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Item 1A. Risk Factors

2022-07-27 compared with 2022-04-27 · 297 added, 109 removed, 615 unchanged (40% of the section changed)

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Before you decide whether to invest in our securities, you should carefully consider these risk factors 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.

Our risk factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

For the risks relating to our pending merger with Silicon Motion, please refer to the section of these risk factors captioned "Risks Relating to the Proposed Merger with Silicon Motion."

Risk Factor Summary

Risks Relating to the Proposed Merger with Silicon Motion

• If the merger is completed, our actual financial and operating results could differ materially from any expectations or guidance, including with respect to any cost savings and other potential synergies.

• Failure to integrate Silicon Motion with our business successfully in the expected time-frame may adversely affect our results and financial condition if the merger is completed.

• Our business relationships may be subject to disruption due to uncertainty associated with the merger.

• We and Silicon Motion may have difficulty motivating and retaining executives and other key personnel in light of the pending merger

• The merger agreement contains provisions that could require us to pay Silicon Motion a termination fee of $160 million under certain circumstances.

• If the proposed merger is not completed, we will have incurred substantial costs.

• Our ability to complete the merger is subject to various closing conditions, including approval of Silicon Motion’s shareholders and certain required regulatory approvals, which may contain burdensome conditions, that could have an adverse effect on our operation of the business following the merger.

• As a result of the transaction, we will materially increase our secured term loan indebtedness which adversely affects our operating results and cash-flows and our new loan agreements will likely contain covenants that could adversely affect our operational freedom and ability to pursue strategic transactions.

• We may not have sufficient cash flow from our business to pay our substantial indebtedness.

• Additional shareholder lawsuits could be filed in the future challenging the merger, which may delay or prevent the consummation of the merger, cause us and/or Silicon Motion to incur substantial defense or settlement costs, or otherwise adversely affect us or Silicon Motion.

• The fact that there is a merger pending could materially harm us or Silicon Motion and our results of operations.

• Counterparties of Silicon Motion may acquire certain rights which could negatively affect us following the merger.

• If the merger is consummated, the issuance of shares of our common stock to Silicon Motion securityholders will reduce the percentage interests of our stockholders.

• After completion of the merger, we will be exposed to intensified risks associated with doing business in Taiwan because of tense regional geopolitical risk with China

• The COVID-19 pandemic may delay or prevent the completion of the merger.

• We expect to incur substantial expenses related to the merger of MaxLinear and Silicon Motion.

• We will record goodwill that could become impaired and adversely affect our future operating results.

• The market value of our common stock could decline if large amounts of our common stock are sold following the merger.

Risks Related to Our Business

• 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.

• Impacts of the global semiconductor supply shortage and high inflation could adversely affect our business, financ i al condition, and results of operations.

• We face intense and increasing competition, which could have an adverse effect on our revenue, revenue growth rate and market share.

• Impacts of the global semiconductor supply shortage and high inflation could adversely affect our business, financial condition, and results of operations.

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

• We depend on a limited number of 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.

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

• The loss of, or a significant reduction in orders from our major customers that comprise a substantial portion of our revenue could have a material adverse effect on our revenue and operating results.

• Average selling prices of our products could decrease rapidly.

• 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.

• A significant portion of our revenue is attributable to demand for our products in markets for broadband 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.

• Development delays and consolidation trends among cable and satellite Pay-TV and broadband operators could adversely affect our future revenues and operating results.

• 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.

We may not sustain our current growth rate and/or 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.

• 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.

• 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 and retain qualified design and technical personnel, we may not be able to effectively execute our strategy.

• Failure to timely develop and introduce new or enhanced products could impair our ability to attract and retain customers and harm our competitive position.

• 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 in new markets.

• 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 incur significant expenditures to win business 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 that could adversely affect our business and our stock price.

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

• 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.

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

• 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.

• We may still incur substantially more debt or take other actions, which would intensify the risks.

Risks Relating to Intellectual Property

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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.

• Failure to manage our third-party relationships successfully, or mitigate negative impacts from using third parties, 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.

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

• Any failure of third parties to provide services and technology necessary for the operation of our business could have a material adverse effect on our business.

Risks Relating to Our Common Stock

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

Risks Relating to our Proposed Merger with Silicon Motion

If the merger is completed, 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 proposed merger with Silicon Motion, and as a result, we currently believe that the merger will, in aggregate, be accretive to our free cash-flow and non-GAAP earnings per share, excluding upfront non-recurring charges, transaction related expenses, the amortization of purchased intangible assets, and inventory and property and equipment fair value adjustments.

The expectations and guidance we have provided with respect to the potential financial impact of the merger are subject to numerous assumptions, however, including assumptions derived from our diligence efforts concerning the status of and prospects for Silicon Motion’s business, which we do not currently control, and assumptions relating to the near-term prospects for the semiconductor industry generally and the markets for Silicon Motion’s products in particular.

Additional assumptions we have made relate to numerous matters, including (without limitation) the following:

• projections of Silicon Motion’s future revenues;

• the anticipated financial performance of Silicon Motion’s products and products currently in development;

• anticipated cost savings and other synergies associated with the merger, including potential revenue synergies;

• our capital structure after the merger;

• the amount of goodwill and intangibles that will result from the merger;

• certain other purchase accounting adjustments that we expect to record in our financial statements in connection with the merger;

• merger costs, including restructuring charges and transaction costs payable to our financial, legal, and accounting advisors;

• our ability to maintain, develop, and deepen relationships with customers of Silicon Motion;

• other financial and strategic risks of the merger, including the possible impact of reduced liquidity of MaxLinear resulting from deal-related cash outlays, the credit risk associated from the potential debt facility described below, and continued uncertainty arising from the COVID-19 pandemic.

We cannot provide any assurances with respect to the accuracy of our assumptions, including our assumptions with respect to future revenues or revenue growth rates, if any, of Silicon Motion, and we cannot provide assurances with respect to our ability to realize the cost savings that we currently anticipate.

Risks and uncertainties that could cause our actual results to differ materially from currently anticipated results include, but are not limited to, risks relating to our ability to integrate Silicon Motion successfully;

currently unanticipated incremental costs that we may incur in connection with integrating the two companies;

risks relating to our ability to realize incremental revenues from the merger in the amounts that we currently anticipate;

risks relating to the willingness of Silicon Motion’s customers and other partners to continue to conduct business with MaxLinear;

and numerous risks and uncertainties that affect the semiconductor industry generally and the markets for our products and those of Silicon Motion specifically.

We believe the continuing pandemic enhances certain of these risks and presents additional uncertainty in our ability to achieve the financial and strategic objectives of the merger.

Any failure to integrate Silicon Motion successfully and to realize the financial benefits we currently anticipate from the merger would have a material adverse impact on our future operating results and financial condition and could materially and adversely affect the trading price or trading volume of our common stock.

Failure to integrate our business and operations successfully with those of Silicon Motion in the expected time-frame or otherwise may adversely affect our operating results and financial condition if the merger is completed.

The success of the proposed merger with Silicon Motion will depend, in substantial part, on our ability to integrate Silicon Motion’s business and operations successfully with those of MaxLinear and to realize fully the anticipated benefits and potential synergies from combining our companies, 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 Silicon Motion’s product portfolio.

Historically, we and Silicon Motion have been independent companies, and we will continue to operate as such until the consummation of the merger.

We expect that the integration will be complex and time consuming and will require substantial management time and attention, which may divert attention and resources from other important areas, including our existing businesses.

We may face significant challenges in consolidating our operations with Silicon Motion, integrating the two companies’ technologies, and addressing the different corporate cultures of the two companies.

Additional unanticipated costs may be incurred in the course of integrating our respective businesses.

If the companies are not successfully integrated, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected.

In such a case, we would expect our operating results and financial condition to be materially and adversely affected, which could also have a material and adverse effect on the trading price or trading volume of our common stock.

Our business relationships, including customer relationships, and those of Silicon Motion may be subject to disruption due to uncertainty associated with the merger.

In response to the announcement of the merger, customers, vendors, licensors, and other third parties with whom we or Silicon Motion do business or otherwise have relationships may experience uncertainty associated with the merger, and this uncertainty could materially affect their decisions with respect to existing or future business relationships with MaxLinear or Silicon Motion while the merger is pending or with MaxLinear after the merger is consummated.

As a result, we are in many instances unable to evaluate the impact of the merger 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 Silicon Motion products after the merger is consummated, or any general perceptions by customers or other third parties that impute operational or business challenges to us arising from the merger.

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.

These disruptions could have a material adverse effect on our business, operating results, and financial condition while the merger is pending or after it is consummated.

The adverse effect of any such disruptions could be exacerbated by a delay in the consummation of the merger for any reason, including delays associated with obtaining regulatory approvals, or termination of the merger agreement.

Any loss of customers, customer products, design win opportunities, or other important strategic relationships could have a material adverse effect on our business, operating results, and financial condition and could have a material and adverse effect on the trading price or trading volume of our common stock.

We and Silicon Motion may have difficulty motivating and retaining executives and other key personnel in light of the pending merger.

Uncertainty about the effect of the merger on our employees and those of Silicon Motion may have an adverse effect on MaxLinear or Silicon Motion while the merger is pending or on MaxLinear after the merger is consummated.

This uncertainty may impair our or Silicon Motion’s ability to retain and motivate key personnel in the months leading up to the consummation of the merger and our ability to retain and motivate them following the merger.

Employee retention may be particularly challenging as our and Silicon Motion’s employees may experience frustrations during the integration process and uncertainty about their future roles with us following consummation of the merger.

For the merger to be successful, we and Silicon Motion must continue to retain and motivate executives and other key employees during the period before the merger is completed.

Furthermore, after the merger is consummated, MaxLinear must be successful at retaining and motivating key employees in order for the benefits of the transaction 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 merger, which could have a material adverse effect on our business, operating results, and financial condition.

The merger agreement with Silicon Motion contains provisions that could require us to pay Silicon Motion a termination fee of $160 million under certain circumstances.

The consummation of the merger is subject to certain customary closing conditions such as regulatory approval in China.

Under certain circumstances, we could be required to pay Silicon Motion a termination fee if the merger agreement is terminated by MaxLinear or Silicon Motion as a result of a court or other competent authority issuing an order pursuant to regulatory law permanently prohibiting the consummation of the merger, or merger is not consummated by February 6, 2023, or the Outside Date.

The Outside Date will be automatically extended to May 5, 2023 and further to August 7, 2023, if all conditions to closing have been met, other than certain exceptions related to regulatory matters.

However, in certain circumstances, the right to terminate the merger agreement would not be available to a party in material breach of the merger agreement.

If the proposed merger is not completed, we will have incurred substantial costs that may adversely affect our operating results and financial condition as well as the market price of our common stock.

If the merger is not consummated, the price of our common stock may decline to the extent that such market price reflects a market assumption that the merger will be completed.

In addition, we have incurred and will incur substantial costs in connection with the proposed merger.

These costs are primarily associated with the fees of our financial advisors, accountants, lenders, and legal counsel and, with limited exceptions relating to a portion of our financial advisor fees, will be payable regardless of whether the merger is completed.

In addition, we have diverted significant management resources in an effort to complete the merger and are subject to restrictions contained in the merger agreement on the conduct of our business during the pendency of the merger.

If the merger is not completed, we will have received little or no benefit in respect of such costs incurred.

If the merger is not completed under certain circumstances specified in the merger agreement, we may be required to pay a termination fee to Silicon Motion of $160 million, as described above.

Furthermore, if the merger is not consummated, we may experience negative reactions from the financial markets and our suppliers, customers, customer prospects, and employees.

Any of these factors could have an adverse effect on our business, operating results, and financial condition or on the trading price of our common stock.

Our ability to complete the merger is subject to various closing conditions, including approval of Silicon Motion’s shareholders and certain required regulatory approvals, which may contain burdensome conditions, that could have an adverse effect on our operation of the business following the merger.

To complete the merger, Silicon Motion’s shareholders must approve the merger pursuant to the terms of the merger agreement by not less than two-thirds of the votes cast by Silicon Motion shareholders present and voting at Silicon Motion’s extraordinary general meeting.

In addition, completion of the merger is subject to the satisfaction of the remaining customary

closing conditions, including receipt of clearance from the People’s Republic of China State Administration for Market Regulation, among other things.

Even if these approvals are obtained, governmental authorities could impose conditions on the completion of the merger that could delay consummation of the acquisition or have an adverse effect on our business following the acquisition.

If we are unable to complete the merger, we would be subject to a number of risks, including the following:

• we would not realize the anticipated benefits of the acquisition, including, among other things, increased operating efficiencies;

• the attention of our management may have been diverted to the merger rather than to our own operations and the pursuit of other opportunities that could have been beneficial to us;

• the potential loss of key personnel during the pendency of the merger as employees and other service providers may experience uncertainty about their future roles with us following completion of the merger;

• the trading price of our common stock may decline to the extent that the current market prices reflect a market assumption that the merger will be completed.

We can provide no assurance that the various closing conditions will be satisfied, that the necessary regulatory approvals will be obtained, or that any required conditions will not materially adversely affect our business following the merger.

If we are required to undertake divestitures or to commit to certain behavioral remedies in order to obtain any approvals required to complete the acquisition, we may be less able to realize anticipated benefits of the acquisition, and our business, operating results, and financial condition after the merger may be adversely affected.

In addition, we can provide no assurance that these conditions will not result in the abandonment or delay of the merger.

The occurrence of any of these events individually or in combination could have a material adverse effect on our business, financial condition, and results of operations and on the trading price of our common stock.

In order to consummate the merger and distribute the cash consideration payable to Silicon Motion securityholders, we will incur material indebtedness of up to $3.5 billion and we may also use a portion of Silicon Motion’s and our cash resources.

This material increase in our indebtedness will adversely affect our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations.

The loan agreement is also expected to contain financial and operational covenants that would 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.

As previously disclosed, MaxLinear will finance the merger in part with the Senior Secured Credit Facilities, which will provide funding of up to $3.5 billion.

A portion of the proceeds from the Senior Secured Credit Facilities will be used to repay existing debt in full.

As of June 30, 2022, our aggregate indebtedness was $250.0 million.

The material increase in our indebtedness to up to $3.5 billion will adversely affect our operating expenses through materially increased interest payment obligations and will adversely affect our ability to use cash generated from operations as we repay interest and principal under the term loans and revolving credit facility, as applicable.

In addition, the loan agreements will likely contain financial 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.

Accordingly, outstanding indebtedness 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.

Specifically, our materially increased indebtedness could have important consequences to investors in our common stock, including the following:

• we could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate or an adjusted base rate.

If interest rates were to increase substantially, it would adversely affect our operating results and could affect our ability to service the indebtedness;

• our ability to obtain any necessary financing in the future for working capital, capital expenditures, debt service requirements, or other purposes may be limited or financing may be unavailable;

• a substantial portion of our cash flows must be dedicated to the payment of principal and interest on our indebtedness and other obligations and will not be available for use in our business;

• our level of indebtedness could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate;

• our high degree of indebtedness will make us more vulnerable to changes in general economic conditions and/or a downturn in our business, thereby making it more difficult for us to satisfy our obligations.

If we fail to make required debt payments, or if we fail to comply with other covenants in our debt service agreements, we would be in default under the terms of these agreements.

Subject to customary cure rights, any default would permit the holders of the indebtedness to accelerate repayment of this debt and could cause defaults under other indebtedness that we have, any of which could have a material adverse effect on the trading price of our common stock.

Servicing our indebtedness will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay our substantial indebtedness.

Under the Senior Secured Credit Facilities, we may incur up to $3.5 billion in aggregate principal amount of senior indebtedness.

Our substantial indebtedness may increase our vulnerability to any generally adverse economic and industry conditions.

Our ability to make scheduled payments of the principal and interest when due, or to refinance our borrowings under the Senior Secured Credit Facilities, will depend on our future performance, which is subject to economic, financial, competitive and other factors beyond our control.

Our business may not continue to generate cash flow from operations in the future sufficient to satisfy our obligations under our indebtedness, and any future indebtedness we may incur and to make necessary capital expenditures.

If we are unable to generate such cash flow, we may be required to adopt one or more alternatives, such as reducing or delaying investments or capital expenditures, selling assets, refinancing or obtaining additional equity capital on terms that may be onerous or highly dilutive.

Our ability to refinance the term loans or existing or future indebtedness will depend on the capital markets and our financial condition at such time.

We may not be able to engage in any of these activities or engage in these activities on desirable terms, which could result in a default on the Senior Secured Credit Facilities or future indebtedness.

Stockholders of MaxLinear or Silicon Motion securityholders could file additional lawsuits in the future challenging the merger, which may delay or prevent the consummation of the merger and cause us and/or Silicon Motion to incur substantial defense or settlement costs, or otherwise adversely affect us or Silicon Motion.

As of the date of this filing of our quarterly report on Form 10-Q, there are four pending lawsuits challenging the merger with Silicon Motion.

However, potential plaintiffs may file additional lawsuits challenging the merger.

The outcome of any current or future litigation is uncertain.

Such litigation, if not resolved, could prevent or delay completion of the merger and result in substantial costs to us and/or Silicon Motion, including any costs associated with the indemnification of directors and officers.

One of the conditions to the closing is the absence of any provision of applicable law or order by any court or governmental entity (subject to certain limited exceptions) that has the effect of restraining, enjoining or otherwise prohibiting the consummation of the merger.

Therefore, if a plaintiff were successful in obtaining an injunction prohibiting the consummation of the merger on the agreed-upon terms, then such injunction may prevent the merger from being completed, or from being completed within the expected timeframe.

The defense or settlement of any lawsuit or claim that remains unresolved at the time the merger is completed may adversely affect our or Silicon Motion’s business, financial conditions, results of operations and cash flows.

The fact that there is a merger pending could materially harm our or Silicon Motion’s businesses and results of operations.

While the merger is pending, we and Silicon Motion are subject to a number of risks that may harm either business and results of operations, including:

• the diversion of management and employee attention from implementing growth strategies in existing markets or in new markets we or Silicon Motion are targeting;

• potential diversion of public attention from positioning of our or Silicon Motion’s independent brand and products in a manner that appeals to customers;

• the fact that we and Silicon Motion have and will continue to incur expenses related to the merger prior to its closing;

• the potential inability to respond effectively to competitive pressures, industry developments and future opportunities, in particular, given the restrictions on the conduct of our or Silicon Motion’s business during the interim period between signing and closing due to the pre-closing covenants in the merger agreement;

• We or Silicon Motion could be subject to costly litigation associated with the merger;

• current and prospective employees may be uncertain about their future roles and relationships with us or Silicon Motion following completion of the merger, which may adversely affect the ability of us or Silicon Motion to attract and retain key personnel.

Counterparties of Silicon Motion may acquire certain rights upon the merger, which could negatively affect us following the merger.

Silicon Motion is party to numerous contracts, agreements, licenses, permits, authorizations and other arrangements that contain provisions giving counterparties certain rights (including, in some cases, termination rights) in the event of an “assignment” of such agreement or a “change in control” of Silicon Motion or its subsidiaries.

The definitions of “assignment” and “change in control” vary from contract to contract and, in some cases, the “assignment” or “change in control” provisions may be implicated by the merger.

If an “assignment” or “change in control” occurs, a counterparty may be permitted to terminate its contract with Silicon Motion or to exercise other remedies thereunder.

Whether a counterparty would have cancellation rights or other rights in connection with the merger depends upon the language and governing law of its agreement with Silicon Motion.

Whether a counterparty exercises any cancellation rights or other rights it has would depend on, among other factors, such counterparty’s views with respect to our financial strength and business reputation following the merger, prevailing market conditions and the business implications of exercising any such rights.

We and Silicon Motion cannot presently predict the effects, if any, if the merger is deemed to constitute an assignment or change in control under certain of Silicon Motion’s contracts and other arrangements, including the extent to which cancellation rights or other rights would be exercised, if at all, or the effect on our financial condition, results of operations or cash flows following the merger, but such effect could be material.

If the merger with Silicon Motion is consummated, the issuance of shares of our common stock to Silicon Motion securityholders will reduce the percentage interests of our stockholders.

At the completion of the proposed merger with Silicon Motion, we expect to issue shares of our common stock to former Silicon Motion securityholders entitled to receive consideration pursuant to the merger agreement.

If the merger is consummated, we expect that our stockholders will own approximately 86% and that Silicon Motion stockholders will own approximately 14% of our outstanding capital stock following completion of the merger.

The issuance of shares of our common stock to Silicon Motion securityholders in the acquisition and the assumption by us of Silicon Motion restricted stock units will cause a reduction in the relative percentage voting and economic interests of our current stockholders.

After completion of the merger, we will be exposed to intensified risks associated with doing business in Taiwan because of tense regional geopolitical risk with China.

Following the merger, the revenue and operations of Silicon Motion will form a substantial portion of our revenue and operations, and since most of Silicon Motion’s business operations are in Taiwan and its principal executive offices are in Hong Kong, risks of conducting business in Taiwan and Hong Kong, as described in the section “Risks Related to Our Business” under the risk factor “ We are also subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments such as China and Russia ” will be further intensified.

Past and recent developments in relations between Taiwan and China have on occasion depressed the market prices of the securities of companies with significant business activities in Taiwan.

We cannot assure you that any contentious situation between Taiwan and China will always resolve in maintaining the current status quo or remain peaceful.

Relations between Taiwan and China, potential confrontations between the United States and China and other factors affecting military, political, social or economic conditions in Taiwan and Hong Kong could have a material adverse effect on the Company’s financial condition and results of operations, as well as the market price and the liquidity of our common stock.

The COVID-19 pandemic may delay or prevent the completion of the merger.

Given the ongoing and dynamic nature of the COVID-19 pandemic, it is difficult to predict its future impact on our or Silicon Motion’s business, and there is no guarantee that efforts by us or Silicon Motion to address any adverse impacts will be effective.

The merger may also be delayed or adversely affected by the COVID-19 pandemic, or become more costly due to our or Silicon Motion’s respective policies or government policies and actions to protect the health and safety of individuals, or government policies or actions to maintain the functioning of national or global economies and markets could delay or prevent the completion of the merger.

We and Silicon Motion may also incur additional costs to remedy damages caused by such disruptions, which could adversely affect our or Silicon Motion’s financial condition or results of operations.

We expect to incur substantial expenses related to the merger of MaxLinear and Silicon Motion.

We expect to incur substantial expenses in connection with the pending merger and subsequent integration of Silicon Motion's business with MaxLinear.

We expect operational integration to require substantial management attention.

Numerous factors, many of which are beyond our control, could affect the total cost or the timing of expected merger and integration expenses.

Moreover, many of the expenses that will be incurred are by their nature difficult to estimate accurately at the present time.

These expenses could, particularly in the near term, reduce the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings related to the integration of Silicon Motion.

These merger and integration expenses may result in MaxLinear’s taking significant charges against earnings.

We will record goodwill in connection with the Silicon Motion merger that could become impaired and adversely affect our future operating results.

The merger with Silicon Motion will be accounted for as a business combination using 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 Silicon Motion will be recorded, as of completion, at their respective fair values and added to our assets and liabilities.

Our reported financial condition and results of operations after completion of the merger will reflect Silicon Motion’s balances and results but will not be restated retroactively to reflect the historical financial position or results of operations of Silicon Motion for periods prior to the merger.

As a result, comparisons of future results against prior period results will be more difficult for investors.

Under the acquisition method of accounting, the total purchase price will be allocated to Silicon Motion’s tangible assets and liabilities and identifiable intangible assets based on their fair values as of the date of completion of the merger.

The excess of the purchase price over those fair values will be recorded as goodwill.

We expect that the merger will result in the creation of a material amount of intangible assets and goodwill based upon the application of the acquisition method of accounting.

To the extent the value of goodwill or intangibles becomes impaired, we may be required to incur material charges relating to such impairment.

Any such impairment charge 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.

The market value of our common stock could decline if large amounts of our common stock are sold following the merger with Silicon Motion

Following the merger with Silicon Motion, our stockholders and former securityholders of Silicon Motion will own interests in a company operating an expanded business with more assets and a different mix of liabilities.

Our current stockholders (and the securityholders of Silicon Motion who will receive our common stock in connection with the merger) may not wish to continue to invest in us, or may wish to reduce their investment in us, in order to comply with institutional investing guidelines, to increase diversification or to track any rebalancing of stock indices in which our common stock and Silicon Motion ADS are or were included.

If, following the merger, large amounts of our common stock are sold, the price of our common stock could decline.

Risks Related to Our Business

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We compete in different target markets to various degrees on the basis of a number of principal competitive factors, including our products’ performance, features and functionality, energy efficiency, size, ease of system design, customer support, product roadmap, reputation, reliability and price.

We expect competition to increase and intensify as a result of industry consolidation and the resulting creation of larger semiconductor companies.

We expect competition to increase and intensify as a result of industry consolidation and the resulting

creation of larger semiconductor companies.

Large semiconductor companies resulting from industry consolidation could enjoy substantial market power, which they could exert through, among other things, aggressive pricing that could adversely affect our customer relationships and revenues.

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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.

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• Further supply constraints, including prolonged global semiconductor supply 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, or from customer push out requests;

• Disruptions in product shipments from travel and shipping restrictions imposed in response to local outbreaks, or from customer postponement requests;

• Governmental closures beyond our control;

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We sell our products throughout the world.

Products shipped to Asia accounted for 80% of our net revenue in the three months ended March 31, 2022.

In addition, as of March 31, 2022, approximately 75% of our employees are located outside of

the United States.

Products shipped to Asia accounted for 81% of our net revenue in the six months ended June 30, 2022.

In addition, as of June 30, 2022, approximately 75% of our employees are located outside of the United States.

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

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We depend on a limited number of 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 March 31, 2022, our top three customers accounted for 37% of our net revenue, and our ten largest customers collectively accounted for 71% of our net revenue, of which distributor customers accounted for 32% of our net revenue.

In the six months ended June 30, 2022, our top two customers accounted for 28% of our net revenue, and our ten largest customers collectively accounted for 71% of our net revenue, of which distributor customers accounted for 30% 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.

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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.

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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A significant portion of our revenue is attributable to demand for our products in markets for broadband 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, 2022 and 2021, revenue directly attributable to broadband applications accounted for approximately 51% and 59% of our net revenue, respectively.

For the six months ended June 30, 2022 and 2021, revenue directly attributable to broadband applications accounted for approximately 50% and 57% 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.

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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 March 31, 2022 and 2021, our research and development expense was $65.9 million and $63.2 million, respectively.

For the six months ended June 30, 2022 and 2021, our research and development expense was $146.3 million and $137.6 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.

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

Our net revenue increased from $209.4 million in the three months ended March 31, 2021 to $263.9 million in the three months ended March 31, 2022 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 in our broadband market.

Our net revenue increased from $414.7 million in the six months ended June 30, 2021 to $543.9 million in the six months ended June 30, 2022 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 in our broadband market.

Impacts from the COVID-19 pandemic, such as global supply shortages, uncertainty in customer demand, as well as the global economy could result in increased volatility in our sales and revenues.

You should not rely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance.

Please refer to the Risk Factor entitled “ Our operating results are subject to substantial quarterly and annual fluctuations and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price ” for a discussion of factors contributing to variances in our operating results or rates of growth.

Please refer to the Risk Factor entitled “ Our operating results are subject to substantial

quarterly and annual fluctuations and may fluctuate significantly due to a number of factors that could adversely affect our business and our stock price ” for a discussion of factors contributing to variances in our operating results or rates of growth.

If we are unable to sustain adequate revenue growth, our financial results could suffer and our stock price could decline.

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We believe that we will need to continue to make substantial investments in research and development in an attempt to ensure a product roadmap that anticipates these types of changes;

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.

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 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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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 SoCs, ASICs, and FPGAs used in next-generation communication and artificial intelligence systems.

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 SoCs, ASICs, and FPGAs used in next-generation communication and artificial intelligence systems.

Our limited operating experience in 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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In addition, any delay or cancellation of a customer’s plans could materially and adversely affect our financial results, as we may have incurred significant expense and generated no revenue.

Finally, our customers’ failure to successfully market and sell their products could reduce demand for our products and materially and adversely affect our business, financial condition and results of operations.

Finally, our customers’ failure to successfully market and sell their products could reduce demand for our products and materially and adversely affect

our business, financial condition and results of operations.

If we were unable to generate revenue after incurring substantial expenses to develop any of our products, our business would suffer.

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

The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and price erosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand.

Any future downturns may result in diminished product demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices.

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A significant downturn or upturn 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.

If we fail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Our business is subject to various international and U.S.

laws and other legal requirements, including packaging, product content, labor, import/export control regulations, the Foreign Corrupt Practices Act, and other anticorruption laws.

These regulations are complex, change frequently and have generally become more stringent over time.

We may be required to incur significant costs to comply with these regulations or to remedy violations.

Any failure by us to comply with applicable government regulations could result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to conduct our operations.

laws and governmental regulations, and compliance with these laws and regulations may cause us to incur significant expenses.

If we fail to maintain compliance with applicable laws and regulations, we may be forced to recall products and cease their manufacture and distribution, and we could be subject to civil or criminal penalties.

Our business is subject to various international and U.S.

laws, regulations and other legal requirements, including those related to packaging, product content, labor, import/export control regulations, anticorruption laws such as the Foreign Corrupt Practices Act, privacy, cybersecurity, competition and antitrust and others.

These laws and regulations are complex, change frequently, occasionally are conflicting or ambiguous, and have generally become more stringent over time.

We may be required to incur significant costs to comply with these laws and regulations or to remedy violations.

Any failure by us to comply with applicable laws and regulations could result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on our ability to conduct our operations.

In addition, because many of our products are regulated or sold into regulated industries, we must comply with additional regulations in marketing our products.

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For example, as indicated elsewhere in this report, we do a substantial portion of our business in Asia and particularly in China.

In recent years, there has been a substantial focus by regulators in the United States and Europe on the business practices of major Chinese technology companies such as Huawei and ZTE.

In prior years, there has been a substantial focus by regulators in the United States and Europe on the business practices of major Chinese technology companies such as Huawei and ZTE.

ZTE is our current customer, but in May 2019 and subsequent months, and again in September 2020 with additional affiliated entities, we ceased prohibited business operations with Huawei and its affiliates and certain other restricted entities.

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We could incur increased administrative and legal costs in order to respond to any inquiries, and any failure to comply with applicable laws could adversely affect our business and operating results.

We have implemented policies and procedures, including adoption of an anti-corruption policy and procedures to ensure compliance with applicable export control laws, but there can be no assurance that these policies and procedures will prove effective.

We must conform the manufacture and distribution of our semiconductors to various laws and adapt to regulatory requirements in all countries as these requirements change.

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If our products are not in compliance with prevailing industry standards for a significant period of time, we could miss opportunities to achieve crucial design wins.

We may not be successful in developing or using new technologies or in developing new products or product enhancements that achieve market acceptance.

We may not be successful in developing

or using new technologies or in developing new products or product enhancements that achieve market acceptance.

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

As of March 31, 2022, our aggregate indebtedness was $290.0 million.

As of June 30, 2022, our aggregate indebtedness was $250.0 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.

As of March 31, 2022, our aggregate indebtedness was $290.0 million from an initial term loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides for the Revolving Facility of up to $100.0 million, which remains undrawn as of March 31, 2022.

As of June 30, 2022, our aggregate indebtedness was $250.0 million from an initial term loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides for the Revolving Facility of up to $100.0 million, which remains undrawn as of June 30, 2022.

The credit agreement also permits the Company to request incremental loans in an aggregate principal amount not to exceed the sum of an amount equal to the greater of (x) $175.0 million and (y) 100% of “Consolidated EBITDA” (as defined in such agreement), plus the amount of certain voluntary prepayments, plus an unlimited amount that is subject to pro forma compliance with certain first lien net leverage ratio, secured net leverage ratio and total net leverage ratio tests.

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Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement will amortize in equal quarterly installments equal to 0.25% of the original principal amount, with the balance payable on June 23, 2028.

The Company is subject to commitment fees ranging from 0.175% to 0.25% on the undrawn portion

of the revolving facility, and any outstanding loans under the revolving facility will bear interest at either an Adjusted LIBOR plus a margin of 1.00% to 1.75% or an Adjusted Base Rate plus a margin of 0% to 0.75%.

The Company is subject to commitment fees ranging from 0.175% to 0.25% on the undrawn portion of the revolving facility, and any outstanding loans under the revolving facility will bear interest at either an Adjusted LIBOR plus a margin of 1.00% to 1.75% or an Adjusted Base Rate plus a margin of 0% to 0.75%.

The Company’s obligations under the June 23, 2021 Credit Agreement are required to be guaranteed by certain of its domestic subsidiaries meeting materiality thresholds set forth in the credit agreement.

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We may still incur substantially more debt or take other actions, which would intensify the risks discussed immediately above.

We and our subsidiaries may, subject to any limitations in the terms of our existing loan facilities or the Senior Secured Credit Facilities, incur additional debt, secure existing or future debt, recapitalize our debt or take a number of other actions that are not limited by the terms of our term loans that could have the effect of diminishing our ability to make payments under the indebtedness when due.

If we incur any additional debt, the related risks that we and our subsidiaries face could intensify.

In addition to pending merger with Silicon Motion, we may, from time to time, make additional business acquisitions or investments, which involve significant risks.

We have completed multiple acquisitions in the past six 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.

Any such transactions could result in:

• issuances of equity securities dilutive to our existing stockholders;

• substantial cash payments;

• the incurrence of substantial debt and assumption of unknown liabilities;

• large one-time write-offs;

• amortization expenses related to intangible assets;

• a limitation on our ability to use our net operating loss carryforwards;

• the diversion of management's time and attention from operating our business to acquisition integration challenges;

• stockholder or other litigation relating to the transaction;

• adverse tax consequences;

• costs and expenses associated with any undisclosed or potential liabilities;

• the potential loss of key employees, customers and suppliers of the acquired businesses.

To the extent we pay the purchase price of any acquisition or investment in cash or through borrowings under our Revolving Facility, it would reduce our cash balances and/or result in indebtedness we must service, which may have a material and adverse effect on our business and financial condition.

If the purchase price is paid with our stock, it would be dilutive to our stockholders.

In addition, we may assume liabilities associated with a business acquisition or investment, including unrecorded liabilities that are not discovered at the time of the transaction, and the repayment of those liabilities may have a material and adverse effect on our financial condition.

Integrating acquired organizations and their products and services, including the integration of completed acquisitions, may be expensive, time-consuming and a strain on our resources and our relationships with employees, customers, distributors and suppliers, and ultimately may not be successful.

The benefits or synergies we may expect from the acquisition of complementary or supplementary businesses may not be realized to the extent or in the time frame we initially anticipate.

Some of the risks that may affect our ability to successfully integrate acquired businesses include those associated with:

• failure to successfully further develop the acquired products or technology;

• conforming the acquired company’s standards, policies, processes, procedures and controls with our operations;

• coordinating new product and process development, especially with respect to highly complex technologies;

• loss of key employees or customers of the acquired business;

• hiring additional management and other critical personnel;

• in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particular economic, currency, political and regulatory risks associated with specific countries;

• increasing the scope, geographic diversity and complexity of our operations;

• consolidation of facilities, integration of the acquired businesses' accounting, human resource and other administrative functions and coordination of product, engineering and sales and marketing functions;

• the geographic distance between the businesses;

• liability for activities of the acquired businesses before the acquisition, including patent and trademark infringement claims, violations of laws, commercial disputes, tax liabilities and other known and unknown liabilities;

• litigation or other claims in connection with the acquired businesses, including claims for terminated employees, customers, former stockholders or other third parties.

We may not be able to identify suitable acquisition or investment candidates, or even if we do identify suitable candidates, they may be difficult to finance, expensive to fund and there is no guarantee that we can obtain any necessary regulatory approvals or complete such transactions on terms that are favorable to us.

We have in the past been and may in the future be party to ligation related to acquisitions.

Any adverse determination in litigation resulting from acquisitions could have a material adverse effect on our business and operating results.

Risks Relating to Intellectual Property

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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.

In particular, from time to time, we receive correspondence from competitors and other third parties 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 and claims 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.

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

• pay substantial damages for infringement;

• pay substantial damages, indemnification expenses and attorneys’ fees;

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

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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.

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.

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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.

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.

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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, manufacturing could be disrupted, we could have difficulties fulfilling our customer orders and our net revenue could decline.

For example, in the event that manufacturing capacity is reduced or eliminated at one or more facilities, 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.

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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.

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.

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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 47% and 44% of our net revenue in the three months ended March 31, 2022 and 2021, respectively.

Sales to distributors accounted for approximately 46% and 45% of our net revenue in the six months ended June 30, 2022 and 2021, 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.

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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.

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.

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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.

While we may 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.

While we may 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.

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The trading price of our common stock is highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control.

For example, in 2021, the trading price of our common stock ranged from a low of $30.47 to a high of $77.89.

For example, in the first six months of 2022, the trading price of our common stock ranged from a low of $32.87 to a high of $77.57 and in 2021, the trading price of our common stock ranged from a low of $30.47 to a high of $77.89.

These factors include those discussed in this “Risk Factors” section of the Quarterly Report on Form 10-Q and others such as:

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Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress the market price of our common stock and could impair our ability to raise capital through the sale of additional equity securities.

As of March 31, 2022, we had approximately 77.4 million shares of common stock outstanding.

As of June 30, 2022, we had approximately 78.3 million shares of common stock outstanding.

All shares of common stock are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the Securities Act, unless held by our “affiliates,” as that term is defined under Rule 144 of the Securities Act.

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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.

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.

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

We may, from time to time, make additional business acquisitions or investments, which involve significant risks.

We have completed multiple acquisitions in the past five years.