheet of the combined companies, including $ 235.8 million of cash from Exar, and the net proceeds of approximately $ 416.8 million from $ 425.0 million of new transaction debt (Note 8 ).

During the year ended December 31, 2018, the Company made updates to estimates of certain tax-related assets acquired and liabilities assumed with a corresponding net increase to goodwill of $ 0.3 million related to this acquisition (Note 5 ).

The Company completed its purchase price allocation accounting associated with this acquisition in 2018.

Acquisition of Certain Assets and Assumption of Certain Liabilities of the G.hn business of Marvell Semiconductor, Inc.

On April 4, 2017, the Company consummated the transactions contemplated by a share and asset acquisition agreement with Marvell Semiconductor, Inc., or Marvell, to purchase certain assets and assume certain liabilities of Marvell’s G.hn business, including its Spain legal entity, for aggregate cash consideration of $ 21.0 million .

The Company also hired certain employees of the G.hn business outside of Spain and assumed employment obligations of the Spanish entity acquired, which is now a subsidiary of MaxLinear.

The acquired assets and assumed liabilities, together with the employees who joined MaxLinear and its subsidiaries as a result of the transaction, represent a business as defined in ASC 805, Business Combinations .

The Company has integrated the acquired assets and employees into its existing business.

The Company completed its purchase price allocation accounting associated with this acquisition in 2018.

Restructuring Activity

From time to time, the Company approves and implements restructuring plans as a result of internal resource alignment, and cost saving measures.

Such restructuring plans include terminating employees, vacating certain leased facilities, and cancellation of contracts.

Acquisition of the Wi-Fi and Broadband assets business

On July 31, 2020, the Company and certain of its designated subsidiaries completed their acquisition of the Home Gateway Platform Division, which the Company refers to as the Wi-Fi and Broadband assets business, pursuant to an Asset Purchase Agreement with Intel Corporation, or Intel, dated April 5, 2020 (the “Asset Purchase Agreement”), and related agreements.

The Company paid cash consideration of $ 150.0 million for the purchase of certain assets of the Wi-Fi and Broadband assets business, and assumed certain liabilities primarily related to specified employment matters.

The transaction was funded with a portion of the net proceeds from a secured incremental term loan with an aggregate principal amount of $ 175.0 million (Note 8).

The Wi-Fi and Broadband assets business develops a broad portfolio of connected home products, including Wi-Fi, Ethernet and Broadband Gateway Processor SoCs, which enables the Company to strengthen its existing connected home portfolio by bringing together a complete, scalable, and complementary platform of connectivity and access solutions to address its customers’ needs across target end-markets.

The acquired assets and assumed liabilities, together with the employees who joined the Company and its subsidiaries as a result of the transaction, represent a business as defined in ASC 805, Business Combinations .

The Company is integrating the acquired assets and rehired employees into the Company’s existing business.

The Asset Purchase Agreement also contains customary representations, warranties and covenants, including indemnification provisions set forth therein.

Pursuant to the Purchase Agreement, Intel has retained, and will be obligated to indemnify MaxLinear for, certain liabilities, including but not limited to those relating to the Home Gateway Platform Division for pre-closing taxes and specified employment matters, and MaxLinear has assumed, and will indemnify Intel for, certain liabilities, including but not limited to those relating to the Home Gateway Platform Division and the Transferred Assets for certain pre-closing and post-closing actions, events and periods (including certain product-related liabilities for products sold prior to the Closing for up to a $ 25.0 million cap), and specified employment matters.

In connection with the transaction, the Company and Intel have entered into as of the closing certain other ancillary agreements, including (i) an intellectual property matters agreement, pursuant to which Intel will grant to the Company a license to certain intellectual property rights for use by the Company in connection with the acquired assets and the Company will grant back to Intel a license to the intellectual property rights in the acquired assets, (ii) a supply agreement, pursuant to which Intel will manufacture and fabricate certain products for the Company that are part of the acquired assets, (iii) an ethernet network controller services agreement, pursuant to which the Company will provide Intel with certain development services with respect to certain Intel ethernet network controller products, (iv) a transition services agreement, pursuant to which Intel will provide certain services on a transitional basis for up to a 12-month period after the closing, the scope of which includes services relating to real estate and facilities, information technology, and supply chain, procurement, sales operations, and engineering support, and (v) a side letter regarding the delayed transfer of certain inventory.

Pursuant to the delayed inventory side letter, the Company has control and economic benefits of the inventory, but the title and possession of the inventory has been delayed until the last day that Intel provides services under the transition services agreement.

Acquisition Consideration

The following table summarizes the fair value of purchase price consideration to acquire the Wi-Fi and Broadband assets business (in thousands):

Description Amount

Fair value of purchase consideration:

Cash $ 150,000

MAXLINEAR, INC.

1 unchanged sentence

(in thousands, except per share amounts and percentage data)

Purchase Price Allocation

The following is an allocation of purchase price as of the July 31, 2020 acquisition closing date based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition (in thousands):

Description Amount

Purchase price allocation:

Inventory $ 67,100

Property and equipment 17,641

Identifiable intangible assets 58,000

Deferred tax assets 457

Accrued expenses ( 68 )

Accrued price protection liability ( 413 )

Accrued compensation ( 7,916 )

Other long-term liabilities ( 8,197 )

Identifiable net assets acquired 126,604

Goodwill 23,396

Total purchase price $ 150,000

The fair value of inventories acquired with the Wi-Fi and Broadband assets business included acquisition accounting fair market value adjustments of $ 32.9 million.

The Company recognized $ 32.9 million in inventory fair value adjustments in cost of sales in the consolidated statement of operations for the year ended December 31, 2020.

The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets (in thousands):

Category Estimated Life in Years Fair Value

Finite-lived intangible assets:

Developed technology 7 $ 43,200

Customer-related intangible 5 6,800

Product backlog 0.58 800

Indefinite-lived intangible assets:

IPR&D N/A 7,200

Total identifiable intangible assets acquired $ 58,000

Acquisition of NanoSemi, Inc.

On September 9, 2020, the Company completed its acquisition of NanoSemi, Inc.

or NanoSemi, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with NanoSemi, dated September 9, 2020.

The initial closing transaction consideration consisted of $ 10.0 million in cash and 804,163 shares of MaxLinear’s common stock.

In addition, the NanoSemi securityholders will receive $ 35.0 million in deferred cash payments payable in 2021, and certain NanoSemi securityholders may also receive up to an additional $ 35.0 million in potential contingent consideration, subject to the acquired business’s satisfying certain financial objectives from July 1, 2020 through December 31, 2022.

The stock consideration was issued in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended.

In connection with the acquisition, MaxLinear agreed to provide the NanoSemi stockholders with certain registration rights with respect to the shares of MaxLinear common stock they received in the acquisition.

NanoSemi is an industry-leading provider of intellectual property that utilizes patented machine learning techniques to improve signal integrity and power efficiency in systems-on-chip, or SoCs, application-specific integrated circuits, or ASICs, and field-programmable gate arrays, or FPGAs, used in next-generation communication and artificial intelligence systems.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

technology enables higher throughput connections for 5G, Wi-Fi, and WiGig smartphones and base stations while simultaneously reducing energy consumption.

Acquisition Consideration

The following table summarizes the fair value of purchase price consideration to acquire NanoSemi (in thousands):

Description Amount

Fair value of purchase consideration:

Cash $ 10,000

Common stock issued (1)

Deferred payments (2)

Contingent consideration (3)

Total purchase price $ 61,180

_________________

(1) The fair value of common stock issued in the merger is based on 804,163 shares issued on the September 9, 2020 acquisition date at the closing price of the Company’s common stock of $ 21.24 per share.

(2) The fair value of the deferred payments was determined by discounting to present value payments totaling $ 35.0 million expected to be made to NanoSemi securityholders throughout 2021.

(3) The fair value of contingent consideration is zero as the applicable financial objectives from July 1, 2020 through December 31, 2022 are not expected to be met based on the Company's forecast.

Purchase Price Allocation

The following is an allocation of purchase price as of the September 9, 2020 acquisition closing date based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition (in thousands):

Description Amount

Purchase price allocation:

Accounts receivable $ 175

Prepaid expenses and other current assets 879

Property and equipment 177

Leased right-of-use assets 1,805

Identifiable intangible assets 19,900

Accounts payable ( 602 )

Accrued expenses and other current liabilities ( 323 )

Accrued compensation ( 223 )

Long-term lease liabilities ( 1,546 )

Other long-term liabilities ( 164 )

Identifiable net assets acquired 20,078

Goodwill 41,102

Total purchase price $ 61,180

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets (in thousands):

Category Estimated Life in Years Fair Value

Finite-lived intangible assets:

Developed technology 7 $ 17,500

Trademarks and tradenames 7 1,000

Customer-related intangible 5 900

Product backlog 5.33 500

Total identifiable intangible assets acquired $ 19,900

Assumptions in the Allocations of Purchase Price

Management prepared the purchase price allocations for the Wi-Fi and Broadband assets business and NanoSemi, and in doing so considered or relied in part upon reports of a third party valuation expert to calculate the fair value of certain acquired assets, which primarily included identifiable intangible assets, inventory, and property and equipment, and the portions of the purchase consideration for NanoSemi expected to be paid to NanoSemi securityholders in the future, as described above.

Certain NanoSemi securityholders that are employees are not required to remain employed in order to receive the deferred payments and contingent consideration;

accordingly, the fair value of the deferred payments and contingent consideration have been accounted for as a portion of the purchase consideration.

Estimates of fair value require management to make significant estimates and assumptions.

The goodwill recognized is attributable primarily to the acquired workforce, expected synergies, and other benefits that MaxLinear believes will result from integrating the operations of the Wi-Fi and Broadband assets business and NanoSemi with the operations of MaxLinear.

Certain liabilities included in the purchase price allocations are based on management’s best estimates of the amounts to be paid or settled and based on information available at the time the purchase price allocations were prepared.

Adjustments between the preliminary purchase price allocations initially recorded as reflected in the Company’s interim condensed consolidated financial statements as of September 30, 2020 and the amounts reflected as of December 31, 2020 primarily resulted from a refinement of the Company’s forecast with respect to the NanoSemi business, resulting in a decrease in estimated fair value of contingent consideration to $ 0 and a decrease in the valuation of intangible assets;

and updates to our evaluation of certain income tax positions with respect to both acquisitions.

Updates to the valuations of certain assets acquired and liabilities assumed and our evaluation of certain income tax positions may result in changes to the recorded amounts of assets and liabilities, with corresponding adjustments to goodwill amounts in subsequent periods.

We expect to complete the purchase price allocations within 12 months of the respective acquisition dates.

The fair value of the identified intangible assets acquired from the Wi-Fi and Broadband assets business and NanoSemi was estimated using an income approach.

Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset.

Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return.

More specifically, the fair value of the developed technology, IPR&D and backlog assets was determined using the multi-period excess earnings method, or MPEEM.

MPEEM is an income approach to fair value measurement attributable to a specific intangible asset being valued from the asset grouping’s overall cash-flow stream.

MPEEM isolates the expected future discounted cash-flow stream to its net present value.

Significant factors considered in the calculation of the developed technology and IPR&D intangible assets were the risks inherent in the development process, including the likelihood of achieving technological success and market acceptance.

Each project was analyzed to determine the unique technological innovations, the existence and reliance on core technology, the existence of any alternative future use or current technological feasibility and the complexity, cost, and time to complete the remaining development.

Future cash flows for each project were estimated based on forecasted revenue and costs, taking into account the expected product life cycles, market penetration, and growth rates.

Developed technology will begin amortization immediately and IPR&D will begin amortization upon the completion of each project.

If any of the projects are abandoned, the Company will be required to impair the related IPR&D asset.

In connection with the acquisition of the Wi-Fi and Broadband assets business, the Company has assumed liabilities which primarily consist of accrued employee compensation and benefits in jurisdictions where such transfer is required either by law or by work council agreement.

In connection with the acquisition of NanoSemi, the Company assumed certain operating liabilities.

The liabilities assumed in these acquisitions are included in the respective purchase price allocations above.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Goodwill recorded in connection with the Wi-Fi and Broadband assets business and NanoSemi was $ 23.4 million and $ 41.1 million, respectively.

The Company does not expect to deduct any of the acquired goodwill for tax purposes.

Proforma Combined Financial Information

The following table presents unaudited pro forma combined financial information for each of the periods presented, as if the acquisitions of the Wi-Fi and Broadband assets business and NanoSemi had occurred at the beginning of fiscal year 2019:

Years Ended December 31,

(in thousands)

Net revenue – proforma combined $ 703,165 $ 708,139

Net loss – proforma combined $ ( 101,783 ) $ ( 152,070 )

The following adjustments were included in the unaudited pro forma combined net revenues:

Years Ended December 31,

(in thousands)

Net revenue $ 478,596 $ 317,180

Net revenue – acquired businesses 224,569 390,959

Net revenues – proforma combined $ 703,165 $ 708,139

The following adjustments were included in the unaudited pro forma combined net loss:

Years Ended December 31,

(in thousands)

Net loss $ ( 98,593 ) $ ( 19,898 )

Results of operations – acquired businesses ( 63,882 ) ( 97,368 )

Proforma adjustments

Depreciation of property and equipment 5,810 2,020

Amortization of intangible assets 11,428 17,583

Inventory fair value adjustments 32,945 ( 32,945 )

Acquisition and integration expenses 14,243 ( 14,243 )

Interest expense ( 4,963 ) 2,816

Other expense 1,867 ( 7,604 )

Income taxes ( 638 ) ( 2,431 )

Net loss – proforma combined $ ( 101,783 ) $ ( 152,070 )

Net loss per share – proforma combined:

Basic $ ( 1.39 ) $ ( 2.12 )

Diluted $ ( 1.39 ) $ ( 2.12 )

Shares used to compute net loss per share – proforma combined:

Basic 73,133 71,809

Diluted 73,133 71,809

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The pro forma combined financial information for the year ended December 31, 2020 includes aggregate non-recurring adjustments of $ 33.7 million consisting of inventory fair value adjustments of $ 32.9 million and amortization of intangible assets of $ 0.8 million, respectively, for which the related assets have useful lives of less than one year.

The pro forma combined financial information is presented for illustrative purposes only and is not necessarily indicative of the consolidated results of operations of the consolidated business had the acquisitions actually occurred at the beginning of fiscal year 2019 or of the results of future operations of the consolidated business.

The unaudited pro forma financial information does not reflect any operating efficiencies and cost saving that may be realized from the integration of the acquisitions in the Company's consolidated statements of operations.

For the year ended December 31, 2020, $ 209.7 million of revenue and $ 110.7 million of gross profit, excluding $ 36.3 million consisting of inventory fair-value adjustments of $ 32.9 million and amortization of acquired intangible assets of $ 3.4 million for the Wi-Fi and Broadband assets business and NanoSemi since the acquisition date, are included in the Company’s consolidated statement of operations.

Acquisition and integration-related costs of $ 14.2 million related to the acquisitions of the Wi-Fi and Broadband assets business and NanoSemi were included in selling, general, and administrative expenses in the Company’s statement of operations for the year ended December 31, 2020.

Restructuring Activity

From time to time, the Company approves and implements restructuring plans as a result of internal resource alignment, and cost saving measures.

Such restructuring plans include terminating employees, vacating certain leased facilities, and cancellation of contracts.

The following table presents the activity related to the plans, which is included in restructuring charges in the consolidated statements of operations:

Years Ended December 31,

2020 2019 2018

(in thousands)

1 unchanged sentence

Lease related expenses 1,998 1,301 1,608

Included in employee separation expenses for the year ended December 31, 2017 is stock-based compensation from the acceleration of certain stock-based awards the Company assumed from Exar due to existing change in control provisions triggered upon termination or diminution of authority of former Exar executives of $ 5.1 million .

Lease related and other charges primarily related to exiting certain redundant facilities.

Other 215 185 136

$ 3,833 $ 2,636 $ 3,838

Lease related charges for the year ended December 31, 2020 included the impairment of leased right-of-use assets of $ 1.5 million related to a reduction in expected cash inflows from subleases.

Lease related and other charges for the years ended December 31, 2019 and 2018 primarily related to exiting certain redundant facilities.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The following table presents a roll-forward of the Company's restructuring liability for the years ended December 31, 2020 and 2019.

The restructuring liability is included in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.

Employee Separation Expenses

Lease Related Expenses

Employee Separation Expenses Lease Related Expenses Other Total

(in thousands)

Liability as of December 31, 2018 $ 409 $ 1,490 $ 47 $ 1,946

Transfer to right-of-use asset — ( 299 ) — ( 299 )

Restructuring charges 1,150 1,301 185 2,636

3 unchanged sentences

Restructuring charges 1,620 1,998 215 3,833

Transfer to right-of-use asset

Cash payments ( 2,165 ) ( 322 ) ( 36 ) ( 2,523 )

Reimbursement due from Intel (Note 6) 4,415 — — 4,415

Non-cash charges and adjustments ( 596 ) ( 1,774 ) ( 195 ) ( 2,565 )

2 unchanged sentences

Long-term portion as of December 31, 2020 $ — $ 369 $ — $ 369

Remaining lease related charges as of December 31, 2019 primarily consist of common area maintenance obligations.

As of December 31, 2020, the remaining employee separation balance primarily consists of reduction in force costs that will be reimbursed by Intel and other severance payments, and remaining lease related charges primarily consist of common area maintenance obligations.

The Company does not expect to incur additional material costs related to current restructuring plans.

Goodwill and Intangible Assets

1 unchanged sentence

The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company’s estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date).

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The following table presents the changes in the carrying amount of goodwill for the periods indicated:

2 unchanged sentences

Beginning balance $ 238,330 $ 238,330

Acquisitions (Note 3) 64,498 —

Ending balance $ 302,828 $ 238,330

The Company performs an annual goodwill impairment assessment on October 31st each year, using a two-step quantitative assessment.

Step one is the identification of potential impairment.

This involves comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill.

If the fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary.

If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any.

The Company determined there were no indications of impairment associated with goodwill.

As a result, no goodwill impairment was recognized as of October 31, 2019 .

The Company performs an annual goodwill impairment assessment on October 31st each year, using a quantitative assessment comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill.

If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

As a result of the Company's impairment assessment, no goodwill impairment was recognized as of October 31, 2020.

In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present.

3 unchanged sentences

The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which continue to be amortized:

December 31, 2019

December 31, 2018

Gross Carrying Amount

Accumulated Amortization

Net Carrying Amount

Gross Carrying Value

Accumulated Amortization

Net Carrying Amount

December 31, 2020 December 31, 2019

(in Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Value Accumulated Amortization Net Carrying Amount

(in thousands)

4 unchanged sentences

Non-compete covenants 3.0 1,100 ( 1,100 ) — 1,100 ( 1,083 ) 17

Backlog 2.4 1,300 ( 641 ) 659 — — —

6.2 $ 454,930 $ ( 254,864 ) $ 200,066 $ 381,517 $ ( 193,546 ) $ 187,971

The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:

Years Ended December 31,

2020 2019 2018

Cost of net revenue $ 37,784 $ 33,932 $ 35,821

1 unchanged sentence

Selling, general and administrative 23,529 23,035 31,976

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

$ 61,318 $ 57,015 $ 67,947

Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.

3 unchanged sentences

Beginning balance $ 187,971 $ 240,500

Acquisitions (Note 3) 70,700 —

Other additions 2,799 86

Transfers to developed technology from IPR&D — 4,400

Amortization ( 61,318 ) ( 57,015 )

Impairment losses ( 86 ) —

Ending balance $ 200,066 $ 187,971

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The Company regularly reviews the carrying amounts of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives.

1 unchanged sentence

Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value.

During the years ended December 31, 2019 and 2017, no impairment losses related to finite-lived intangible assets were recognized.

Impairment loss related to finite-lived intangible assets for the year ended December 31, 2018 was $2.2 million and related to acquired developed technology.

During the year ended December 31, 2019, no impairment losses related to finite-lived intangible assets were recognized.

Impairment losses related to finite-lived intangible assets for the year ended December 31, 2020 was $ 0.1 million and related to purchased licensed technology and for the year ended December 31, 2018 was $2.2 million and related to acquired developed technology.

The following table presents future amortization of the Company’s finite-lived intangible assets at December 31, 2020:

(in thousands)

2021 $ 66,772

Thereafter 16,074

Total $ 200,066

Indefinite-lived Intangible Assets

4 unchanged sentences

Beginning balance $ — $ 4,400

Acquisitions (Note 3) 7,200 —

Transfers to developed technology from IPR&D — ( 4,400 )

3 unchanged sentences

Based on the Company’s assessment as of October 31, 2020, no indicators of impairment were identified.

In the years ended

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

December 31, 2019 and 2018, no IPR&D impairment losses were recorded.

In the year ended December 31, 2017, the Company recognized impairment losses of $ 2.0 million related to the Company's abandonment of a single IPR&D project.

In the years ended December 31, 2020, 2019 and 2018, no IPR&D impairment losses were recorded.

Financial Instruments

The composition of financial instruments is as follows:

December 31, 2019

December 31, 2018

The composition of financial instruments were as follows:

December 31, 2020 December 31, 2019

(in thousands)

Interest rate swap

Contingent consideration (Note 3) $ — $ —

Interest rate swap $ — $ 37

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The fair values of the Company’s financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants and is recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities.

8 unchanged sentences

The Company also considers the risk of nonperformance by assessing the swap counterparty's credit risk in the estimate of fair value of the interest rate swap.

As of December 31, 2019 and 2018 , the Company has not made any adjustments to the valuations obtained from its third party pricing providers.

The following table presents a summary of the Company’s financial instruments that are measured on a recurring basis:

Fair Value Measurements

Quoted Prices

Identical Assets

(in thousands)

Interest rate swap, December 31, 2018

Interest rate swap, December 31, 2019

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Through the expiration of the swap in October 2020, the Company has not made any adjustments to the valuations obtained from its third party pricing providers.

The contingent consideration liability is associated with the Company’s acquisition of NanoSemi (Note 3) and is classified as a Level 3 financial instrument.

The fair value of contingent consideration is based on applying the Monte Carlo simulation method to forecast achievement under various contingent consideration events which may result in up to $35.0 million in payments subject to the acquired business’s satisfying certain financial objectives from July 1, 2020 through December 31, 2022, under the Merger Agreement.

Key inputs in the valuation include forecasted revenue, of which the financial objectives are not expected to be met, revenue volatility and discount rate.

Underlying forecast mathematics were based on Geometric Brownian Motion in a risk-neutral framework and discounted back to the applicable period in which the accumulative thresholds were achieved at discount rates commensurate with the risk and expected payout term of the contingent consideration.

The following are the financial instruments that are measured on a recurring basis.

The contingent consideration liability, a Level 3 financial instrument, was $ 0 as of December 31, 2020.

The interest rate swap, which expired in October 2020 and was a Level 2 financial instrument, was a liability of $ 0.04 million as of December 31, 2019.

The following table summarizes activity for the interest rate swap:

4 unchanged sentences

Unrealized gain (loss) recognized in other comprehensive income (loss) 122 ( 1,660 )

Gain recognized in earnings ( 85 ) —

Ending balance $ — $ ( 37 )

4 unchanged sentences

cash and cash equivalents, restricted cash, net receivables, certain other assets, accounts payable, accrued price protection liability, accrued expenses, accrued compensation costs, and other current liabilities.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The Company’s long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes (Note 8).

1 unchanged sentence

Cash, cash equivalents, and restricted cash consist of the following:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

(in thousands)

3 unchanged sentences

Total cash, cash equivalents and restricted cash $ 150,034 $ 93,117

As of December 31, 2019 and December 31, 2018 , cash and cash equivalents included $ 20.4 million and $ 0 of money market funds, respectively.

As of December 31, 2020 and December 31, 2019, cash and cash equivalents included $ 20.4 million and $ 20.4 million of money market funds, respectively.

As of December 31, 2020 and 2019, the Company has restricted cash of $ 1.1 million and $ 0.4 million, respectively.

1 unchanged sentence

Inventory consists of the following:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

(in thousands)

1 unchanged sentence

Finished goods 61,987 16,985

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

$ 97,839 $ 31,510

Prepaid and other current assets consist of the following:

December 31, 2020 December 31, 2019

(in thousands)

Prepaid expenses $ 7,674 $ 3,366

Other receivables 32,762 —

Other current assets 6,985 3,426

$ 47,421 $ 6,792

As of December 31, 2020, other receivables of $ 32.8 million consist of amounts due from Intel of approximately $ 28.4 million for amounts collected on the Company’s behalf from customers on sales of the Company’s products under the transition services agreement and of approximately $ 4.4 million for reimbursement of certain severance and other personnel-related costs pursuant to the Asset Purchase Agreement (Note 3).

Property and equipment consist of the following:

December 31, 2019

December 31, 2018

(in Years) December 31, 2020 December 31, 2019

(in thousands)

1 unchanged sentence

Machinery and equipment 3 - 5

55,456 35,660

Masks and production equipment 2 - 5

19,205 15,209

Software 3 7,194 5,956

Leasehold improvements 1 - 5

Construction in progress

16,871 16,186

Construction in progress N/A 8,050 746

109,300 75,956

Less accumulated depreciation and amortization ( 69,830 ) ( 59,343 )

$ 39,470 $ 16,613

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Depreciation expense for the years ended December 31, 2020, 2019, and 2018 was $ 11.3 million, $ 7.3 million, and $ 11.1 million, respectively.

5 unchanged sentences

Reversal of unclaimed rebates ( 159 ) ( 42 )

Payments ( 13,574 ) ( 28,304 )

Ending balance $ 47,766 $ 12,557

Accrued expenses and other current liabilities consist of the following:

December 31, 2019

December 31, 2018 (1)

December 31, 2020 December 31, 2019

(in thousands)

Deferred purchase price payments $ 34,484 $ —

Payables under transition services agreement 17,420 —

Accrued technology license payments 5,821 4,500

9 unchanged sentences

Accrued obligations to customers for stock rotation rights 2,036 1,410

(1) Due to the adoption of ASC 842 on January 1, 2019 with a cumulative effect adjustment to accumulated deficit, prior period amounts have not been adjusted to include short-term lease payment obligations.

Other 13,642 4,496

$ 105,842 $ 31,171

As of December 31, 2020, other payables of $ 17.4 million consist of amounts due to Intel of approximately $ 9.1 million for purchases of inventory and $ 8.3 million for other operating expenses incurred by Intel on behalf of MaxLinear under the transition services agreement (Note 3).

MAXLINEAR, INC.

2 unchanged sentences

The following table summarizes the balances in accumulated other comprehensive income (loss) by component:

Cumulative Translation Adjustments

Interest Rate Hedge

Cumulative Translation Adjustments Interest Rate Hedge Pension and Other Defined Benefit Plan Obligation Total

(in thousands)

1 unchanged sentence

Other comprehensive income (loss) before reclassifications, net of tax 160 ( 1,319 ) — ( 1,159 )

Net current period other comprehensive income (loss)

Cumulative effect of adoption of new accounting principles

Balance at December 31, 2019 ( 747 ) ( 140 ) — ( 887 )

Other comprehensive income (loss) before reclassifications, net of tax 1,010 225 1,172 2,407

Amounts reclassified, net of tax — ( 85 ) — ( 85 )

Net current period other comprehensive income (loss) 1,010 140 1,172 2,322

2 unchanged sentences

The carrying amount of the Company's long-term debt consists of the following:

December 31, 2019

December 31, 2018

December 31, 2020 December 31, 2019

(in thousands)

Principal balance:

Initial term loan $ 212,000 $ 212,000

Incremental term loan 157,812 —

369,812 212,000

Unamortized debt discount ( 1,767 ) ( 1,328 )

3 unchanged sentences

Long-term debt, non-current portion $ 363,592 $ 206,909

On May 12, 2017, the Company entered into a credit agreement with certain lenders and a collateral agent in connection with the acquisition of Exar (Note 3).

The credit agreement provides for an initial secured term B loan facility (the “Initial Term Loan”) in an aggregate principal amount of $ 425.0 million .

As of December 31, 2020 and 2019, the weighted average effective interest rate on long-term debt was approximately 4.4 % and 4.9 %, respectively.

During the year ended December 31, 2020, the Company recognized amortization of debt discount of $ 0.4 million and debt issuance costs of $ 1.1 million to interest expense.

During the year ended December 31, 2019, the Company recognized amortization of debt discount of $ 0.3 million and debt issuance costs of $ 0.9 million to interest expense.

During the year ended December 31, 2018, the Company recognized amortization of debt discount of $ 0.3 million and debt issuance costs of $ 0.8 million to interest expense.

The approximate fair value of the term loan as of December 31, 2020 and 2019 was $ 376.1 million and $ 214.6 million, respectively, which was estimated on the basis of inputs that are observable in the market and which is considered a Level 2 measurement method in the fair value hierarchy.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

As of December 31, 2020, future payments of principal are as follows:

(in thousands)

Total principal payments due 369,812

current portion —

Long-term debt principal, non-current portion $ 369,812

Initial Term Loan

On May 12, 2017, the Company entered into a credit agreement with certain lenders and a collateral agent in connection with the acquisition of Exar Corporation.

The credit agreement provides for an initial secured term B loan facility, or the

“Initial Term Loan,” in an aggregate principal amount of $ 425.0 million.

The credit agreement permits the Company to request incremental loans in an aggregate principal amount not to exceed the sum of $ 160.0 million (subject to adjustments for any voluntary prepayments), plus an unlimited amount that is subject to pro forma compliance with certain secured leverage ratio and total leverage ratio tests.

4 unchanged sentences

The Company is also required to pay fees customary for a credit facility of this size and type.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The Company is required to make mandatory prepayments of the outstanding principal amount of term loans under the credit agreement with the net cash proceeds from the disposition of certain assets and the receipt of insurance proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow beyond stated threshold amounts, and from the incurrence of certain indebtedness.

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If an event of default exists, the lenders may require immediate payment of all obligations under the credit agreement, and may exercise certain other rights and remedies provided for under the credit agreement, the other loan documents and applicable law.

As of December 31, 2019 and 2018 , the weighted average effective interest rate on long-term debt was approximately 4.9 % and 4.6 % , respectively.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The debt is carried at its principal amount, net of unamortized debt discount and issuance costs, and is not adjusted to fair value each period.

1 unchanged sentence

The debt discount of $ 2.1 million and debt issuance costs of $ 6.0 million are being amortized to interest expense using the effective interest method from the issuance date through the contractual maturity date of the term loan of May 12, 2024.

During the year ended December 31, 2019 , the Company recognized amortization of debt discount of $ 0.3 million and debt issuance costs of $ 0.9 million to interest expense.

During the year ended December 31, 2018 , the Company recognized amortization of debt discount of $ 0.3 million and debt issuance costs of $ 0.8 million to interest expense.

During the year ended December 31, 2017 , the Company recognized amortization of debt discount of $ 0.2 million and debt issuance costs of $ 0.6 million to interest expense.

The approximate fair value of the term loan as of December 31, 2019 and 2018 was $ 214.6 million and $ 268.1 million , respectively, which was estimated on the basis of inputs that are observable in the market and which is considered a Level 2 measurement method in the fair value hierarchy.

As of December 31, 2019 and 2018 , the remaining principal balance on the term loan was $ 212.0 million and $ 262.0 million , respectively.

The remaining principal balance is due on May 12, 2024 at the maturity date on the term loan.

Incremental Term Loan

In connection with the acquisition of the Wi-Fi and Broadband assets business, on July 31, 2020, the Company entered into an incremental term loan agreement with certain lenders that amends the credit agreement, dated as of May 12, 2017 with a secured incremental term loan facility in an aggregate principal amount of $ 175.0 million (the “Incremental Term Loan”).

The Incremental Term Loan bears interest, at the Company’s option, at an Adjusted LIBOR plus a fixed applicable margin of 4.25 % per annum or an Adjusted Base Rate plus a fixed applicable margin of 3.25 % per annum.

The Incremental Term Loan is subject to a financial covenant of an initial maximum total net leverage ratio of 3.5 to 1 which decreases to 3.0 to 1 beginning with the sixth full fiscal quarter ending after July 31, 2020.

During any period during which the Company (i) fails to maintain a public corporate rating from S&P that is equal to or higher than BB- and a public corporate rating from Moody's that is equal to or higher than Ba3 or (ii) fails to maintain a total leverage ratio of 3.0 to 1 or less, the applicable margin will increase to 4.75% in the case of LIBOR Rate loans and 3.75% in the case of Base Rate loans.

As of December 31, 2020, the Company was in compliance with such covenants.

Commencing on July 31, 2020, the Incremental Term Loan amortizes in quarterly installments of principal equal to (i) 1.25 % of the original aggregate principal amount of the Incremental Term Loan on the last day of each of the first through fourth full fiscal quarters of the Company after July 31, 2020, (ii) 2.50 % of the original aggregate principal amount of the Incremental Term Loan on the last day of each of the fifth through eighth full fiscal quarters of the Company after July 31, 2020, and (iii) 3.75 % of the original aggregate principal amount of the Incremental Term Loan on the last day of each of the ninth through the eleventh full fiscal quarters of the Company after July 31, 2020.

The Incremental Term Loan has a term of three years and will mature on July 31, 2023, at which time all outstanding principal and accrued and unpaid interest on the Incremental Term Loan is due.

The Company is also required to pay fees customary for a credit facility of this size and type.

The Company has made aggregate payments of principal of $ 17.2 million to date through December 31, 2020.

The debt is carried at its principal amount, net of unamortized debt discount and issuance costs, and is not adjusted to fair value each period.

The issuance date fair value of the liability component of the debt in the amount of $ 181.1 million was determined using a discounted cash flow analysis, in which the projected interest and principal payments were discounted back to the issuance date of the term loan at a market interest rate for nonconvertible debt of 3.2 %, which represents a Level 3 fair value measurement.

The debt discount of $ 0.9 million and debt issuance costs of $ 1.8 million are being amortized to interest expense using the effective interest method from the issuance date through the contractual maturity date of the term loan of July 31, 2023.

Interest Rate Swap

In November 2017, the Company entered into a fixed-for-floating interest rate swap with an amortizing notional amount to swap a substantial portion of variable rate LIBOR interest payments under its term loans for fixed interest payments bearing an interest rate of 1.74685 %.

The Company's outstanding debt is still subject to a 2.5 % fixed applicable margin during the term of the loan.

The interest rate swap is designated as a cash flow hedge of a portion of floating rate interest payments on long-term debt and effectively fixes the interest rate on a substantial portion of the Company’s long-term debt at approximately 4.25 % .

Accordingly, the Company applies cash flow hedge accounting to the interest rate swap and it is recorded at fair value as an asset or liability and the effective portion of changes in the fair value of the interest rate swap, as measured quarterly, are reported in other comprehensive income (loss).

As of December 31, 2019 and 2018 , the fair value of the interest rate swap was a $ 0.04 million liability and $ 1.6 million asset, respectively (Note 6 ).

The interest rate swap is included in other current liabilities in the consolidated balance sheets as of December 31, 2019.

The change in fair value related to the interest rate swap

The interest rate swap expired in October 2020.

The Company's outstanding debt was still subject to a 2.5 % fixed applicable margin during the term of the loan.

The interest rate swap was designated as a cash flow hedge of a portion of floating rate interest payments on long-term debt and effectively fixed the interest rate on a substantial portion of the Company’s long-term debt at approximately 4.25 %.

Accordingly, the Company applied cash flow hedge accounting to the interest rate swap and it was recorded at fair value as an asset or liability and the effective portion of changes in the fair value of the interest rate swap, as measured quarterly, were reported in other comprehensive income (loss).

As of December 31, 2019, the fair value of the interest rate swap was a $ 0.04 million liability and was included in other current liabilities in the consolidated balance sheet (Note 6).

The change in fair value related to the interest rate swap asset included in other comprehensive income (loss) for the years ended December 31, 2020, 2019, and 2018 was a $ 0.1 million increase, a $ 1.7 million decrease and a $ 0.9 million increase in fair value, respectively.

Upon expiration of the interest rate swap, a total $ 0.1 million of unrealized gain was recorded in interest income and included in gain/loss on foreign currency and other in the statement of cash flows at December 31, 2020.

MAXLINEAR, INC.

1 unchanged sentence

(in thousands, except per share amounts and percentage data)

asset included in other comprehensive income (loss) for the years ended December 31, 2019 , 2018 , and 2017 was a $ 1.7 million decrease, $ 0.9 million increase, and $ 0.7 million increase in fair value, respectively.

The interest rate swap expires in October 2020 and the total $ 0.04 million of unrealized loss recorded in accumulated other comprehensive income (loss) at December 31, 2019 is expected to be recorded in interest expense over the next twelve months, upon expiration of the interest rate swap.

Stock-Based Compensation and Employee Benefit Plans

On March 29, 2017, each share of the Company’s then outstanding Class A common stock and Class B common stock automatically converted into a single class of common stock pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation.

Also on March 29, 2017, the shares underlying outstanding stock options, restricted stock units and restricted stock awards automatically converted to rights to receive shares of a single class of common stock.

The conversion had no impact on the total number of issued and outstanding shares of capital stock;

the Class A shares and Class B shares converted into an equivalent number of shares of common stock.

The board of directors approved a reduction in the Company’s total number of authorized shares of capital stock by 65,445,853 from 1,575,000,000 to 1,509,554,147 to account for the 58,876,053 shares of Class A common stock and 6,569,800 shares of Class B common stock retired upon conversion, such that the authorized number of shares of Class A common stock is 441,123,947 and the authorized number of shares of Class B common stock is 493,430,200 .

No additional Class A shares or Class B shares will be issued following the conversion.

The authorized number of shares of common stock and preferred stock remain unchanged at 550,000,000 shares and 25,000,000 shares, respectively.

Following the conversion, each share of common stock is entitled to one vote per share and otherwise has the same designations, rights, powers and preferences as the Class A common stock prior to the conversion.

In addition, holders of the common stock vote as a single class of stock on any matter that is submitted to a vote of stockholders.

Prior to the conversion, the holders of the Company’s Class A and Class B common stock had identical voting rights, except that holders of Class A common stock were entitled to one vote per share and holders of Class B common stock were entitled to ten votes per share with respect to transactions that would result in a change of control of the Company or that relate to the Company’s equity incentive plans.

In addition, holders of Class B common stock had the exclusive right to elect two members of the Company’s Board of Directors, each referred to as a Class B Director.

The shares of Class B common stock were not publicly traded.

Each share of Class B common stock was convertible at any time at the option of the holder into one share of Class A common stock and in most instances automatically converted upon sale or other transfer.

Each share of common stock is entitled to one vote per share and holders of the common stock vote as a single class of stock on any matter that is submitted to a vote of stockholders.

Employee Compensation Plans

At December 31, 2020, the Company had stock-based compensation awards outstanding under the following plans:

the 2004 Stock Plan, the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP, and plans under which equity incentive awards were assumed in connection with the acquisitions of Entropic in 2015 and Exar Corporation in 2017.

All current stock awards are issued under the 2010 Plan and ESPP.

2010 Equity Incentive Plan

The 2010 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards.

The 2010 Plan, as amended, provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards.

The aggregate number of shares of common stock that may be issued pursuant to stock awards under the 2010 Plan will increase by any shares subject to stock options or other awards granted under the 2004 Stock Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awards granted under the 2004 Stock Plan that are forfeited to or repurchased by the Company.

4 unchanged sentences

Options granted will generally vest over a four years period and the term can be from seven to ten years .

In December 2018, the Company's board of directors approved an amendment to the plan to add a clawback policy, which requires the Company's executive officers to repay to MaxLinear certain incentive compensation if (i) the Company restates its financial statements as a result of a material error or due to material non-compliance with reporting requirements under applicable law;

The 2010 plan , as amended, contains a clawback policy, which requires the Company's executive officers to repay to MaxLinear certain incentive compensation if (i) the Company restates its financial statements as a result of a material error or due to material non-compliance with reporting requirements under applicable law;

(ii) no more than three (3) years have elapsed since the original filing date of the financial statements;

and (iii) an independent committee of the board’s compensation committee determines, in its sole discretion, that the misreporting

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

event occurred due to fraud or intentional misconduct within MaxLinear and, following consideration of such factors as the committee may deem reasonable and appropriate, including the extent to which an executive officer knew or should have known of the factors resulting in the misreporting, that the executive officer should repay any “recoverable compensation.” Recoverable compensation is defined in the clawback policy but generally includes any cash or equity compensation paid to executive officers under the Company's Executive Incentive Bonus Plan or 2010 Equity Incentive Plan to the extent the amount actually paid by MaxLinear exceeds the amount that would have been paid if the financial misreporting event had not occurred.

and (iii) an independent committee of the board’s compensation committee determines, in its sole discretion, that the misreporting event occurred due to fraud or intentional misconduct within MaxLinear and, following consideration of such factors as the committee may deem reasonable and appropriate, including the extent to which an executive officer knew or should have known of the factors resulting in the misreporting, that the executive officer should repay any “recoverable compensation.” Recoverable compensation is defined in the clawback policy but generally includes any cash or equity compensation paid to executive officers under the Company's Executive Incentive Bonus Plan or 2010 Equity Incentive Plan, as amended, to the extent the amount actually paid by MaxLinear exceeds the amount that would have been paid if the financial misreporting event had not occurred.

To date, there has been no repayment of compensation from executive officers pursuant to such clawback policy.

11 unchanged sentences

Generally, all eligible employees, including executive officers, employed by the Company may participate in the ESPP and may contribute up to 15 % of their earnings for the purchase of the Company’s common stock under the ESPP.

Unless otherwise determined by the Company’s board of directors, common stock will be purchased for accounts of employees participating in the ESPP at a price per share equal to the lower of (a) 85 % of the fair market value of a share of the Company’s common stock on the first date of an offering or (b) 85 % of the fair market value of a share of the Company’s common stock on the date of purchase.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

common stock on the date of purchase.

As of December 31, 2020, the number of shares of common stock reserved for future issuance under the ESPP is 3,365,693 shares.

3 unchanged sentences

When bonus awards are settled in common stock issued under the 2010 Plan, the number of shares issuable to plan participants is determined based on the closing sales price of the Company's common stock as determined in trading on the New York Stock Exchange on the date approved by the Board of Directors.

In February 2019 and 2018, the Company issued 0.3 million freely-tradable shares of its common stock in settlement of bonus awards to employees, including executives, for the 2018 and 2017 performance periods, respectively.

At December 31, 2019 , an accrual of $ 3.5 million was recorded for bonus awards for employees for the 2019 performance period, which the Company intends to settle in shares of its common stock to be issued under its 2010 Equity Incentive Plan, as amended, with the number of shares issuable to plan participants determined based on the closing sales price of the Company’s common stock as determined in trading on the New York Stock Exchange at a date to be determined.

In March 2020 and February 2019, the Company issued 0.2 million and 0.3 million freely-tradable shares, respectively, of its common stock in settlement of bonus awards to employees, including executives, for the 2019 and 2018 performance periods, respectively.

At December 31, 2020, an accrual of $ 32.8 million was recorded for bonus awards for employees for the 2020 performance period, which the Company intends to settle primarily in shares of its common stock, unless otherwise required to be settled in cash due to local laws or agreements.

Common stock in settlement of employee bonuses is to be issued under the Company’'s 2010 Equity Incentive Plan, as amended, with the number of shares issuable to plan participants determined based on the closing sales price of the Company’s common stock as determined in trading on the New York Stock Exchange at a date to be determined.

The Company's compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Stock-Based Compensation

1 unchanged sentence

Years Ended December 31,

2020 2019 2018

(in thousands)

3 unchanged sentences

Restructuring expense 596 — —

$ 47,597 $ 32,040 $ 31,721

The total unrecognized compensation cost related to unvested restricted stock units as of December 31, 2020 was $ 79.7 million, and the weighted average period over which these equity awards are expected to vest is 2.8 years.

4 unchanged sentences

Number of Shares

(in thousands)

Weighted-Average Grant-Date Fair Value per Share

(in thousands) Weighted-Average Grant-Date Fair Value per Share

Outstanding at December 31, 2019 2,924 $ 21.72

Granted 4,601 18.96

Vested ( 1,197 ) 20.57

Canceled ( 496 ) 18.44

Outstanding at December 31, 2020 5,832 20.05

Performance-Based Restricted Stock Units

Performance-based restricted stock units are eligible to vest at the end of each fiscal year in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over a multiple of four times the related results for the fourth quarter of 2018 relative to the growth rates for a peer group of companies for the same metrics and periods.

For the performance-based restricted stock units granted in 2019, 60 % of each performance-based award is subject to the net sales metric for the performance period and 40 % is subject to the non-GAAP diluted earnings per share metric for the performance period.

The maximum percentage for a particular metric is 250 % of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30 % and 100 % , respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period.

As of December 31, 2019 , the Company believes that it is probable that the Company will achieve performance metrics specified in the award agreement based on its expected revenue and non-GAAP diluted EPS results over the performance period and calculated growth rates relative to its peers’ expected results based on data available, as defined in the award agreement.

MAXLINEAR, INC.

1 unchanged sentence

(in thousands, except per share amounts and percentage data)

Performance-Based Restricted Stock Units

Performance-based restricted stock units are eligible to vest at the end of each fiscal year in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over baseline results relative to the growth rates for a peer group of companies for the same metrics and periods.

For the performance-based restricted stock units granted, 60 % of each performance-based award is subject to the net sales metric for the performance period and 40 % is subject to the non-GAAP diluted earnings per share metric for the performance period.

The maximum percentage for a particular metric is 250 % of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30 % and 100 %, respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period.

As of December 31, 2020, the Company believes that it is probable that the Company will achieve performance metrics specified in the award agreement based on its expected revenue and non-GAAP diluted EPS results over the performance period and calculated growth rates relative to its peers’ expected results based on data available, as defined in the respective award agreements.

A summary of the Company’s performance-based restricted stock unit activity is as follows:

Number of Shares

(in thousands)

Weighted-Average Grant-Date Fair Value per Share

(in thousands) Weighted-Average Grant-Date Fair Value per Share

Outstanding at December 31, 2019 445 $ 22.21

Vested ( 21 ) 22.21

Canceled ( 118 ) 15.98

Outstanding at December 31, 2020 1,722 13.97

6 unchanged sentences

Years Ended December 31,

2020 2019 2018

Weighted-average grant date fair value per share $ 6.41 - $ 8.66

2 unchanged sentences

Risk-free interest rate 0.12 % - 0.15 %

1.59 % - 2.43 %

2.09 % - 2.51 %

Dividend yield — % — % — %

Expected term (in years) 0.5 0.5 0.5

40.47 - 43.14%

Volatility 59.72 % - 93.25 %

40.47 % - 43.14 %

4 unchanged sentences

In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company's daily closing stock prices.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Stock Options

1 unchanged sentence

Number of Options

(in thousands)

Weighted-Average Exercise Price

Weighted-Average Contractual Term

Aggregate Intrinsic Value

(in thousands) Weighted-Average Exercise Price Weighted-Average Contractual Term

(in years) Aggregate Intrinsic Value

(in thousands)

Outstanding at December 31, 2019 1,337 $ 13.05

Exercised ( 496 ) 9.78

Canceled ( 44 ) 20.85

Outstanding at December 31, 2020 797 $ 14.67 2.7 $ 18,757

1 unchanged sentence

Exercisable at December 31, 2020 664 $ 13.90 2.4 $ 16,123

No stock options were granted by the Company during the year ended December 31, 2019 .

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

The fair values of stock options granted in 2018 and 2017 were estimated using the Black-Scholes option pricing model on the grant date using the following assumptions:

Years Ended December 31,

No stock options were granted by the Company during the years ended December 31, 2020 and 2019.

The fair values of stock options granted in 2018 were estimated using the Black-Scholes option pricing model on the grant date using the following assumptions:

Weighted-average grant date fair value per share $ 8.14

Risk-free interest rate 2.76 %

1.29% - 1.99%

Dividend yield — %

Expected term (in years) 5.50

45.39% - 50.32%

_____________

(1) On May 12, 2017, the Company assumed certain stock options and restricted stock units from Exar.

The assumptions above pertain to the Company's estimates of the fair value of such assumed equity awards, of which the vested portion was allocated to purchase price and the unvested portion allocated to future unrecognized compensation expense to be recognized over the remaining service period of the awards.

Volatility 44.30 %

The risk-free interest rate assumption was based on the U.S.

9 unchanged sentences

Years Ended December 31,

2020 2019 2018

(in thousands)

Domestic $ ( 112,778 ) $ ( 61,893 ) $ 16,405

Foreign ( 2,074 ) 29,409 ( 49,257 )

Loss before income taxes $ ( 114,852 ) $ ( 32,484 ) $ ( 32,852 )

The income tax provision (benefit) consists of the following:

MAXLINEAR, INC.

1 unchanged sentence

(in thousands, except per share amounts and percentage data)

The income tax provision (benefit) consists of the following:

Years Ended December 31,

2020 2019 2018

(in thousands)

Federal $ ( 176 ) $ 1,604 $ 3,292

State 12 16 37

Foreign 2,687 1,560 1,640

Total current 2,523 3,180 4,969

Federal ( 18,595 ) ( 13,793 ) 788

State ( 705 ) ( 1,829 ) ( 2,799 )

Foreign 8,025 1,095 ( 3,884 )

Change in valuation allowance ( 7,507 ) ( 1,239 ) ( 5,727 )

3 unchanged sentences

Years Ended December 31,

2020 2019 2018

(in thousands)

5 unchanged sentences

Foreign income inclusion 1,446 3,936 1,103

Transaction costs

Provision to return ( 286 ) 1,887 ( 27 )

Uncertain tax positions 222 1,244 1,463

Foreign tax credits

Permanent and other 131 716 1,319

Foreign unremitted earnings ( 233 ) ( 103 ) 1,960

Other tax rate changes

Tax Act — — 185

Transaction costs 883 — —

Attribute expirations 11,937 2,837 —

13 unchanged sentences

Stock-based compensation 5,415 3,460

168,066 160,597

Less valuation allowance ( 71,811 ) ( 77,957 )

96,255 82,640

Deferred tax liabilities:

Fixed assets ( 42 ) ( 246 )

Leased right-of-use assets ( 1,099 ) ( 1,483 )

2 unchanged sentences

At December 31, 2020, the Company had federal, state and foreign tax net operating loss carryforwards of approximately $ 281.3 million, $ 78.7 million and $ 4.4 million, respectively.

The federal, state and foreign tax loss carryforwards will begin to expire in 2020 , 2020 and 2026 respectively, unless previously utilized.

The federal and state tax loss carryforwards will begin to expire in 2021 and 2028, respectively, unless previously utilized.

The foreign tax loss carryforwards will not expire.

At December 31, 2020, the Company had federal, state and foreign tax credit carryforwards of approximately $ 49.0 million, $ 90.1 million and $ 1.9 million, respectively.

2 unchanged sentences

The Company also has foreign incentive deductions of approximately $ 5.8 million that do not expire.

In addition, the Company has $ 0.3 million of federal alternative minimum tax credit carryforwards that will be refundable in future years, due to the Tax Cuts and Jobs Act described below.

The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the temporary differences reverse.

2 unchanged sentences

Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years.

Based upon the Company's review of all positive and negative evidence, the Company released $ 51.2 million in valuation allowance against certain of its deferred tax assets in 2017.

In 2018, the Company released an additional $ 11.3 million of its valuation allowance as a result of completing its analysis of the effects of the Tax Act.

The Company believes it is more likely than not to realize certain federal and foreign deferred assets.

The Company continues to maintain a valuation allowance on its state deferred taxes, certain of its federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where the Company has cumulative losses or otherwise is not expected to utilize certain tax attributes.

The Company does not incur expense or benefit in certain tax-free jurisdictions in which it operates.

The income tax benefit for the year ended December 31, 2019 primarily related to the mix of pre-tax income among jurisdictions, discrete tax benefits related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10.

The income tax benefit for the year ended December 31, 2018 primarily related to a partial release of the Company's valuation allowance and the mix of pre-tax income among jurisdictions, excess tax benefits related to stock-based compensation, and release of uncertain tax positions under ASC 740-10.

The income tax benefit for the year ended December 31, 2020 primarily related to the generation of research and development tax credits, mix of pre-tax income among jurisdictions, excess tax benefits related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10.

The income tax benefit for the year ended December 31, 2019 and 2018 primarily related to the mix of pre-tax income among jurisdictions, discrete tax benefits related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10.

Income tax positions must meet a more-likely-than-not threshold to be recognized.

Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met.

Previously recognized tax positions that no longer meet the more-likely-than-not threshold are de-recognized

MAXLINEAR, INC.

1 unchanged sentence

(in thousands, except per share amounts and percentage data)

The income tax benefit for the year ended December 31, 2017 primarily related to the release of the federal valuation allowance in 2017 and the effects of the Tax Act.

Income tax positions must meet a more-likely-than-not threshold to be recognized.

Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met.

Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first financial reporting period in which that threshold is no longer met.

in the first financial reporting period in which that threshold is no longer met.

The Company records potential penalties and interest accrued related to unrecognized tax benefits within the consolidated statements of operations as income tax expense.

14 unchanged sentences

Additions based on tax positions related to the current year 1,506

Additions related to acquisitions 1,154

Decreases based on tax positions of prior year ( 922 )

4 unchanged sentences

Under the incentives, qualifying income derived from certain sales of the Company’s integrated circuits is taxed at a concessionary rate over the incentive period, and there are reduced Singapore withholding taxes on certain intercompany royalties during the incentive period.

Primarily because of the Company’s Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on the Company’s income tax expense in 2017, 2018, or 2019.

Employee Retirement Plan

On March 27, 2020, the U.S.

government enacted the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, a $2 trillion relief package comprising a combination of tax provisions and other stimulus measures.

The CARES Act broadly provides entities tax payment relief and significant business incentives and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, or the Tax Act.

The tax relief measures for entities include a five-year net operating loss carry back, increases interest expense deduction limits, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property.

The Act also provides other non-income tax benefits, including federal funding for a range of stabilization measures and emergency funding to assist those impacted by the COVID-19 pandemic.

Similar legislation is being enacted in other jurisdictions in which the Company operates.

ASC Topic 740, Income Taxes , requires the effect of changes in tax rates and laws on deferred tax balances to be recognized in the period in which new legislation is enacted.

The enactment of the CARES Act and similar legislation in other jurisdictions in which the Company operates was not material to the Company’s income tax benefit for the year ended December 31, 2020.

On July 27, 2015, the US Tax Court decided on behalf of Altera Corporation, or Altera US, that certain 2003 Internal Revenue Service, or IRS regulations underpinning the transfer pricing between related parties for shared costs were invalid.

The case involved the cost-sharing arrangement, or CSA entered into by Altera US with an international subsidiary.

Pursuant to the terms of the CSA, the parties agreed to share the risks and costs of research and development, or R&D activities, including granted stock options and other stock-based compensation, or SBC, to certain of its employees responsible for conducting the R&D activities.

In allocating the costs to be shared pursuant to that CSA, Altera US included the cash compensation of its

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

employees engaged in R&D in the shared cost pool but excluded their SBC.

The IRS had imposed transfer pricing adjustments in each of the tax years 2004 through 2007 on the basis of Altera US’ failure to include SBC costs in its CSA cost pool.

On June 7, 2019, in a 2-1 ruling, a panel of the Ninth Circuit Court of Appeals reversed the Tax Court’s holding and upheld a 2003 IRS regulation that requires participants in a CSA to share SBC costs.

After the Ninth Circuit Court’s reversal, Altera filed a petition for en banc review of the decision by Ninth Circuit judges.

The petition was denied, and the taxpayer decided to appeal to the Supreme Court.

On June 22, 2020, the Supreme Court of the United States announced that it was denying the petition for certiorari and will not review an appeals court decision in the case of Altera Corporation & Subsidiaries v.

Commissioner (Altera v.

The announcement represented new information that the Company considered in its second quarter tax provision for the six months ended June 30, 2020.

The evaluation of this ruling for all open tax periods was not material to the Company’s income tax benefit for the year ended December 31, 2020.

Employee Retirement Plans

Defined Contribution Plan

The Company has a 401(k) defined contribution retirement plan (the 401(k) Plan) covering all eligible employees.

1 unchanged sentence

The Company is not required to contribute, nor has it contributed, to the 401(k) Plan for any of the periods presented.

Pension and Other Defined Benefit Retirement Obligations

In connection with the July 31, 2020 acquisition of the Wi-Fi and Broadband assets business (Note 3), the Company assumed an obligation of $ 7.9 million associated with certain defined benefit retirement plans, including a pension plan.

The benefit is based on a formula applied to eligible employee earnings.

Net periodic benefit costs were $ 0.2 million for the year ended December 31, 2020 and were recorded to research and development expenses in the consolidated statement of operations.

Benefit Obligation and Plan Assets for Pension Benefit Plans

The vested benefit obligation for a defined-benefit pension or other retirement plan is the actuarial present value of the vested benefits to which the employee is currently entitled based on the employee's expected date of separation or retirement.

December 31, 2020

(in thousands)

Changes in projected benefit obligation:

Projected benefit obligation, beginning of period $ —

Projected benefit obligation assumed in acquisition 13,274

Service cost 157

Interest cost 59

Actuarial (gain) loss ( 1,172 )

Benefits paid ( 786 )

Currency exchange rate changes 490

Projected benefit obligation, end of period 12,022

Changes in fair value of plan assets:

Fair value of plan assets, beginning of period —

Plan assets transferred from acquisition 5,417

Currency exchange rate changes 217

Fair value of plan assets, end of period 5,634

Net unfunded status $ 6,388

Amounts recognized in the Consolidated Balance Sheets

Other long-term liabilities $ 6,388

Accumulated other comprehensive (income) loss, before tax $ ( 1,172 )

Changes in actuarial gains and losses in the projected benefit obligation are primarily driven by discount rate movement.

The Company uses the corridor approach to amortize actuarial gains and losses.

Under this approach, net actuarial gains or losses in excess of 10% of the larger of the projected benefit obligation or the fair value of plan assets are amortized on a straight-line basis.

As of December 31, 2020, all plans had accumulated benefit obligations and projected benefit obligations in excess of plan assets.

As of December 31, 2020, the accumulated benefit obligations were $ 11.1 million for the pension plans.

December 31, 2020

(in thousands)

Plans with accumulated benefit obligation in excess of plan assets

Accumulated benefit obligation $ 11,127

Plan assets $ 5,634

Plans with projected benefit obligation in excess of plan assets

Projected benefit obligation $ 12,022

Plan assets $ 5,634

Assumptions for Pension Benefit Plans

December 31, 2020

(in thousands)

Weighted average actuarial assumptions used to determine benefit obligations

Discount rate 0.5 % - 0.6 %

Rate of compensation increase 2.6 % - 3.8 %

Weighted average actuarial assumptions used to determine costs

Discount rate 0.5 % - 0.6 %

Expected long-term rate of return on plan assets 0.79 %

Rate of compensation increase 2.6 % - 3.8 %

The Company establishes the discount rate for each pension plan by analyzing current market long-term bond rates and matching the bond maturity with the average duration of the pension liabilities.

The Company establishes the long-term expected rate of return by developing a forward-looking, long-term return assumption for each pension fund asset class, taking into account factors such as the expected real return for the specific asset class and inflation.

A single, long-term rate of return is then calculated as the weighted average of the target asset allocation percentages and the long-term return assumption for each asset class.

Pension Plan Assets

The plan assets are currently all in liquid cash and cash equivalents and an investment strategy is being developed to ensure that sufficient assets are available to pay pension benefits as they come due.

Estimated Future Benefit Payments for Pension Benefit Plans

The estimated benefit payments over the next five years and beyond are as follows:

Estimated Future Benefit Payments

(in thousands)

Thereafter 762

Operating Leases

1 unchanged sentence

These leases often have original terms of 2 to 7 years and contain options to extend the lease up to 5 years or terminate the lease, which are included in leased right-of-use assets and lease liabilities in the consolidated balance sheet when the Company is reasonably certain it will renew the underlying leases.

Since the implicit rate of such leases is unknown and the Company is not reasonably

certain to renew its leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments.

As of December 31, 2019 , the weighted average discount rate for operating leases was 5.0 % and the weighted average remaining lease term for operating leases was 2.9 years .

Since the implicit rate of such leases is unknown and the Company is not reasonably certain to renew its leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments.

As of December 31, 2020 and 2019, the weighted

average discount rate for operating leases was 4.0 % and 5.0 %, respectively, and the weighted average remaining lease term for operating leases was 4.6 years and 2.9 years, respectively.

The table below presents aggregate future minimum payments due under leases, reconciled to lease liabilities included in the consolidated balance sheet as of December 31, 2020:

1 unchanged sentence

(in thousands)

Thereafter 4,794

Total minimum payments 30,658

imputed interest ( 2,655 )

unrealized translation loss

unrealized translation gain 1,013

Total lease liabilities 29,006

2 unchanged sentences

Operating lease costs were $ 5.2 million, $ 3.1 million and $ 4.5 million for the years ended December 31, 2020, 2019 and 2018, respectively.

Short-term lease costs for the year ended December 31, 2019 were not material.

There were $ 0.5 million of right-of-use assets obtained in exchange for new lease liabilities for the year ended December 31, 2019 .

The Company has subleased certain facilities that it ceased using in connection with a restructuring plan (Note 4 ).

Such subleases expire at various years through fiscal 2023 .

As of December 31, 2019 , future minimum rental income under non-cancelable subleases are as follows:

(in thousands)

Short-term lease costs for the years ended December 31, 2020 and 2019 were not material.

There were $ 15.9 million and $ 0.5 million of right-of-use assets obtained in exchange for new lease liabilities for the years ended December 31, 2020 and 2019, respectively, including $ 1.8 million in right-of-use assets from acquisitions in 2020 (Note 3).

The Company has a subleased facility that it ceased using in connection with a restructuring plan (Note 4).

Such sublease expires in fiscal 2021, and future minimum rental income under the sublease is $ 0.1 million.

Total sublease income related to leased facilities the Company ceased using in connection with a restructuring plan for the years ended December 31, 2020, 2019 and 2018 was approximately $ 0.4 million, $ 1.2 million and $ 2.4 million, respectively (Note 4).

3 unchanged sentences

As a result of such terminations, the Company reduced leased right-of-use assets by approximately $ 9.2 million, lease liabilities by approximately $ 10.1 million, and other related liabilities by approximately $ 0.3 million in the consolidated balance sheet.

The related net impact in the consolidated statement of operations was a gain of approximately

$ 1.2 million , which consisted of a gain on extinguishment of lease-related liabilities of $ 10.4 million , partially offset by impairment of leased right-of-use assets of $ 9.2 million .

The related net impact in the consolidated statement of operations was a gain of approximately $ 1.2 million, which consisted of a gain on extinguishment of lease-related liabilities of $ 10.4 million, partially offset by impairment of leased right-of-use assets of $ 9.2 million.

The Company also recorded impairment of related leasehold improvements of $ 1.4 million.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Commitments and Contingencies

1 unchanged sentence

As of December 31, 2020, future minimum payments under inventory purchase and other obligations are as follows:

Inventory Purchase Obligations

Other Obligations

Inventory Purchase Obligations Other Obligations Total

(in thousands)

2021 $ 71,211 $ 21,315 $ 92,526

2022 — 18,640 18,640

2023 — 10,121 10,121

2024 — 447 447

Total minimum payments $ 71,211 $ 50,523 $ 121,734

Other obligations consist of contractual payments due for software licenses.

CrestaTech Litigation

The Company was a defendant in patent litigation originally filed by CrestaTech Technology Corporation, or CrestaTech.

On January 21, 2014, CrestaTech filed a complaint for patent infringement against the Company in the United States District Court of Delaware, or District Court Litigation, alleging that the Company infringed U.S.

7,075,585, or the ‘585 Patent and 7,265,792, or the ‘792 Patent.

In addition to asking for compensatory damages, CrestaTech alleged willful infringement and sought a permanent injunction.

CrestaTech also named Sharp Corporation, Sharp Electronics Corp.

and VIZIO, Inc.

as defendants based upon their alleged use of the Company’s television tuners.

Following the litigation history described in the Company’s prior filings on Form 10-K and Form 10-Q, the District Court dismissed the District Court Litigation in April 2018.

While the successor plaintiff following a Chapter 7 bankruptcy proceeding of CrestaTech below had suggested that the dismissal may have been in error, it took no action to re-instate the case.

In the related bankruptcy proceeding, the plaintiff stated that it “no longer has any valid patent claims that it is asserting in any of the proceedings purchased under the Sale Agreement,” which includes the District Court Litigation against the Company in re Cresta Technology Corporation, Case No.

16-50808 (N.D.

2016) at Dkt.

In November 2019, the Company entered into a settlement agreement with CF Crespe resolving all outstanding matters with CF Crespe and CrestaTech (its predecessor-in-interest).

On December 5, 2019, the Federal Circuit dismissed the Company’s appeal from the inter partes review of CF Crespe’s patent number 7,075,585 -- the only remaining active matter as of the parties’ settlement.

The terms of the settlement are confidential, and the settlement did not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Trango Systems, Inc.

On or about August 2, 2016, Trango Systems, Inc., or Trango, filed a complaint in the Superior Court of California, County of San Diego, Central Division, against defendants Broadcom Corporation, Inc., or Broadcom, and the Company, collectively, Defendants.

Trango is a purchaser that alleges various fraud, breach of contract, and interference with economic relations claims in connection with the discontinuance of a chip line the Company acquired from Broadcom in 2016.

Trango seeks unspecified general and special damages, pre-judgment interest, expenses and costs, attorneys’ fees, punitive damages, and unspecified injunctive and equitable relief.

On June 23, 2017, the Court sustained the Company's demurrer to each cause of action in the second amended complaint filed on or about December 6, 2016.

Trango filed its third amended complaint on or about July 13, 2017.

On February 23, 2018, the Court sustained, in part, the Company's demurrer, dismissing with prejudice the cause of action for breach of a written contract, and Trango voluntarily dismissed its cause of action for breach of an implied-in-fact contract.

The remaining causes of action have been permitted to proceed.

On March 15, 2018, Trango filed its fourth amended complaint.

The Company filed its answer on April 17, 2018.

Also, on April 17, Broadcom filed a cross-complaint against the Company, alleging causes of action for indemnity, contribution and apportionment, and declaratory relief.

Broadcom voluntarily dismissed the cross-complaint on June 8, 2018.

On December 10, 2018, the Company filed a motion for summary judgment, or in the alternative summary adjudication concerning all of Trango’s causes of action asserted against it.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

entered into a settlement agreement and on June 6, 2019, the case was dismissed with prejudice.

The terms of the settlement are confidential, and the settlement did not have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

Our inventory purchase obligations and other obligations increased by $ 99.1 million to $ 121.7 million as of December 31, 2020, from $ 22.6 million as of December 31, 2019 primarily as a result of increased orders of software licenses and inventory placed with our vendors during the period, which is due in part to our 2020 acquisitions (Note 3).

Other Matters

2 unchanged sentences

Concentration of Credit Risk, Significant Customers and Geographic Information

Concentration of Credit Risk

Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable.

9 unchanged sentences

Years Ended December 31,

2020 2019 2018

Percentage of total net revenue

Customer A (direct) 15 % 14 % 18 %

Customer B (direct) 13 % * *

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Balances greater than 10% of accounts receivable, based on the Company’s billings to the contract manufacturer customers, are as follows:

Percentage of gross accounts receivable

Customer B (direct) 17 % *

Customer C (distributor) 13 % *

Customer D (distributor) * 10 %

Suppliers comprising greater than 10% of total inventory purchases are as follows:

Years ended December 31,

2020 2019 2018

Vendor A 34 % * *

Vendor B 20 % 14 % 19 %

Vendor C 11 % 17 % 16 %

Vendor D * 13 % 15 %

Vendor E * 15 13 %

* Represents less than 10% of the inventory purchases for the respective period.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Geographic Information

1 unchanged sentence

Years Ended December 31,

% of total net revenue

2020 2019 2018

Amount % of total net revenue Amount % of total net revenue Amount % of total net revenue

Asia $ 393,579 82 % $ 265,122 84 % $ 312,877 81 %

United States 15,501 3 % 13,984 4 % 18,060 5 %

Rest of world 69,516 15 % 38,074 12 % 54,060 14 %

Total $ 478,596 100 % $ 317,180 100 % $ 384,997 100 %

The products shipped to individual countries representing greater than 10% of net revenue for each of the periods presented are as follows:

Years Ended December 31,

2020 2019 2018

Percentage of total net revenue

Hong Kong 42 % 46 % 43 %

China 17 % 14 % 19 %

The determination of which country a particular sale is allocated to is based on the destination of the product shipment.

No other individual country accounted for more than 10% of net revenue during these periods.

Although a large percentage of the Company’s products is shipped to Asia, and in particular, China, the Company believes that a significant number of the systems designed by customers and incorporating the Company’s semiconductor products are subsequently sold outside Asia to Europe, Middle East, and Africa, or EMEA markets and North American markets.

Although a large percentage of the Company’s products is shipped to Asia, and in particular, Hong Kong and China, the Company believes that a significant number of the systems designed by customers and incorporating the Company’s semiconductor products are subsequently sold outside Asia to Europe, Middle East, and Africa, or EMEA markets and North American markets.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Long-lived assets, which consists of property and equipment, net, leased right-of-use assets, intangible assets, net, and goodwill, by geographic area are as follows (in thousands):

As of December 31,

Amount % of total Amount % of total

United States $ 403,071 72 % $ 385,302 85 %

Singapore 136,967 24 % 63,556 14 %

Rest of world 31,412 5 % 5,034 1 %

_____________

(1) Amounts do not include leased right-of-use assets in the prior period due to the adoption of ASC 842 under the modified retrospective method with a cumulative effect adjustment to accumulated deficit as of January 1, 2019.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Total $ 571,450 100 % $ 453,892 100 %

Revenue from Contracts with Customers

2 unchanged sentences

Year Ended December 31,

Connected home

Broadband $ 244,424 $ 119,320 $ 207,336

% of net revenue 51 % 38 % 54 %

3 unchanged sentences

% of net revenue 18 % 25 % 25 %

Connectivity 70,739 33,354 —

% of net revenue 15 % 11 % — %

Total net revenue $ 478,596 $ 317,180 $ 384,997

_______________

(1) Due to the adoption of ASC 606 on January 1, 2018 using the modified retrospective method, amounts prior to 2018 have not been adjusted to reflect the change to recognize certain distributor sales upon sale to the distributor, or the sell-in method, from recognition upon the Company's sale to the distributors' end customers, or the sell-through method, which required the deferral of revenue and profit on such distributor sales.

(1) The Company’s net revenues by market was revised during 2020 to align with changing end-market conditions, the Company’s current business priorities, as well as growth opportunities in the four categories.

The broadband category includes the Company’s prior connected home category plus the SoC business from the Wi-Fi and Broadband assets business, but excludes wired connectivity.

The infrastructure category remains unchanged.

Industrial and multi-market includes the previously reported revenue plus component revenues from the Wi-Fi and Broadband assets business.

The Company’s connectivity category includes primarily its MoCA/G.hn products and Wi-Fi and Ethernet revenues from the Wi-Fi and Broadband assets business.

The 2019 amounts were adjusted to reflect the change in market categories;

however, 2018 amounts have not been adjusted.

Revenues from sales to the Company’s distributors accounted for 49 %, 52 % and 42 % of net revenue for the years ended December 31, 2020, 2019 and 2018, respectively.

3 unchanged sentences

There were no material changes in the contract liabilities balance during the years ended December 31, 2020 and 2019.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Obligations to Customers for Price Adjustments and Returns and Assets for Right-of-Returns

8 unchanged sentences

As of December 31, 2020 and 2019, there were no impairment losses recorded on customer accounts receivable.

MAXLINEAR, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in thousands, except per share amounts and percentage data)

Selected Quarterly Financial Data (Unaudited)

3 unchanged sentences

Year Ended December 31, 2020

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Net revenue $ 62,027 $ 65,220 $ 156,633 $ 194,716

Gross profit $ 30,762 $ 32,743 $ 66,206 $ 83,087

Net loss $ ( 15,469 ) $ ( 21,807 ) $ ( 36,645 ) $ ( 24,672 )

Net loss per share:

Basic $ ( 0.21 ) $ ( 0.30 ) $ ( 0.50 ) $ ( 0.33 )

Diluted $ ( 0.21 ) $ ( 0.30 ) $ ( 0.50 ) $ ( 0.33 )

Year Ended December 31, 2019

First Quarter

Second Quarter

Third Quarter

Fourth Quarter

First Quarter Second Quarter Third Quarter Fourth Quarter

(in thousands, except per share amounts)

Net income (loss)

Net income (loss) per share:

Net revenue $ 84,635 $ 82,507 $ 80,020 $ 70,018

Gross profit $ 45,077 $ 44,080 $ 41,904 $ 36,624

Net loss $ ( 4,851 ) $ ( 2,229 ) $ ( 4,714 ) $ ( 8,104 )

Net loss per share:

Basic $ ( 0.07 ) $ ( 0.03 ) $ ( 0.07 ) $ ( 0.11 )

Diluted $ ( 0.07 ) $ ( 0.03 ) $ ( 0.07 ) $ ( 0.11 )

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures