What changed in this filing

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Item 1A. Risk Factors

2021-04-28 compared with 2020-11-05 · 347 added, 294 removed, 454 unchanged (59% of the section changed)

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Before you decide whether to invest in our securities, you should carefully consider the risk factors discussed in our Annual Report on Form 10-K, which we filed with the SEC on February 11, 2021, or the Annual Report, together with all of the other information included in this Quarterly Report on Form 10-Q, and in our other public filings, which could materially affect our business, financial condition or future results.

Risk Factor Summary

Risks Relating to our Acquisitions

• Our actual financial and operating results could differ materially from any expectations or guidance provided by us concerning future results, including with respect to any cost savings and other potential synergies.

• Failure to integrate the acquired businesses successfully in the expected time-frame may adversely affect our results and financial condition.

• Our business relationships, including customer relationships, may be subject to disruption due to uncertainty associated with the acquisitions.

• We may have difficulty motivating and retaining key personnel in light of the acquisitions.

• We have incurred material secured term loan indebtedness which adversely affects our operating results and cash-flows and contains covenants that could adversely affect our operational freedom and ability to pursue strategic transactions.

Risks Related to Our Business

• Impacts of the COVID-19 pandemic and global semiconductor chip shortage could adversely affect our business, financial condition, and results of operations.

• We face intense competition expected to increase in the future, which could have an adverse effect on our revenue, revenue growth rate, if any, and market share.

• We depend on a limited number of customers, who themselves are dependent on a consolidating set of service provider customers, for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from our major customers could have a material adverse effect on our revenue and operating results.

• A significant portion of our revenue is attributable to demand for our products in markets for broadband (previously connected home) solutions, and development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

• If we fail to penetrate new applications and markets, our revenue, revenue growth rate, if any, and financial condition could be materially and adversely affected.

• We may be unable to make the substantial and productive research and development investments that are required to remain competitive in our business.

• A significant variance in our operating results or rates of growth, if any, could lead to substantial volatility in our stock price.

We may not sustain our current growth rate, and we may not be able to manage future growth effectively.

• The complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the market acceptance of our new products, damage our reputation and adversely affect our operating costs.

• Average selling prices of our products could decrease rapidly, which would have a material adverse effect on our revenue and gross margins.

• If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and our competitive position could be harmed.

• We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actual results could negatively affect our inventory levels, sales and operating results.

• We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses particularly as we seek to enter new markets where we may not have prior experience.

• If we are unable to attract, train and retain qualified design and technical personnel, we may not be able to execute our business strategy effectively.

• Our business would be adversely affected by the departure of existing members of our senior management team.

• Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process which does not assure product sales.

• Winning business is subject to lengthy competitive selection processes that require us to incur significant expenditures and customers may decide to cancel or change their product plans, which could cause us to generate no revenue from a product and adversely affect our results of operations.

• Our operating results are subject to substantial quarterly and annual fluctuations due to a number of factors that could adversely affect our business and our stock price.

• We are subject to the cyclical nature of the semiconductor industry.

• Our business, financial condition and results of operations could be adversely affected by political and economic conditions and other factors related to our international operations.

• Our business is subject to various governmental regulations, and if we fail to maintain compliance, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Risks Relating to Intellectual Property

• We may face future claims of intellectual property infringement, which could be time-consuming, costly to defend or settle and result in the loss of significant rights.

• If we are unable to protect our significant amount of intellectual property, our business could be adversely affected.

• We have been and may be subject to future information technology failures, including data protection breaches and cyber-attacks, that could disrupt our operations, damage our reputation and adversely affect our business, operations, and financial results.

Risks Relating to Reliance on Third Parties

• We rely on a limited number of third parties to manufacture, assemble, and test our products, and the failure to manage our relationships with our third-party contractors successfully, or impacts from natural disasters, public health crises, or other labor stoppages in the regions where such contractors operate, could adversely affect our ability to market and sell our products.

• Should any of our distributors cease or be forced to stop distributing our products, our business would suffer.

• We do not have any long-term supply contracts with our contract manufacturers or suppliers, and any disruption in our supply of products or materials could have a material adverse effect on our business, revenue and operating results.

• We rely on third parties to provide services and technology necessary for the operation of our business.

Any failure of one or more of our partners, vendors, suppliers or licensors to provide these services or technology could have a material adverse effect on our business.

Risks Relating to Our Common Stock

• Our management team may use our available cash and cash equivalents in ways with which you may not agree or in ways which may not yield a return.

• Anti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by our stockholders to replace or remove our current management and limit the market price of our common stock.

• Our share price may be volatile as a result of various factors.

Risks Relating to our Acquisitions

Our actual financial and operating results could differ materially from any expectations or guidance provided by us concerning future results, including (without limitation) expectations or guidance with respect to the financial impact of any cost savings and other potential synergies.

We currently expect to realize material synergies as a result of our acquisitions of the Home Gateway Platform Division of Intel Corporation, or Intel, which we refer to as the WiFi and Broadband assets business and NanoSemi, Inc., or NanoSemi, and as a result, we currently believe that the acquisitions will, in aggregate, be accretive to our free cash-flow and non-GAAP earnings per share, excluding upfront non-recurring charges, transaction related expenses, and the amortization of purchased intangible assets and step-up to fair value of inventory.

We currently expect to realize material synergies as a result of our acquisitions of the Home Gateway Platform Division of Intel Corporation, or Intel, which we refer to as the Wi-Fi and Broadband assets business, and NanoSemi, Inc., or NanoSemi, and as a result, we currently believe that the acquisitions will, in aggregate, be accretive to our free cash-flow and non-GAAP earnings per share, excluding upfront non-recurring charges, transaction related expenses, and amortization of purchased intangible assets.

The expectations and guidance we have provided with respect to the potential financial impact of the acquisitions are subject to numerous assumptions, however, including assumptions derived from our diligence efforts concerning the status of and prospects for the acquired businesses and assumptions relating to the near-term prospects for the semiconductor industry generally and the markets for the products of the acquired businesses in particular.

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• certain other purchase accounting adjustments that we recorded in our financial statements in connection with the acquisitions;

• acquisition costs, including restructuring charges and transactions costs to our financial, legal, and accounting advisors;

• acquisition costs, including restructuring charges, acquisition transition and integration costs;

• our ability to maintain, develop, and deepen relationships with customers of the acquired businesses;

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Failure to integrate the acquired businesses with our business and operations successfully in the expected time-frame or otherwise may adversely affect MaxLinear’s operating results and financial condition.

The success of the acquisitions of the WiFi and Broadband assets business and NanoSemi will depend, in substantial part, on our ability to integrate the acquired businesses with MaxLinear and to realize fully the anticipated benefits and potential synergies from the integration, including, among others, currently expected cost savings from duplicative functions;

The success of the acquisitions of the Wi-Fi and Broadband assets business and NanoSemi will depend, in substantial part, on our ability to integrate the acquired businesses with MaxLinear and to realize fully the anticipated benefits and potential synergies from the integration, including, among others, currently expected cost savings from duplicative functions;

potential operational efficiencies in our respective supply chains and in research and development investments;

and potential revenue growth resulting from the addition of the product portfolio of the acquired businesses.

Certain of the acquired products of the WiFi and Broadband assets business are supplied to us under the terms of a supply agreement with Intel.

Certain of the acquired products of the Wi-Fi and Broadband assets business are supplied to us on a turnkey basis under the terms of a supply agreement with Intel.

While we believe this supply agreement mitigates certain near-term integration risks, we also rely on Intel as a source of supply for these products.

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As a result, we are in many instances unable to evaluate the impact of the acquisitions on certain assumed contract rights and obligations, including intellectual property rights.

These business relationships may be subject to disruption as customers and others may elect to delay or defer purchase or design-win decisions or switch to other suppliers due to the uncertainty about the direction of our offerings, any perceived unwillingness on our part to support existing products of the acquired businesses, or any general perceptions by customers or other third parties that impute operational or business challenges to us arising from the acquisitions.

other third parties that impute operational or business challenges to us arising from the acquisitions.

In addition, customers or other third parties may attempt to negotiate changes in existing business relationships, which may result in additional obligations imposed on us.

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Employee retention may be particularly challenging as our employees may experience frustrations during the integration process and uncertainty about their future roles with us following completion of integration of the acquired businesses, which also operate in jurisdictions materially affected by the COVID-19 pandemic.

In particular, the WiFi and Broadband assets business has major engineering, development, and other personnel in Germany, Austria, Israel, India, Singapore, Taiwan, Hong Kong, and China and NanoSemi has engineering and development personnel in Boston, Massachusetts.

Attempting to complete the integration of these acquired businesses and new personnel around the world has been and will continue to be substantially complicated by continuing restrictions on travel and social distancing.

We are taking various steps to mitigate these risks, but we cannot predict whether or to what extent the pandemic may adversely affect our ability to retain employees and successfully integrate the acquired businesses.

MaxLinear must be successful at retaining and motivating key employees in order for the benefits of the transactions to be fully realized.

If key employees depart, we may incur significant costs in identifying, hiring, and retaining replacements, which could substantially reduce or delay our ability to realize the anticipated benefits of the acquisitions, which could have a material adverse effect on our business, operating results, and financial condition.

We have incurred approximately $175.0 million of incremental secured term loan indebtedness, primarily to fund our $150.0 million acquisition of the WiFi and Broadband assets business, bringing our aggregate indebtedness to $387.0 million at September 30, 2020.

We have incurred approximately $175.0 million of incremental secured term loan indebtedness, primarily to fund our $150.0 million acquisition of the Wi-Fi and Broadband assets business.

As of March 31, 2021, our aggregate indebtedness was $349.8 million.

Such indebtedness adversely affects our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations and contains financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

MaxLinear financed the $150.0 million acquisition of the WiFi and Broadband assets business in part with an incremental secured term loan facility in an aggregate principal amount of approximately $175.0 million, bringing our aggregate indebtedness to $387.0 million at September 30, 2020.

MaxLinear financed the $150.0 million acquisition of the Wi-Fi and Broadband assets business in part with an incremental secured term loan facility in an aggregate principal amount of approximately $175.0 million, of which $137.8 million was outstanding as of March 31, 2021.

The incremental term loan has a three-year term expiring in July 2023 and bears interest, at our option, at either 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.

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The incremental term loan facility is secured by a first priority security interest in MaxLinear’s assets, subject to certain customary exceptions, as well as pledges of our equity interests in certain subsidiaries.

We have previously only carried long term debt on our balance sheet from one acquisition.

We have prepaid a substantial portion of the total principal of debt from the prior acquisition and have financed the remainder of our operations principally

through working capital generated from operations as well as sales and issuances of our equity securities.

MaxLinear previously financed the acquisition of Exar in part with a secured initial term loan facility in an aggregate principal amount of approximately $425.0 million, of which $212.0 million remained outstanding as of September 30, 2020.

We had previously only carried long term debt on our balance sheet from one acquisition.

We have prepaid a substantial portion of the total principal of debt from the prior acquisition and have financed the remainder of our operations principally through working capital generated from operations as well as sales and issuances of our equity securities.

The outstanding principal on the initial term loan is due at maturity on May 12, 2024.

Our outstanding initial term loan debt is subject to a Adjusted LIBOR plus a 2.5% fixed applicable margin during the remainder of the term of the loan.

Our outstanding initial term loan debt is subject to an Adjusted LIBOR plus a 2.5% fixed applicable margin during the remainder of the term of the loan.

The existing term loan facility is secured by a first priority security interest in MaxLinear’s assets, subject to certain customary exceptions, as well as pledges of our equity interests in certain subsidiaries.

As of March 31, 2021, our aggregate indebtedness under the initial and incremental term loan facilities was $349.8 million.

Our material incremental indebtedness adversely affects our operating expenses through increased interest payment obligations and adversely affects our ability to use cash generated from operations as we repay interest and principal under the term loans.

In addition, the incremental term loan provisions include financial covenants such as 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 after July 31, 2020, a requirement to maintain certain public corporate debt ratings, and operational covenants that may adversely affect our ability to engage in certain activities, including certain financing and acquisition transactions, stock repurchases, guarantees, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

The initial secured term loan is only subject to operational covenants.

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Goodwill and other acquired intangible assets could become impaired and adversely affect our future operating results.

The acquisitions of the WiFi and Broadband assets business and NanoSemi are accounted for as business combinations under the acquisition method of accounting by MaxLinear in accordance with accounting principles generally accepted in the United States.

The acquisitions of the Wi-Fi and Broadband assets business and NanoSemi are accounted for as business combinations under the acquisition method of accounting by MaxLinear in accordance with accounting principles generally accepted in the United States.

Under the acquisition method of accounting, the assets and liabilities of acquired businesses are recorded, as of completion, at their respective fair values and added to our assets and liabilities.

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We conduct our annual goodwill and indefinite-lived intangible asset impairment analysis on October 31 each year, or more frequently if we believe indicators of impairment exist.

In addition, there can be no guarantee that acquired intangible assets, particularly in-process research and development, will generate revenues or profits that we include in our forecast that is the basis for their fair values as of the acquisition date.

In addition, there can be no guarantee that acquired

intangible assets, particularly in-process research and development, will generate revenues or profits that we include in our forecast that is the basis for their fair values as of the acquisition date.

Any such impairment charges relating to goodwill or other intangible assets could have a material impact on our operating results in future periods, and the announcement of a material impairment could have an adverse effect on the trading price and trading volume of our common stock.

As of September 30, 2020, our balance sheet reflected goodwill of $302.6 million and other intangible assets of $232.1 million.

As of March 31, 2021, our balance sheet reflected goodwill of $302.8 million and other intangible assets of $191.5 million.

Consequently, we could recognize material impairment charges in the future.

In addition to our acquisitions of the WiFi and Broadband assets business and NanoSemi, we may, from time to time, make additional business acquisitions or investments, which involve significant risks.

We have completed multiple acquisitions in the past three years.

In addition to our acquisitions of the Wi-Fi and Broadband assets business and NanoSemi, we may, from time to time, make additional business acquisitions or investments, which involve significant risks.

We have completed multiple acquisitions in the past four years.

We may also enter into alliances or make investments in other businesses to complement our existing product offerings, augment our market coverage or enhance our technological capabilities.

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Risks Related to Our Business

Impacts of the COVID-19 pandemic could adversely affect our business, financial condition, and results of operations.

Impacts of the COVID-19 pandemic and global semiconductor chip shortage could adversely affect our business, financial condition, and results of operations.

In late January 2020 and early February 2020, in response to a severe outbreak of the novel coronavirus disease, or COVID-19, the government of China instituted mandatory quarantines in Wuhan, China, extended lunar new year holiday closures, and restricted shipments out of the country.

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On March 11, 2020, the World Health Organization declared a global pandemic regarding COVID-19.

The COVID-19 pandemic has reached all of the countries and states in which we operate, including in California where our headquarters and central engineering team are located, as well as Spain, India, Singapore, Taiwan, Canada, France, Japan, South Korea, Hong Kong, Israel, Germany and Austria, where additional engineering, sales, and administrative personnel are located.

The COVID-19 pandemic has reached all of the countries and states in which we operate, including in California where our headquarters and central engineering team are located, as well as Spain, India, Singapore, Taiwan, Canada, Japan, South Korea, Hong Kong, Israel, Germany, and Austria, where additional engineering, sales, and administrative personnel are located.

In many of these jurisdictions, local authorities have instituted stay-at-home or shelter-in-place orders.

To protect the health and safety of our employees, we adopted social distancing policies including suspending employee travel and implementing remote work arrangements for substantially all of our workforce worldwide.

As of September 30, 2020, some of our workforce have returned to the office at reduced capacity adhering to local health authority guidelines.

While we have experienced some negative impact to our net revenue and gross profits in the first half of 2020 due to several industry-wide dynamics related to COVID-19, including supply constraints described above, as well as certain customer push-out requests, we are currently benefiting from the work-from-home environment that is driving an increase in demand for certain of our products.

As of March 31, 2021, some of our workforce have returned to the office at reduced capacity adhering to local health authority guidelines and we are encouraging our employees to get COVID-19 vaccines as they become available.

While we experienced some negative impact to our net revenue and gross profits in the first half of 2020 due to several industry-wide dynamics related to COVID-19, including supply constraints described above, as well as certain customer push-out requests, since then, we have been benefiting from the work-from-home environment that is driving an increase in demand for certain of our products.

However, a sudden increase in demand for electronics containing semiconductor chips and stockpiling of chips by certain firms in China blacklisted by the U.S.

has exacerbated bottlenecks in the supply chain, resulting in a global semiconductor chip shortage impacting our industry.

Some chip manufacturers are estimating this supply shortage may continue into 2022.

While these chip manufacturers are working to increase capacity in the future, and we are continuing to work closely with our suppliers and customers to minimize the potential adverse impacts of the supply shortage, such shortage may have a near-term impact on our ability to meet increased demand on certain products and have a negative impact on our operating results beginning in the second quarter of 2021, which may continue into 2022.

Further, global financial markets reacted negatively to the COVID-19 pandemic’s impacts causing significant declines in the stock price and market capitalization of many companies across all industries, although some have recovered.

Heightened volatility and uncertainty in customer demand and the worldwide economy in general has continued as a result of the COVID-19 pandemic, and we may experience increased volatility in sales and revenues in the near future.

Heightened volatility, global supply shortages, and uncertainty in customer demand and the worldwide economy in general has continued as a result of the COVID-19 pandemic, and we may experience increased volatility in sales and revenues in the near future.

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

Other areas of our business which could be disrupted or subject to negative impacts may include, but may not be limited to, the following:

• Decreased demand in geographic locations more severely impacted by the outbreak, particularly in the U.S.

• Further supply constraints, including delays in production from temporary facility closures, supply shortages, and foundry, assembly or test capacity limitations;

• Further supply constraints, including prolonged global semiconductor chip shortages, foundry, assembly or test capacity limitations, and delays in production from temporary facility closures;

• Disruptions in product shipments from travel and shipping restrictions imposed in response to local outbreaks;

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• Increased data security risks from remote working arrangements of our employees and those of our customers and vendors.

Although we currently expect that our present cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our 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 we pursue additional acquisitions.

Although we currently expect that our present cash and cash equivalent balances and cash flows that are generated from operations will be sufficient to meet our operating requirements for at least the next twelve months, a material adverse impact from COVID-19 and global semiconductor chip shortages could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions.

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

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As our products are integrated into a variety of communications and industrial platforms, our competitors range from large, international merchant semiconductor companies offering a wide range of semiconductor products to smaller companies specializing in narrow markets, to internal or vertically integrated engineering groups within certain of our customers.

Our primary merchant semiconductor competitors include Silicon Labs, NXP Semiconductors N.V., MediaTek, Inc., Broadcom Ltd, Rafael Microelectronics, Inc., Inphi Corporation, M/A-COM Technology Solutions Holdings, Inc., Semtech Corporation, Qorvo Inc., Texas Instruments, HiSilicon Technologies Co., Ltd., Analog Devices, Renesas Electronics Corporation, Maxim Integrated Products, Inc.

(which recently entered into a definitive agreement to be acquired by Analog Devices), Monolithic Power Systems, Microchip Technology, Inc., Ambarella, Inc., and Infineon Technologies AG.

Our primary merchant semiconductor competitors include Silicon Laboratories, Inc., NXP Semiconductors N.V., MediaTek, Inc., Broadcom Ltd, Rafael Microelectronics, Inc., Inphi Corporation (which recently entered into a definitive agreement to be acquired by Marvell Technology Group Ltd.), M/A-COM Technology Solutions Holdings, Inc., Semtech Corporation, Qorvo Inc., Texas Instruments Incorporated, HiSilicon Technologies Co., Ltd., Analog Devices, Inc., Renesas Electronics Corporation, Maxim Integrated Products, Inc.

(which entered into a definitive agreement to be acquired by Analog Devices), Monolithic Power Systems, Inc., Microchip Technology, Inc., Ambarella, Inc., and Infineon Technologies AG.

It is quite likely that competition in the markets in which we participate will increase in the future as existing competitors improve or expand their product offerings.

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If we cannot offer an attractive solution for applications where our competitors offer more fully integrated products, we may lose significant market share to our competitors.

Certain of our competitors have fully-integrated tuner/demodulator/video processing solutions targeting high-performance cable, satellite, or DTV applications, and thereby

potentially provide customers with smaller and cheaper solutions.

Some of our targeted customers for our optical interconnect solutions are module makers who are vertically integrated, where we compete with internally supplied components, and we compete with much larger analog and mixed-signal catalog competitors in the multi-market high-performance analog markets.

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Moreover, the competitive landscape is changing as a result of intense consolidation within our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun to collaborate with each other.

In addition, changes in government trade policies, including the imposition of tariffs and export restrictions, could limit our ability to sell our products to certain customers and adversely affect our ability to compete successfully.

In addition, changes in government trade policies, including the imposition of tariffs and export restrictions, could limit our ability to sell our products to certain customers and adversely affect

our ability to compete successfully.

These developments may materially and adversely affect our current and future target markets and our ability to compete successfully in those markets.

We depend on a limited number of customers, that have undergone or are undergoing consolidation and who themselves are dependent on a consolidating set of service provider customers, for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from one or more of our major customers could have a material adverse effect on our revenue and operating results.

In the three months ended September 30, 2020, our top two customers, accounted for 29% of our net revenue, and our ten largest customers collectively accounted for 71% of our net revenue, of which distributor customers accounted for 31% of our net revenue.

In the nine months ended September 30, 2020, our top two customers, accounted for 25% of our net revenue, of which a distributor customer accounted for 11% of our net revenue, and our ten largest customers collectively accounted for 65% of our net revenue, of which distributor customers accounted for 36% of our net revenue.

We expect that our operating results for the foreseeable future will continue to show a substantial but declining percentage of sales dependent on a relatively small number of customers and on the ability of these customers to sell products that incorporate our RF receivers or RF receiver SoCs, digital STB video SoCs, DBS ODU receiver SOCs, and MoCA®, G.hn connectivity solutions and high-performance analog solutions.

In the three months ended March 31, 2021, our top three customers accounted for 37% of our net revenue, and our ten largest customers collectively accounted for 72% of our net revenue, of which distributor customers accounted for 39% of our net revenue.

We expect that our operating results for the foreseeable future will continue to show a substantial percentage of sales dependent on a relatively small number of customers.

In the future, these customers may decide not to purchase our products at all, may purchase fewer products than they did in the past, or may defer or cancel purchases or otherwise alter their purchasing patterns.

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Our agreements with certain of these distributors provide protection against price reduction on their inventories of our products.

loss of certain distributors could have a material adverse effect on our business and results of operations, and price reductions associated with their inventories of our products could have a substantial adverse effect on our operating results in the event of a dramatic decline in selling prices for these products.

In addition, the current situation relating to trade with China and governmental and regulatory concerns relating to specific Chinese companies remain fluid and unpredictable.

The loss of certain distributors could have a material adverse effect on our business and results of operations, and price reductions associated with their inventories of our products could have a substantial adverse effect on our operating results in the event of a dramatic decline in selling prices for these products.

In addition, the current situation relating to trade with China and governmental and regulatory concerns relating to specific Chinese companies continue to remain fluid and unpredictable.

Our current and future operating results could be materially and adversely affected by limitations on our ability to sell to one or more Chinese customers and by tariffs and other trade barriers that may be implemented by governmental authorities.

A significant, but declining portion of our revenue is attributable to demand for our products in markets for connected home solutions, and development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

For the three months ended September 30, 2020 and 2019, revenue directly attributable to connected home applications accounted for approximately 24% and 51% of our net revenue, respectively.

For the nine months ended September 30, 2020 and 2019, revenue directly attributable to connected home applications accounted for approximately 35% and 50% of our net revenue, respectively.

Delays in the development of, or unexpected developments in the connected home markets could have an adverse effect on order activity by original equipment manufacturers in these markets and, as a result, on our business, revenue, operating results and financial condition.

A significant portion of our revenue is attributable to demand for our products in markets for broadband (previously connected home) solutions, and development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

For the three months ended March 31, 2021 and 2020, revenue directly attributable to broadband (previously connected home) applications accounted for approximately 59% and 43% of our net revenue, respectively.

Delays in the development of, or unexpected developments in the broadband markets could have an adverse effect on order activity by original equipment manufacturers in these markets and, as a result, on our business, revenue, operating results and financial condition.

In addition, consolidation trends among Pay-TV and broadband operators may continue, which could have a material adverse effect on our future operating results and financial condition.

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We sell a significant portion of our products to manufacturers of cable broadband voice and data modems and gateways, Pay-TV set-top boxes and gateways into cable and satellite operator markets, satellite outdoor units or LNB’s, optical modules for long-haul and metro telecommunications markets, and RF transceivers and modem solutions for wireless infrastructure markets.

We have expanded our product offerings to include broadband data access, power management and interface technologies which are ubiquitous functions in new and existing markets such as wireless and wireline communications infrastructure, broadband access, industrial, enterprise network, and automotive applications.

Our future revenue growth, if any, will depend in part on our ability to further penetrate into, and expand beyond, these markets with analog, digital and mixed-signal solutions targeting the markets for high-speed optical interconnects for data center, metro, and long-haul optical modules, telecommunications wireless infrastructure, and cable DOCSIS 3.1 network infrastructure products.

Our product offerings also include broadband data access, power management and interface technologies which are ubiquitous functions in new and existing markets such as wireless and wireline communications infrastructure, broadband access, industrial, enterprise network, and automotive applications.

We have further expanded our product offerings to include Wi-Fi, ethernet and broadband gateway processor systems-on-chip, or SoCs, and intellectual property that utilizes patented machine learning techniques to improve signal integrity and power efficiency in SoCs, application-specific integrated circuits, or ASICs, and field-programmable gate arrays, or FPGAs, used in next-generation communication and artificial intelligence systems.

Our future revenue growth, if any, will depend in part on our ability to further penetrate into, and expand beyond, these markets with analog, digital and mixed-signal solutions targeting the markets for Wi-Fi and broadband, high-speed optical interconnects for data center, metro, and long-haul optical modules, telecommunications wireless infrastructure, and cable DOCSIS 3.1 network infrastructure products.

Each of these markets presents distinct and substantial risks.

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Many of our products originated with our research and development efforts, which we believe have provided us with a significant competitive advantage.

For the three months ended September 30, 2020 and 2019, our research and development expense was $55.8 million and $23.2 million, respectively.

For the nine months ended September 30, 2020 and 2019, our research and development expense was $109.5 million and $74.9 million, respectively.

We monitor such expenditures as part of our strategy of devoting focused research and development efforts on the

development of innovative and sustainable product platforms.

For the three months ended March 31, 2021 and 2020, our research and development expense was $63.2 million and $25.7 million, respectively.

We monitor such expenditures as part of our strategy of devoting focused research and development efforts on the development of innovative and sustainable product platforms.

We are committed to investing in new product development internally in order to stay competitive in our markets and plan to maintain research and development and design capabilities for new solutions in advanced semiconductor process nodes such as 28nm and 16nm and beyond.

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In addition, we cannot assure you that the technologies that are the focus of our research and development expenditures will become commercially successful.

We experienced a decline in net revenues in our recent past but are currently benefiting from an uptick in demand for certain products due to the work-from-home environment caused by the COVID-19 pandemic.

A significant variance in our operating results or rates of growth, if any, could lead to substantial volatility in our stock price.

We are currently benefiting from an uptick in demand for certain products due to the work-from-home environment caused by the COVID-19 pandemic.

A significant variance in our operating results or rates of growth, if any, could lead to

substantial volatility in our stock price.

We may not sustain our current growth rate, and we may not be able to manage future growth effectively.

We experienced a decline in net revenues due to anticipated declines from legacy product shipments used in satellite, terrestrial, and video SoC applications, as well as a slowdown in the cable market owing to the market transition from DOCSIS 3.0 to DOCSIS 3.1 and related customer inventory reductions, and macro environment and trade issues, including industry-wide dynamics pertaining to the COVID-19 pandemic.

Our net revenue decreased from approximately $385.0 million in 2018 to $317.2 million in 2019.

However, our net revenue increased from $247.2 million in the nine months ended September 30, 2019 to $283.9 million in the nine months ended September 30, 2020, as we are currently benefiting from the work-from-home environment that is driving an increase in demand for certain of our products, particularly those from our acquisition of the WiFi and Broadband assets business.

Our net revenue increased from $62.0 million in the three months ended March 31, 2020 to $209.4 million in the three months ended March 31, 2021 due to market strength attributed to the work-from-home environment that is driving an increase in demand for certain of our products, particularly those from our acquisition of the Wi-Fi and Broadband assets business.

The COVID-19 pandemic could result in increased volatility in our sales and revenues.

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The complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the market acceptance of our new products, damage our reputation with current or prospective customers and adversely affect our operating costs.

Highly complex products like our broadband RF receivers and RF receiver SoCs, physical medium devices for optical modules, RF transceiver and modem solutions for wireless infrastructure markets, and high-performance analog solutions may contain defects and bugs when they are first introduced or as new versions are released.

Highly complex products like our Wi-Fi and broadband RF receivers and RF receiver SoCs, physical medium devices for optical modules, RF transceiver and modem solutions for wireless infrastructure markets, and high-performance analog solutions may contain defects and bugs when they are first introduced or as new versions are released.

Where any of our products, including legacy acquired products, contain defects or bugs, or have reliability, quality or compatibility problems, we may not be able to successfully correct these problems.

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If any of these problems are not found until after we have commenced commercial production of a new product, we may be required to incur additional development costs and product recall, repair or replacement costs, and our operating costs could be adversely affected.

These problems may also result in warranty or product liability claims against us by our customers or others that may require us to

make significant expenditures to defend these claims or pay damage awards.

These problems may also result in warranty or product liability claims against us by our customers or others that may require us to make significant expenditures to defend these claims or pay damage awards.

In the event of a warranty claim, we may also incur costs if we compensate the affected customer.

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We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices.

From time to time, we have reduced the average unit price of our products due to competitive pricing pressures, new product introductions by us or our competitors, and for other reasons, and we expect that we will have to do so again in the future.

From time to time, we have reduced the average unit price of our products due to competitive pricing pressures,

new product introductions by us or our competitors, and for other reasons, and we expect that we will have to do so again in the future.

In particular, we believe that industry consolidation has provided a number of larger semiconductor companies with substantial market power, which has had an adverse impact on selling prices in some of our markets.

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If we fail to introduce new or enhanced products that meet the needs of our customers or penetrate new markets in a timely fashion, we will lose market share and our operating results will be adversely affected.

In particular, we believe that we will need to develop new products in part to respond to changing dynamics and trends in our end user markets, including (among other trends) consolidation among cable and satellite operators, potential industry shifts away from the hardware devices and other technologies that incorporate our products, and changes in consumer television viewing habits and how consumers access and receive broadcast content and digital broadband services.

In particular, we believe that we will need to develop new products in part to respond to changing dynamics and trends in our end user markets, including (among other trends) consolidation among cable and satellite operators, potential industry shifts away from the hardware devices and other technologies that incorporate certain of our products, and changes in consumer television viewing habits and how consumers access and receive broadcast content and digital broadband services.

We cannot predict how these trends will continue to develop or how or to what extent they may affect our future revenues and operating results.

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however, we cannot provide any assurances that we will accurately predict the direction in which our markets will evolve or that we will be able to develop, market, or sell new products that respond to such changes successfully or in a timely manner, if at all.

We have settled in the past intellectual property litigation and may face additional claims of intellectual property infringement.

Any future litigation could be time-consuming, costly to defend or settle and result in the loss of significant rights.

The semiconductor industry is characterized by companies that hold large numbers of patents and other intellectual property rights and that vigorously pursue, protect and enforce intellectual property rights.

Third parties have in the past and may in the future assert against us and our customers and distributors their patent and other intellectual property rights to technologies that are important to our business.

In particular, from time to time, we receive correspondence from competitors seeking to engage us in discussions concerning potential claims against us, and we receive correspondence from customers seeking indemnification for potential claims related to infringement claims asserted against down-stream users of our products.

We investigate these requests as received and could be required to enter license agreements with respect to third party intellectual property rights or indemnify third parties, either of which could have an adverse effect on our future operating results.

Claims that our products, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution are costly to defend or settle and could divert the efforts and attention of our management and technical personnel.

In addition, many of our customer and distributor agreements require us to indemnify and defend our customers or distributors from third-party infringement claims and pay damages in the case of adverse rulings.

Claims of this sort also could harm our relationships with our customers or distributors and might deter future customers from doing business with us.

In order to maintain our relationships with existing customers and secure business from new customers, we have been required from time to time to provide additional assurances beyond our standard terms.

If any future proceedings result in an adverse outcome, we could be required to:

• cease the manufacture, use or sale of the infringing products, processes or technology;

• pay substantial damages for infringement;

• expend significant resources to develop non-infringing products, processes or technology;

• license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;

• cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor;

• pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology.

Any of the foregoing results could have a material adverse effect on our business, financial condition, and results of operations.

We rely on a limited number of third parties to manufacture, assemble, and test our products, and the failure to manage our relationships with our third-party contractors successfully, or impacts from natural disasters, public health crises, or other labor stoppages in the regions where such contractors operate, could adversely affect our ability to market and sell our products.

We do not have our own manufacturing facilities.

We operate an outsourced manufacturing business model that utilizes third-party foundry and assembly and test capabilities.

As a result, we rely on third-party foundry wafer fabrication, including sole sourcing for many components or products.

Currently, the majority of our products are manufactured by Global Foundries, Semiconductor Manufacturing International Corporation, or SMIC, Taiwan Semiconductor Manufacturing Corp, or TSMC, and United Microelectronics Corporation, or UMC, at foundries located in Taiwan, Singapore, and China.

We also use third-party contractors for all of our assembly and test operations.

Relying on third party manufacturing, assembly and testing presents significant risks to us, including the following:

• failure by us, our customers, or their end customers to qualify a selected supplier;

• capacity shortages during periods of high demand or from events beyond our control;

• reduced control over delivery schedules and quality;

• shortages of materials;

• misappropriation of our intellectual property;

• limited warranties on wafers or products supplied to us;

• potential increases in prices.

The ability and willingness of our third-party contractors to perform is largely outside our control.

If one or more of our contract manufacturers or other outsourcers fails to perform its obligations in a timely manner or at satisfactory quality levels,

our ability to bring products to market and our reputation could suffer.

For example, in the event that manufacturing capacity is reduced or eliminated at one or more facilities, including as a response to the recent worldwide decline in the semiconductor industry, manufacturing could be disrupted, we could have difficulties fulfilling our customer orders and our net revenue could decline.

In addition, if these third parties fail to deliver quality products and components on time and at reasonable prices, we could have difficulties fulfilling our customer orders, our net revenue could decline and our business, financial condition and results of operations would be adversely affected.

Additionally, our product shipment and manufacturing capacity may be similarly reduced or eliminated at one or more facilities due to the fact that the majority of our fabrication and assembly and test contractors are all located in the Pacific Rim region, principally in China, Taiwan, and Singapore.

The risk of earthquakes in these geographies is significant due to the proximity of major earthquake fault lines, and Taiwan in particular is also subject to typhoons and other Pacific storms.

Earthquakes, fire, flooding, or other natural disasters in Taiwan or the Pacific Rim region, or political unrest, war, labor strikes, work stoppages or public health crises, such as the outbreak of COVID-19, in countries where our contractors’ facilities are located could result in the disruption of our product shipments, foundry, assembly, or test capacity.

For example, as a result of the extension of the lunar new year holidays due to the outbreak of COVID-19, certain of our product shipments from China were temporarily delayed earlier in the first quarter of 2020.

Although we continue to monitor the situation, it is currently unknown whether any resurgence of the outbreak will occur and disrupt our product shipments or impact manufacturing in the region over future periods.

If such disruption were to recur over a prolonged period, it could have a material impact on our revenues and our business.

Any disruption resulting from similar events on a larger scale or over a prolonged period could cause significant delays in shipments of our products until we are able to resume such shipments, or shift our manufacturing, assembly, or test from the affected contractor to another third-party vendor, if needed.

There can be no assurance that alternative capacity could be obtained on favorable terms, if at all.

We utilize a significant amount of intellectual property in our business.

If we are unable to protect our intellectual property, our business could be adversely affected.

Our success depends in part upon our ability to protect our intellectual property.

To accomplish this, we rely on a combination of intellectual property rights, including patents, copyrights, trademarks and trade secrets in the United States and in selected foreign countries where we believe filing for such protection is appropriate.

Effective patent, copyright, trademark and trade secret protection may be unavailable, limited or not applied for in some countries.

Some of our products and technologies are not covered by any patent or patent application.

We cannot guarantee that:

• any of our present or future patents or patent claims will not lapse or be invalidated, circumvented, challenged or abandoned;

• our intellectual property rights will provide competitive advantages to us;

• our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by our agreements with third parties;

• any of our pending or future patent applications will be issued or have the coverage originally sought;

• our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak;

• any of the trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or be invalidated, circumvented, challenged or abandoned;

• we will not lose the ability to assert our intellectual property rights against or to license our technology to others and collect royalties or other payments.

In addition, our competitors or others may design around our protected patents or technologies.

Effective intellectual property protection may be unavailable or more limited in one or more relevant jurisdictions relative to those protections available in the United States, or may not be applied for in one or more relevant jurisdictions.

If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit our ability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and results of operations.

Monitoring unauthorized use of our intellectual property is difficult and costly.

Unauthorized use of our intellectual property may have occurred or may occur in the future.

Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwise adequately protect our intellectual property would adversely affect our business.

Moreover, if we are required to commence litigation, whether as a plaintiff or defendant as has occurred in the past, not only will this be time-consuming, but we will also be forced to incur significant costs and divert our attention and efforts of our employees, which could, in turn, result in lower revenue and higher expenses.

We also rely on customary contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement security measures to protect our trade secrets.

We cannot assure you that these contractual protections and security measures will not be breached, that we will have adequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of such contracts.

In addition, we have a number of third-party patent and intellectual property license agreements.

Some of these license agreements require us to make one-time payments or ongoing royalty payments.

Also, a few of our license agreements contain most-favored nation clauses or other price restriction clauses which may affect the amount we may charge for our products, processes or technology.

We cannot guarantee that the third-party patents and technology we license will not be licensed to our competitors or others in the semiconductor industry.

In the future, we may need to obtain additional licenses, renew existing license agreements or otherwise replace existing technology.

We are unable to predict whether these license agreements can be obtained or renewed or the technology can be replaced on acceptable terms, or at all.

When we settled a trademark dispute with Linear Technology Corporation, we agreed not to register the “MAXLINEAR” mark or any other marks containing the term “LINEAR”.

We may continue to use “MAXLINEAR” as a corporate identifier, including to advertise our products and services, but may not use that mark on our products.

The agreement does not affect our ability to use our registered trademark “MxL”, which we use on our products.

Due to our agreement not to register the “MAXLINEAR” mark, our ability to effectively prevent third parties from using the “MAXLINEAR” mark in connection with similar products or technology may be affected.

If we are unable to protect our trademarks, we may experience difficulties in achieving and maintaining brand recognition and customer loyalty.

We are subject to risks associated with our distributors’ product inventories and product sell-through.

Should any of our distributors cease or be forced to stop distributing our products, our business would suffer.

We currently sell a large portion of our products to customers through our distributors, who maintain their own inventories of our products.

Sales to distributors accounted for approximately 46% and 60% of our net revenue in the three months ended September 30, 2020 and 2019, respectively.

Sales to distributors accounted for approximately 54% and 50% of our net revenue in the nine months ended September 30, 2020 and 2019, respectively.

Upon shipment of product to these distributors, title to the inventory transfers to the distributor and the distributor is invoiced, generally with 30 to 60 day terms.

Distributor sales are also recognized upon shipment to the distributor and estimates of future pricing credits and/or stock rotation rights reduce revenue recognized to the net amount before the actual amounts are known.

If our estimates of such credits and rights are materially understated it could cause subsequent adjustments that negatively impact our revenues and gross profits in a future period.

If our distributors are unable to sell an adequate amount of their inventories of our products in a given quarter to manufacturers and end users or if they decide to decrease their inventories of our products for any reason, our sales through these distributors and our revenue may decline.

In addition, if some distributors decide to purchase more of our products than are required to satisfy end customer demand in any particular quarter, inventories at these distributors would grow in that quarter.

These distributors could then reduce future orders until inventory levels realign with end customer demand, which could adversely affect our product revenue.

Our reserve estimates with respect to the products stocked by our distributors are based principally on reports provided to us by our distributors, typically on a weekly basis.

To the extent that this resale and channel inventory data is inaccurate or not received in a timely manner, we may not be able to make reserve estimates accurately or at all.

We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actual results could negatively affect our inventory levels, sales and operating results.

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In addition, our customers can cancel purchase orders or defer the shipments of our products under certain circumstances.

Our products are manufactured using a silicon foundry according to our estimates of customer demand, which requires us to make separate demand forecast assumptions for every customer, each of which may introduce

significant variability into our aggregate estimate.

We have limited visibility into future customer demand and the product mix that our customers will require, which could adversely affect our revenue forecasts and operating margins.

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In addition, any significant future cancellations or deferrals of product orders or the return of previously sold products due to manufacturing defects could materially and adversely impact our profit margins, increase our write-offs due to product obsolescence and restrict our ability to fund our operations.

We have been and may in the future be subject to information technology failures, including data protection breaches and cyber-attacks, that could disrupt our operations, damage our reputation and adversely affect our business, operations, and financial results.

We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidential data relating to our business and third-party businesses.

In June 2020, we announced a security incident resulting from a Maze ransomware attack affecting certain but not all operational systems within our information technology infrastructure.

Because we did not satisfy the attacker’s monetary demands, on June 15, 2020, the attacker released online certain proprietary information obtained from our network.

Although our internal information technology team, supplemented by a leading cyber defense firm, has been actively taking steps to contain and assess this incident, including implementing enhanced security controls to protect our information technology systems, experienced programmers or hackers may further be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious software programs that compromise our confidential information or that of third parties and cause another disruption or failure of our information technology systems.

In addition, we have in the past and may in the future be subject to “phishing” attacks in which third parties send emails purporting to be from reputable companies in order to obtain personal information and infiltrate our systems to initiate wire transfers or otherwise obtain proprietary or confidential information.

A number of large, public companies have recently experienced losses based on phishing attacks and other cyber-attacks.

The recent security incident and any future compromise of our information technology systems could result in the further unauthorized publication of our confidential business or proprietary information, result in the further unauthorized release of customer, supplier or employee data, result in violations of privacy or other laws, expose us to a risk of litigation, cause us to incur direct losses if attackers access our bank or investment accounts, or damage our reputation.

The cost and operational consequences of implementing further data protection measures either as a response to specific breaches or as a result of evolving risks could be significant.

In addition, our inability to use or access our information systems at critical points in time could adversely affect the timely and efficient operation of our business.

Any delayed sales, significant costs or lost customers resulting from these technology failures could adversely affect our business, operations and financial results.

Third parties with which we conduct business, such as foundries, assembly and test contractors, and distributors, have access to certain portions of our sensitive data.

In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact our business, operations and financial results.

We do not have any long-term supply contracts with our contract manufacturers or suppliers, and any disruption in our supply of products or materials could have a material adverse effect on our business, revenue and operating results.

We currently do not have long-term supply contracts with any of our third-party vendors, including but, not limited to Global Foundries, SMIC, TSMC, and UMC.

We make substantially all of our purchases on a purchase order basis, and our contract manufacturers are not required to supply us products for any specific period or in any specific quantity.

Foundry capacity may not be available when we need it or at reasonable prices.

Availability of foundry capacity has in the past been reduced from time to time due to strong demand.

Foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice.

It is possible that foundry customers that are larger and better financed than we are, or that have long-term agreements with our foundry, may induce our foundry to reallocate capacity to them.

This reallocation could impair our ability to secure the supply of components that we need.

We generally place orders for products with some of our suppliers approximately four to five months prior to the anticipated delivery date, with order volumes based on our forecasts of demand from our customers.

Accordingly, if we inaccurately forecast demand for our products, we may be

unable to obtain adequate and cost-effective foundry or assembly capacity from our third-party contractors to meet our customers’ delivery requirements, or we may accumulate excess inventories.

On occasion, we have been unable to adequately respond to unexpected increases in customer purchase orders and therefore were unable to benefit from this incremental demand.

None of our third-party contractors has provided any assurance to us that adequate capacity will be available to us within the time required to meet additional demand for our products.

We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses particularly as we seek to enter new markets where we may not have prior experience.

For example, we expanded into the markets for satellite set-top and gateway boxes and outdoor units and physical medium devices for the optical interconnect markets.

We have also expanded into the wired whole-home broadband connectivity market and entered the markets for wireless telecommunications infrastructure and power management and interface technologies which are ubiquitous functions in wireless and wireline communications infrastructure, broadband access, industrial, enterprise network, and automotive applications.

Our operating history had previously focused on developing integrated circuits for specific terrestrial, cable and satellite television, and broadband voice and data applications, satellite set-top and gateway boxes and outdoor units and physical medium devices for the optical interconnect markets, and as part of our strategy, we seek to expand our addressable market into new product categories.

For example, we expanded into the markets for the wired whole-home broadband connectivity market and entered the markets for wireless telecommunications infrastructure and power management and interface technologies which are ubiquitous functions in wireless and wireline communications infrastructure, broadband access, industrial, enterprise network, and automotive applications.

We have also expanded into the markets for Wi-Fi, Ethernet and Broadband Gateway Processor SoCs and 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.

Our limited operating experience in these new markets or potential markets we may enter, combined with the rapidly evolving nature of our markets in general, substantial uncertainty concerning how these markets may develop and other factors beyond our control reduces our ability to accurately forecast quarterly or annual revenue.

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Even if we begin a product design, customers may decide to cancel or change their product plans, which could cause us to generate no revenue from a product and adversely affect our results of operations.

We are focused on securing design wins to develop RF receivers and RF receiver SoCs, MoCA and G.hn SoCs, DBS-ODU SoCs, physical medium devices for optical modules, interface and power management devices, and SoC solutions targeting infrastructure opportunities within the telecommunications, wireless, industrial and multimarket and broadband operator markets for use in our customers’ products.

We are focused on securing design wins to develop RF receivers and RF receiver SoCs, MoCA and G.hn SoCs, DBS-ODU SoCs, physical medium devices for optical modules, interface and power management devices, and SoC solutions targeting infrastructure opportunities within the telecommunications, wireless, industrial and multimarket and Wi-Fi and broadband operator markets for use in our customers’ products.

These selection processes typically are lengthy and can require us to incur significant design and development expenditures and dedicate scarce engineering resources in pursuit of a single customer opportunity.

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A significant downturn or upturn could have a material adverse effect on our business and operating results.

The use of open source software in our products, processes and technology may expose us to additional risks and harm our intellectual property.

Our products, processes and technology sometimes utilize and incorporate software that is subject to an open source license.

Open source software is typically freely accessible, usable and modifiable.

Certain open source software licenses require a user who intends to distribute the open source software as a component of the user’s software to disclose publicly part or all of the source code to the user’s software.

In addition, certain open source software licenses require the user of such software to make any derivative works of the open source code available to others on unfavorable terms or at no cost.

This can subject previously proprietary software to open source license terms.

While we monitor the use of all open source software in our products, processes and technology and try to ensure that no open source software is used in such a way as to require us to disclose the source code to the related product, processes or technology when we do not wish to do so, such use could inadvertently occur.

Additionally, if a third party software provider has incorporated certain types of open source software into software we license from such third party for our products, processes or technology, we could, under certain circumstances, be required to disclose the source code to our products, processes or technology.

This could harm our intellectual property position and have a material adverse effect on our business, results of operations and financial condition.

We rely on third parties to provide services and technology necessary for the operation of our business.

Any failure of one or more of our partners, vendors, suppliers or licensors to provide these services or technology could have a material adverse effect on our business.

We rely on third-party vendors to provide critical services, including, among other things, services related to accounting, billing, human resources, information technology, network development, network monitoring, in-licensing and intellectual property that we cannot or do not create or provide ourselves.

We depend on these vendors to ensure that our corporate infrastructure will consistently meet our business requirements.

The ability of these third-party vendors to successfully provide reliable and high quality services is subject to technical and operational uncertainties that are beyond our control.

be entitled to damages if our vendors fail to perform under their agreements with us, our agreements with these vendors limit the amount of damages we may receive.

In addition, we do not know whether we will be able to collect on any award of damages or that these damages would be sufficient to cover the actual costs we would incur as a result of any vendor’s failure to perform under its agreement with us.

Any failure of our corporate infrastructure could have a material adverse effect on our business, financial condition and results of operations.

Upon expiration or termination of any of our agreements with third-party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levels and cost, that are favorable to us and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until the transition is complete.

Additionally, we incorporate third-party technology into and with some of our products, and we may do so in future products.

The operation of our products could be impaired if errors occur in the third-party technology we use.

It may be more difficult for us to correct any errors in a timely manner if at all because the development and maintenance of the technology is not within our control.

There can be no assurance that these third parties will continue to make their technology, or improvements to the technology, available to us, or that they will continue to support and maintain their technology.

Further, due to the limited number of vendors of some types of technology, it may be difficult to obtain new licenses or replace existing technology.

Any impairment of the technology or our relationship with these third parties could have a material adverse effect on our business.

Unanticipated changes in our tax rates or unanticipated tax obligations could affect our future results.

We are subject to income taxes in the United States, Singapore and various other foreign jurisdictions.

The amount of income taxes we pay is subject to our interpretation and application of tax laws in jurisdictions in which we file.

Changes in current or future laws or regulations, the imposition of new or changed tax laws or regulations or new interpretations by taxing authorities or courts could affect our results of operations and lead to volatility with respect tax expenses and liabilities from period to period.

The application of tax laws and related regulations is subject to legal and factual interpretation, judgment and uncertainty.

We cannot determine whether any legislative proposals may be enacted into law or what, if any, changes may be made to such proposals prior to their being enacted into law.

or international tax laws change in a manner that increases our tax obligation, it could result in a material adverse impact on our results of operations and our financial position.

We are subject to examinations and tax audits.

There can be no assurance that the outcome from these audits will not have an adverse effect on our operating results or financial position.

Excess tax benefits associated with employee stock-based compensation are included in income tax expense.

However, since the amount of such excess tax benefits and deficiencies depend on the fair market value of our common stock, our income tax provision is subject to volatility in our stock price and in the future, could unfavorably affect our future effective tax rate.

Our future effective tax rate could be unfavorably affected by unanticipated changes in the valuation of our deferred tax assets and liabilities, and the ultimate use and depletion of these various tax credits and net operating loss carryforwards.

Changes in our effective tax rate could have a material adverse impact on our results of operations.

We record a valuation allowance to reduce our net deferred tax assets to the amount that we believe is more likely than not to be realized.

In making such determination, we consider all available positive and negative evidence quarterly, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance.

To the extent we believe it is more likely than not that some portion of our deferred tax assets will not be realized, we record a valuation allowance against the deferred tax asset.

Realization of our deferred tax assets is dependent primarily upon future taxable income in the applicable jurisdiction.

Based upon our review of all positive and negative evidence, we concluded that a full valuation allowance should continue to be recorded against our state and certain federal and foreign net deferred tax assets at September 30, 2020.

On a periodic basis we evaluate our deferred tax assets for realizability.

The impact of releasing some or all of such valuation allowance in a future period could be material in the period in which such release occurs.

Our corporate income tax liability could materially increase if tax incentives we have negotiated in Singapore cease to be effective or applicable or if we are challenged on our use of such incentives.

We operate under certain favorable tax incentives in Singapore which are effective through March 2022 and may be extended through March 2027, and generally are dependent on our meeting certain headcount and investment thresholds.

Such incentives allow certain qualifying income earned in Singapore to be taxed at reduced rates and are conditional upon our meeting certain employment and investment thresholds over time.

If we fail to satisfy the conditions for receipt of these tax incentives, or to the extent U.S.

or other tax authorities challenge our operation under these favorable tax incentive programs or

our intercompany transfer pricing agreements, our taxable income could be taxed at higher federal or foreign statutory rates and our income tax liability and expense could materially increase beyond our projections.

Each of our Singapore tax incentives is separate and distinct from the others, and may be granted, withheld, extended, modified, truncated, complied with or terminated independently without any effect on the other incentives.

Absent these tax incentives, our corporate income tax rate in Singapore would generally be the 17% statutory tax rate.

We are also subject to operating and other compliance requirements to maintain our favorable tax incentives.

If we fail to comply with such requirements, we could lose the tax benefits and could possibly be required to refund previously realized material tax benefits.

Additionally, in the future, we may fail to qualify for renewal of our favorable tax incentives or such incentives may not be available to us, which could also cause our future taxable income to increase and be taxed at higher statutory rates.

Loss of one more of our tax incentives could cause us to modify our tax strategies and our operational structure, which could cause disruption in our business and have a material adverse impact on our results of operations.

Further, there can be no guarantee that such modification in our tax strategy will yield tax incentives as favorable as those we have negotiated with Singapore.

Our interpretations and conclusions regarding the tax incentives are not binding on any taxing authority, and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded we could suffer material adverse tax and other financial consequences, which would increase our expenses, reduce our profitability and adversely affect our cash flows.

Global economic conditions, including factors that adversely affect consumer spending for the products that incorporate our integrated circuits, could adversely affect our revenues, margins, and operating results.

Our products are incorporated in numerous consumer devices, and demand for such products will ultimately be driven by consumer demand for products such as televisions, personal computers, automobiles, cable modems, and set-top boxes.

Many of these purchases are discretionary.

Global economic volatility and economic volatility in the specific markets in which the devices that incorporate our products are ultimately sold can cause extreme difficulties for our customers and third-party vendors in accurately forecasting and planning future business activities.

This unpredictability could cause our customers to reduce spending on our products, which would delay and lengthen sales cycles.

Furthermore, during challenging economic times our customers may face challenges in gaining timely access to sufficient credit, which could impact their ability to make timely payments to us.

These events, together with economic volatility that may face the broader economy and, in particular, the semiconductor and communications industries, may adversely affect, our business, particularly to the extent that consumers decrease their discretionary spending for devices deploying our products.

Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries in which we conduct business and other factors related to our international operations.

We sell our products throughout the world.

Products shipped to Asia accounted for 82% and 85% of net revenue during the three months ended September 30, 2020 and 2019, respectively.

Products shipped to Asia accounted for 82% and 84% of our net revenue in the nine months ended September 30, 2020 and 2019, respectively.

In addition, as of September 30, 2020, approximately 73% of our employees are located outside of the United States.

Products shipped to Asia accounted for 82% of our net revenue in the three months ended March 31, 2021.

In addition, as of March 31, 2021, approximately 72% of our employees are located outside of the United States.

The majority of our products are manufactured, assembled and tested in Asia, and all of our major distributors are located in Asia.

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government and China have been frayed.

Recent events in Hong Kong have also prompted other governments such as that of the United Kingdom to reconsider its trade and business relationships with China and with certain Chinese companies.

Events in Hong Kong have also prompted other governments such as that of the United Kingdom to reconsider its trade and business relationships with China and with certain Chinese companies.

Difficulties in these relationships have in a number of cases required us to take actions adverse to our business to comply with governmental restrictions on business and trade with China.

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In September 2020, we further ceased business operations that were prohibited with additional entities affiliated with Huawei when the BIS again amended the EAR to add such entities to the Restricted Entity List.

We are required to obtain special licenses to conduct business with Restricted Entities, and in 2021 the BIS continues to add entities which may be potential customers on the Restricted Entity List.

Similarly, we ceased business operations with entities affiliated with ZTE Corp.

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Loss of a key distributor or customer under similar circumstances could have an adverse effect on our business, revenues and operating results.

Changes in trade policies among the United States and other countries, in particular the imposition of new or higher tariffs, could place pressure on our average selling prices as our customers seek to offset the impact of increased tariffs on their own products.

Increased tariffs or the imposition of other barriers to international trade could have a material adverse effect on our revenues and operating results.

The United States has imposed or proposed new or higher tariffs on certain products exported by a number of U.S.

trading partners, including China, Europe, Canada, and Mexico.

In response, many of those trading partners, including China, have imposed or proposed new or higher tariffs on American products.

Continuing changes in government trade policies create a heightened risk of further increased tariffs that impose barriers to international trade.

Our business and operating results are substantially dependent on international trade.

Many of our manufacturers sell products incorporating our semiconductors into international markets.

Tariffs on our customers’ products may adversely affect our gross profit margins in the future due to the potential for increased pressure on our selling prices by customers seeking to offset the impact of tariffs on their own products.

In addition, tariffs could make our OEM and ODM customers’ products less attractive relative to products offered by their competitors, which may not be subject to similar tariffs.

Some OEM and ODMs in our industry have already implemented short-term price adjustments to offset such tariffs and transitioned their production and supply chain to locations outside of China.

that increases in tariffs on imported goods or the failure to resolve current international trade disputes could have a material adverse effect on our business and operating results.

Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses.

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If we fail to comply with these requirements in the manufacture or distribution of our products, we could be required to pay civil penalties, face criminal prosecution and, in some cases, be prohibited from distributing our products in commerce until the products or component substances are brought into compliance.

If we suffer losses to our facilities or distribution system due to catastrophe, our operations could be seriously harmed.

Our facilities and distribution system, and those of our third-party contractors, are subject to risk of catastrophic loss due to fire, flood or other natural or man-made disasters.

A number of our facilities and those of our contract manufacturers are located in areas with above average seismic activity.

The risk of an earthquake in the Pacific Rim region or Southern California is significant due to the proximity of major earthquake fault lines.

Any catastrophic loss to any of these facilities would likely disrupt our operations, delay production, shipments and revenue and result in significant expenses to repair or replace the facility.

The majority of the factories we use for foundry, assembly and test, and warehousing services, are located in Asia, principally in China, Taiwan, and Singapore.

Our corporate headquarters is located in Southern California.

Our operations and financial condition could be seriously harmed in the event of a major earthquake, fire, or other natural or man-made disaster.

Investor confidence may be adversely impacted if we are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002, and as a result, our stock price could decline.

We are subject to rules adopted by the Securities Exchange Commission, or SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, which require us to include in our Annual Report on Form 10-K our management’s report on, and assessment of the effectiveness of, our internal controls over financial reporting.

If we fail to maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section 404.

Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and are important to helping prevent financial fraud.

Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss of investor confidence in the reliability of our consolidated financial statements and could result in investigations or sanctions by the SEC, the New York

Stock Exchange, or NYSE, or other regulatory authorities or in stockholder litigation.

Any of these factors ultimately could harm our business and could negatively impact the market price of our securities.

Ineffective control over financial reporting could also cause investors to lose confidence in our reported financial information, which could adversely affect the trading price of our common stock.

Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives.

However, our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all error and all fraud.

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected.

Our products must conform to industry standards in order to be accepted by end users in our markets.

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Our pursuit of necessary technological advances may require substantial time and expense.

Risks Relating to Intellectual Property

We have settled in the past intellectual property litigation and may face additional claims of intellectual property infringement.

Any future litigation could be time-consuming, costly to defend or settle and result in the loss of significant rights.

Claims of this sort also could harm our relationships with our customers or distributors and might deter future customers from doing business with us.

In order to maintain our relationships with existing customers and secure business from new customers, we have been required

from time to time to provide additional assurances beyond our standard terms.