MAXLINEAR, INC 10-Q

ITEM 1. FINANCIAL STATEMENTS MAXLINEAR, INC. CONSOLIDATED BALANCE SHEETS (unaudited; in thousands, except par value amounts) September 30, 2022 December 31, 2021 Assets Current assets: Cash and cash equivalents $ 181,496 $ 130,572 Short-term restricted cash 971 105 Short-term investments 18,587 — Accounts receivable, net 178,072 119,724 Inventory 165,970 131,703 Prepaid expenses and other current assets 17,879 22,000 Total current assets 562,975 404,104 Long-term restricted cash 26 1,061 Property and equipment, net 67,081 60,924 Leased right-of-use assets 30,041 27,269 Intangible assets, net 122,142 152,540 Goodwill 306,739 306,668 Deferred tax assets 65,767 89,168 Other long-term assets 27,927 8,650 Total assets $ 1,182,698 $ 1,050,384 Liabilities and stockholders’ equity Current liabilities: Accounts payable $ 90,845 $ 52,976 Accrued price protection liability 116,591 40,509 Accrued expenses and other current liabilities 94,414 57,268 Accrued compensation 49,468 56,642 Total current liabilities 351,318 207,395 Long-term lease liabilities 25,040 24,640 Long-term debt 171,607 306,153 Other long-term liabilities 18,852 22,998 Total liabilities 566,817 561,186 Commitments and contingencies Stockholders’ equity: Preferred stock, $ 0.0001 par value; 25,000 shares authorized, no shares issued or outstanding — — Common stock, $ 0.0001 par value; 550,000 shares authorized; 78,565 shares issued and outstanding at September 30, 2022 and 76,778 shares issued and outstanding December 31, 2021 8 8 Additional paid-in capital 697,649 657,485 Accumulated other comprehensive income (loss) ( 5,316 ) 2,125 Accumulated deficit ( 76,460 ) ( 170,420 ) Total stockholders’ equity 615,881 489,198 Total liabilities and stockholders’ equity $ 1,182,698 $ 1,050,384 See accompanying notes. 4 Table of Contents MAXLINEAR, INC. CONSOLIDATED STATEMENTS OF INCOME (unaudited; in thousands, except per share data) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net revenue $ 285,730 $ 229,774 $ 829,666 $ 644,509 Cost of net revenue 118,242 99,981 343,237 290,454 Gross profit 167,488 129,793 486,429 354,055 Operating expenses: Research and development 76,437 67,538 222,718 205,120 Selling, general and administrative 38,472 38,469 123,536 110,823 Restructuring charges 631 — 1,093 2,204 Total operating expenses 115,540 106,007 347,347 318,147 Income from operations 51,948 23,786 139,082 35,908 Interest income 62 28 175 46 Interest expense ( 2,711 ) ( 2,649 ) ( 7,476 ) ( 10,596 ) Loss on extinguishment of debt — — — ( 5,221 ) Other income (expense), net ( 4,705 ) ( 105 ) 1,704 ( 746 ) Total other income (expense), net ( 7,354 ) ( 2,726 ) ( 5,597 ) ( 16,517 ) Income before income taxes 44,594 21,060 133,485 19,391 Income tax provision 16,186 11,802 39,525 5,598 Net income $ 28,408 $ 9,258 $ 93,960 $ 13,793 Net income per share: Basic $ 0.36 $ 0.12 $ 1.21 $ 0.18 Diluted $ 0.35 $ 0.12 $ 1.17 $ 0.17 Shares used to compute net income per share: Basic 78,436 76,582 77,833 75,795 Diluted 80,060 79,815 80,331 79,048 See accompanying notes. 5 Table of Contents MAXLINEAR, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited; in thousands) Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Net income $ 28,408 $ 9,258 $ 93,960 $ 13,793 Other comprehensive loss, net of tax: Foreign currency translation adjustments, net of tax benefits of $ 187 and $ 184 for the three and nine months ended September 30, 2022, respectively, and net of tax expense of $ 196 and $ 427 for the three and nine months ended September 30, 2021, respectively ( 2,378 ) ( 292 ) ( 7,441 ) ( 924 ) Other comprehensive loss ( 2,378 ) ( 292 ) ( 7,441 ) ( 924 ) Total comprehensive income $ 26,030 $ 8,966 $ 86,519 $ 12,869 See accompanying notes. 6 Table of Contents MAXLINEAR, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FISCAL QUARTERS ENDED SEPTEMBER 30, 2022 (unaudited; in thousands) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income (Loss) Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2021 76,778 $ 8 $ 657,485 $ 2,125 $ ( 170,420 ) $ 489,198 Common stock issued pursuant to equity awards, net 1,037 13,835 — — 13,835 Repurchase of common stock ( 440 ) — ( 26,297 ) — — ( 26,297 ) Stock-based compensation — — 18,599 — — 18,599 Other comprehensive loss — — — ( 1,075 ) — ( 1,075 ) Net income — — — — 33,586 33,586 Balance at March 31, 2022 77,375 8 663,622 1,050 ( 136,834 ) 527,846 Common stock issued pursuant to equity awards, net 999 — 310 — — 310 Minimum tax withholding on common stock issued — — ( 3,698 ) — — ( 3,698 ) Repurchase of common stock ( 124 ) — ( 5,214 ) — — ( 5,214 ) Employee stock purchase plan 83 — 2,911 — — 2,911 Stock-based compensation — — 19,464 — — 19,464 Other comprehensive loss — — — ( 3,988 ) — ( 3,988 ) Net income — — — — 31,966 31,966 Balance at June 30, 2022 78,333 8 677,395 ( 2,938 ) ( 104,868 ) 569,597 Common stock issued pursuant to equity awards, net 232 — ( 56 ) — — ( 56 ) Stock-based compensation — — 20,310 — — 20,310 Other comprehensive loss — — — ( 2,378 ) — ( 2,378 ) Net income — — — — 28,408 28,408 Balance at September 30, 2022 78,565 $ 8 $ 697,649 $ ( 5,316 ) $ ( 76,460 ) $ 615,881 See accompanying notes. 7 Table of Contents MAXLINEAR, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY FISCAL QUARTERS ENDED SEPTEMBER 30, 2021 (unaudited; in thousands) Common Stock Additional Paid-In Capital Accumulated Other Comprehensive Income Accumulated Deficit Total Stockholders’ Equity Shares Amount Balance at December 31, 2020 74,536 $ 7 $ 602,064 $ 1,435 $ ( 212,389 ) $ 391,117 Common stock issued pursuant to equity awards, net 917 1 16,565 — — 16,566 Repurchase of common stock ( 75 ) — ( 2,673 ) — — ( 2,673 ) Stock-based compensation — — 12,955 — — 12,955 Other comprehensive loss — — — ( 989 ) — ( 989 ) Net income — — — — 3,802 3,802 Balance at March 31, 2021 75,378 8 628,911 446 ( 208,587 ) 420,778 Common stock issued pursuant to equity awards, net 1,098 — ( 338 ) — — ( 338 ) Repurchase of common stock ( 120 ) — ( 4,464 ) — — ( 4,464 ) Employee stock purchase plan 113 — 2,635 — — 2,635 Stock-based compensation — — 13,966 — — 13,966 Other comprehensive income — — — 357 — 357 Net income — — — — 733 733 Balance at June 30, 2021 76,469 8 640,710 803 ( 207,854 ) 433,667 Common stock issued pursuant to equity awards, net 290 — ( 104 ) — — ( 104 ) Repurchase of common stock ( 24 ) — ( 1,008 ) — — ( 1,008 ) Stock-based compensation — — 16,022 — — 16,022 Other comprehensive loss — — — ( 292 ) — ( 292 ) Net income — — — — 9,258 9,258 Balance at September 30, 2021 76,735 $ 8 $ 655,620 $ 511 $ ( 198,596 ) $ 457,543 See accompanying notes. 8 Table of Contents MAXLINEAR, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited; in thousands) Nine Months Ended September 30, 2022 2021 Operating Activities Net income $ 93,960 $ 13,793 Adjustments to reconcile net income to cash provided by operating activities: Amortization and depreciation 61,906 67,439 Amortization of debt issuance costs and accretion of discounts 1,462 2,584 Stock-based compensation 58,154 42,943 Deferred income taxes 23,321 1,405 Loss on disposal of property and equipment 167 533 Unrealized holding loss on investments 1,418 — Impairment of leasehold improvements — 226 Impairment of leased right-of-use assets 462 429 Loss on extinguishment of debt — 5,221 (Gain) loss on foreign currency ( 3,245 ) 384 Excess tax benefits on stock-based awards ( 9,702 ) ( 5,369 ) Changes in operating assets and liabilities: Accounts receivable ( 57,976 ) ( 39,425 ) Inventory ( 34,267 ) ( 29,440 ) Prepaid expenses and other assets 3,957 33,487 Leased right-of-use assets — 72 Accounts payable, accrued expenses and other current liabilities 82,389 35,054 Accrued compensation 32,187 23,849 Accrued price protection liability 76,968 1,636 Lease liabilities ( 8,485 ) ( 7,070 ) Other long-term liabilities ( 3,307 ) 4,449 Net cash provided by operating activities 319,369 152,200 Investing Activities Purchases of property and equipment ( 24,625 ) ( 26,934 ) Purchases of intangible assets ( 10,440 ) ( 6,616 ) Cash used in acquisitions, net of cash acquired — ( 35,000 ) Proceeds loaned under notes receivable ( 10,000 ) — Purchases of investments ( 29,325 ) ( 5,000 ) Net cash used in investing activities ( 74,390 ) ( 73,550 ) Financing Activities Proceeds from the issuance of debt — 350,000 Payment of debt issuance cost — ( 4,144 ) Repayment of debt ( 135,000 ) ( 389,813 ) Net proceeds from issuance of common stock 3,214 6,286 Minimum tax withholding paid on behalf of employees for restricted stock units ( 28,527 ) ( 11,081 ) Repurchase of common stock ( 31,511 ) ( 8,145 ) Net cash used in financing activities ( 191,824 ) ( 56,897 ) Effect of exchange rate changes on cash and cash equivalents ( 2,400 ) ( 1,233 ) Increase (decrease) in cash, cash equivalents and restricted cash 50,755 20,520 Cash, cash equivalents and restricted cash at beginning of period 131,738 150,034 Cash, cash equivalents and restricted cash at end of period $ 182,493 $ 170,554 Supplemental disclosures of cash flow information: Cash paid for interest $ 6,917 $ 8,798 Cash paid for income taxes $ 14,076 $ 2,894 Supplemental disclosures of non-cash activities: Issuance of shares for payment of bonuses $ 38,615 $ 23,554 See accompanying notes. 9 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 1. Organization and Summary of Significant Accounting Policies Description of Business MaxLinear, Inc. was incorporated in Delaware in September 2003. MaxLinear, Inc., together with its wholly owned subsidiaries, collectively referred to as MaxLinear, or the Company, is a provider of communications systems-on-chip (SoC) solutions used in broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications. MaxLinear is a fabless integrated circuit design company whose products integrate all or substantial portions of a high-speed communication system, including radio frequency (RF), high-performance analog, mixed-signal, digital signal processing, security engines, data compression and networking layers, and power management. MaxLinear’s customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in a wide range of electronic devices, including cable Data Over Cable Service Interface Specifications (DOCSIS), fiber and DSL broadband modems and gateways; Wi-Fi and wireline routers for home networking; radio transceivers and modems for 4G/5G base-station and backhaul infrastructure; fiber-optic modules for data center, metro, and long-haul transport networks; as well as power management and interface products used in these and many other markets. Basis of Presentation and Principles of Consolidation The accompanying unaudited consolidated financial statements include the accounts of MaxLinear, Inc. and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. All intercompany transactions and investments have been eliminated in consolidation. In the opinion of management, the Company’s unaudited consolidated interim financial statements contain adjustments, including normal recurring accruals necessary to present fairly the Company’s consolidated financial position, results of operations, comprehensive income, stockholders’ equity, and cash flows. The consolidated balance sheet as of December 31, 2021 was derived from the Company’s audited consolidated financial statements at that date. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission, or the SEC, on February 2, 2022, or the Annual Report. Interim results for the nine months ended September 30, 2022 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2022. The functional currency of certain foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these foreign subsidiaries are translated at the current exchange rate at the balance sheet date and historical rates for equity. Revenue and expense components are translated at weighted average exchange rates in effect during the period. Gains and losses resulting from foreign currency translation are included as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in the results of operations, and to date, have not been material. Use of Estimates and Significant Risks and Uncertainties The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes of the consolidated financial statements. Actual results could differ from those estimates. During the COVID-19 global pandemic, which is still ongoing, various restrictions were put in place causing a temporary decline in demand for certain items such as automobiles. As restrictions began easing across the world, 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 supply shortage impacting the Company’s industry. Consistent with the prior year, the Company continues to operate in a supply constrained environment and is working closely with its suppliers to mitigate the impact of such shortage. Furthermore, the Company’s management believes this supply-constrained environment may continue into 2023. 10 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Global supply shortages, inflation, and uncertainty in customer demand and the worldwide economy has continued as a result of the COVID-19 pandemic, and the Company may experience continued volatility in its sales and revenues in the near future. However, the magnitude of such volatility on the Company’s business and its duration is uncertain and cannot be reasonably estimated at this time. The Company also believes that its $ 182.5 million of cash and cash equivalents at September 30, 2022 will be sufficient to fund its projected operating requirements for at least the next twelve months. A material adverse impact from the global semiconductor supply shortage could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly as the Company pursues additional acquisitions (Note 3). The Company’s future capital requirements will depend on many factors, including changes in revenue, the expansion of engineering, sales and marketing activities, the timing and extent of expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of the Company’s products and potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to the Company or at all. If the Company is unable to raise additional funds when needed, it may not be able to sustain its operations or execute its strategic plans. The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of October 25, 2022, the issuance date of this Quarterly Report on Form 10-Q. Actual results could differ from those estimates, particularly if the Company experiences material impacts from the global supply shortage. Summary of Significant Accounting Policies Refer to the Company’s Annual Report for a summary of significant accounting policies. There have been no other significant changes to the Company’s significant accounting policies during the nine months ended September 30, 2022. Recently Issued Accounting Pronouncements In October 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , to provide specific guidance to eliminate diversity in practice on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts from customers in a business combination consistent with revenue contracts with customers not acquired in an acquisition. The amendments in this update provide that the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date. These amendments are effective for the Company beginning with fiscal year 2023. The impact of the adoption of the amendments in this update will depend on the magnitude of any customer contracts assumed in a business combination in 2023 and beyond. 2. Net Income (Loss) Per Share Basic earnings per share, or EPS, is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock options, restricted stock units and restricted stock awards are considered to be common stock equivalents and are only included in the calculation of diluted EPS when their effect is dilutive. In periods in which the Company has a net loss, dilutive common stock equivalents are excluded from the calculation of diluted EPS. 11 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The table below presents the computation of basic and diluted EPS: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands, except per share amounts) Numerator: Net income $ 28,408 $ 9,258 $ 93,960 $ 13,793 Denominator: Weighted average common shares outstanding—basic 78,436 76,582 77,833 75,795 Dilutive common stock equivalents 1,624 3,233 2,498 3,253 Weighted average common shares outstanding—diluted 80,060 79,815 80,331 79,048 Net income per share: Basic $ 0.36 $ 0.12 $ 1.21 $ 0.18 Diluted $ 0.35 $ 0.12 $ 1.17 $ 0.17 For the three months ended September 30, 2022 and 2021, the Company excluded common stock equivalents for outstanding stock-based awards, which represented potentially dilutive securities of 2.5 million and 0.08 million, respectively, from the calculation of diluted net income per share due to their anti-dilutive nature. For the nine months ended September 30, 2022 and 2021, the Company excluded common stock equivalents for outstanding stock-based awards, which represented potentially dilutive securities of 1.5 million and 0.07 million, respectively, from the calculation of diluted net income per share due to their anti-dilutive nature. 3. Business Combinations Silicon Motion Merger On May 5, 2022, MaxLinear entered into an agreement and plan of merger, or the Merger Agreement, with Silicon Motion Technology Corporation, or Silicon Motion, an exempted company with limited liability incorporated under the Law of the Cayman Islands, pursuant to which, subject to the terms and conditions thereof, MaxLinear agreed to acquire Silicon Motion pursuant to a statutory merger of Shark Merger Sub, a wholly-owned subsidiary of MaxLinear, with and into Silicon Motion, with Silicon Motion surviving the merger as a wholly-owned subsidiary of MaxLinear. Silicon Motion is a provider of NAND flash controllers for solid state drives, or SSDs, and other solid state storage devices. Under the terms of the Merger Agreement, the transaction consideration will consist of $ 93.54 in cash and 0.388 shares of MaxLinear stock for each Silicon Motion American Depositary Share, or ADS, and $ 23.385 in cash and 0.097 shares of MaxLinear common stock for each Silicon Motion ordinary share not represented by an ADS. Upon closing of the transaction, the current MaxLinear stockholders will own approximately 86 % of the combined company and former Silicon Motion securityholders will own approximately 14 % of the combined company. Based on the closing price of MaxLinear shares on May 4, 2022, the implied value of the total transaction consideration for Silicon Motion is approximately $ 4.3 billion. MaxLinear may fund up to $ 3.5 billion of cash consideration with cash on hand and fully committed debt financing from Wells Fargo Bank, N.A., or Wells Fargo Bank, and other lenders as described below. MaxLinear will also assume Silicon Motion’s vested and unvested employee stock-based compensation awards. The merger is not subject to any financing conditions but is pending satisfaction of customary closing conditions, including regulatory approval in the People’s Republic of China, or China. On June 27, 2022, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR, waiting period expired with respect to the pending merger. On July 13, 2022, the registration statement on Form S-4 was declared effective by the SEC. On August 31, 2022, the Silicon Motion securityholders approved the merger at the extraordinary general meeting. 12 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) On June 17, 2022, MaxLinear entered into an amended and restated commitment letter with Wells Fargo Bank and other lenders pursuant to which, subject to the terms and conditions set forth therein, the lenders have committed to provide (i) a senior secured term B loan facility in an aggregate principal amount of up to $ 2.7375 billion (the “Term B Loan Facility”) (ii) a senior secured term A loan facility in an aggregate principal amount of up to $ 512.5 million (the “Term A Loan Facility”) and (iii) a senior secured revolving credit facility in an aggregate principal amount of up to $ 250.0 million, which we collectively refer to as the Senior Secured Credit Facilities. The funding of the Senior Secured Credit Facilities is contingent on the satisfaction of customary conditions, including (i) the execution and delivery of definitive documentation with respect to credit facilities in accordance with the terms in the amended and restated commitment letter, and (ii) the consummation of the acquisition by MaxLinear of Silicon Motion in accordance with the Merger Agreement. A portion of the proceeds from the Senior Secured Credit Facilities will be used to repay existing debt (Note 8) in full. On October 24, 2022, MaxLinear entered into a second amended and restated commitment letter with Wells Fargo Bank and other lenders, which allows for additional commitments in respect of the Term A Loan Facility to be effected by way of the joinder of additional commitment parties to the second amended and restated commitment letter, and allows for an increase in the Term Loan A Loan Facility on a dollar-for-dollar basis by a corresponding decrease in the amount of the Term Loan B facility. Acquisition of Company X On December 8, 2021, the Company completed its acquisition of a business, or Company X, pursuant to a Purchase and Sale Agreement, or the Purchase Agreement. The initial closing transaction consideration consisted of $ 5.0 million in cash. In addition, their stockholders may receive up to an additional $ 3.0 million in potential contingent consideration, subject to the acquired business satisfying certain financial and personnel objectives by March 31, 2023. Company X is headquartered in Chennai, India and operates as a Wi-Fi solutions and service provider. Acquisition Consideration The following table summarizes the fair value of purchase price consideration to acquire Company X (in thousands): Description Amount Fair value of purchase consideration: Cash $ 5,000 Contingent consideration (1) 2,700 Total purchase price $ 7,700 _________________ (1) The fair value of contingent consideration is based on applying the Monte Carlo simulation method to forecast achievement under various contingent consideration events which may result in up to $ 3.0 million in payments subject to the acquired business’s satisfying certain financial and personnel objectives by March 31, 2023 under the Purchase Agreement. Key inputs in the valuation include forecasted revenue, revenue volatility and discount rate. Underlying forecast mathematics were based on Geometric Brownian Motion in a risk-neutral framework and discounted back to the applicable period in which the accumulative thresholds were achieved at discount rates commensurate with the risk and expected payout term of the contingent consideration. 13 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Purchase Price Allocation An allocation of purchase price as of the December 8, 2021 acquisition closing date based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition primarily includes $ 4.4 million in identifiable intangible assets and $ 0.6 million in net operating liabilities, with $ 3.9 million in goodwill. The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets (in thousands): Category Estimated Life in Years Fair Value Finite-lived intangible assets: Licensed technology 3 $ 4,400 Total identifiable intangible assets acquired $ 4,400 Assumptions in the Allocations of Purchase Price Management prepared the purchase price allocations for Company X and in doing so considered or relied in part upon reports of a third party valuation expert to calculate the fair value of certain acquired assets, which primarily included identifiable intangible assets and contingent consideration. Certain stockholders that are employees of Company X were not required to remain employed in order to receive the contingent consideration; accordingly, the fair value of the contingent consideration was accounted for as a portion of the purchase consideration. Estimates of fair value require management to make significant estimates and assumptions. The goodwill recognized is attributable primarily to the acquired workforce, expected synergies, and other benefits that MaxLinear believes will result from integrating the operations of Company X with the operations of MaxLinear. Certain liabilities included in the purchase price allocations are based on management’s best estimates of the amounts to be paid or settled and based on information available at the time the purchase price allocations were prepared. There were minor adjustments to various assets and liabilities that resulted in a change in the purchase price allocation reflected as of September 30, 2022 compared to the preliminary purchase price allocation as of December 31, 2021 for Company X. These adjustments resulted in a decrease of $ 0.07 million in net operating assets and corresponding increase in goodwill. The fair value of the identified intangible assets acquired from Company X was estimated using an income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. More specifically, the fair value of the licensed technology was determined using the multi-period excess earnings method, or MPEEM. MPEEM is an income approach to fair value measurement attributable to a specific intangible asset being valued from the asset grouping’s overall cash-flow stream. MPEEM isolates the expected future discounted cash-flow stream to its net present value. Future cash flows were estimated based on forecasted revenue and costs, taking into account expected future contracts and remaining contract terms. The licensed technology began amortization immediately upon the closing of the transaction. In connection with the acquisition of Company X, the Company assumed certain operating liabilities. The liabilities assumed in this acquisition are included in the respective purchase price allocations above. Goodwill recorded in connection with Company X was $ 3.9 million as of September 30, 2022. The Company does not expect to deduct any of the acquired goodwill for tax purposes. 4. Restructuring Activity From time to time, the Company approves and implements restructuring plans as a result of internal resource alignment and cost saving measures. Such restructuring plans include terminating employees, vacating certain leased facilities, and cancellation of contracts. 14 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents the activity related to the restructuring plans, which is included in restructuring charges in the consolidated statements of income: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) Employee separation expenses $ 631 $ — $ 631 $ 1,273 Lease related charges — — 462 608 Other — — — 323 $ 631 $ — $ 1,093 $ 2,204 Lease related charges for the nine months ended September 30, 2022 included the impairment of leased right-of-use assets of approximately $ 0.5 million related to exiting a redundant facility. Lease related charges for the nine months ended September 30, 2021 included the impairment of leased right-of-use assets and leasehold improvements of approximately $ 0.4 million and $ 0.2 million, respectively, related to exiting a redundant facility. The following table presents a roll-forward of the Company’s restructuring liability for the nine months ended September 30, 2022. The restructuring liability is included in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets. Employee Separation Expenses Lease Related Charges Other Total (in thousands) Liability as of December 31, 2021 $ — $ 444 $ — $ 444 Restructuring charges 631 462 — 1,093 Cash payments ( 631 ) ( 220 ) — ( 851 ) Non-cash charges and adjustments — ( 462 ) — ( 462 ) Liability as of September 30, 2022 — 224 — 224 Less: current portion as of September 30, 2022 — ( 224 ) — ( 224 ) Long-term portion as of September 30, 2022 $ — $ — $ — $ — 5. Goodwill and Intangible Assets Goodwill Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company’s estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date). During the nine months ended September 30, 2022, there was an increase in the carrying value of goodwill of $ 0.07 million related to minor adjustments to assets and liabilities in the purchase price allocation for Company X. The Company performs an annual goodwill impairment assessment on October 31st each year, using a quantitative assessment comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded. In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the three and nine months ended September 30, 2022 and 2021, there were no indications of impairment of the Company’s goodwill balances. 15 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Acquired Intangibles Finite-lived Intangible Assets The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which are amortized over their estimated useful lives: September 30, 2022 December 31, 2021 Weighted Average Useful Life (in Years) Gross Carrying Amount Accumulated Amortization Net Carrying Amount Gross Carrying Value Accumulated Amortization Net Carrying Amount (in thousands) Licensed technology 5.6 $ 27,290 $ ( 3,550 ) $ 23,740 $ 16,850 $ ( 2,218 ) $ 14,632 Developed technology 7.0 311,261 ( 219,207 ) 92,054 308,661 ( 189,244 ) 119,417 Trademarks and trade names 6.2 14,800 ( 12,921 ) 1,879 14,800 ( 11,221 ) 3,579 Customer relationships 5.0 128,800 ( 124,422 ) 4,378 128,800 ( 116,847 ) 11,953 Backlog 2.4 1,300 ( 1,209 ) 91 1,300 ( 941 ) 359 6.2 $ 483,451 $ ( 361,309 ) $ 122,142 $ 470,411 $ ( 320,471 ) $ 149,940 The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of income as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) (in thousands) Cost of net revenue $ 9,480 $ 10,761 $ 30,192 $ 32,288 Research and development 1 1 3 3 Selling, general and administrative 1,541 5,812 10,643 17,697 $ 11,022 $ 16,574 $ 40,838 $ 49,988 Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of income results primarily from acquired developed technology. The following table sets forth the activity related to finite-lived intangible assets: Nine Months Ended September 30, 2022 2021 (in thousands) Beginning balance $ 149,940 $ 200,066 Additions 10,440 6,616 Transfers to developed technology from IPR&D 2,600 — Amortization ( 40,838 ) ( 49,988 ) Ending balance $ 122,142 $ 156,694 The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value. During each of the three and nine months ended September 30, 2022 and 2021, no impairment losses related to finite-lived intangible assets were recognized. 16 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The following table presents future amortization of the Company’s finite-lived intangible assets at September 30, 2022: Amount (in thousands) 2022 (3 months) $ 10,938 2023 40,580 2024 25,855 2025 14,520 2026 13,410 Thereafter 16,839 Total $ 122,142 Indefinite-lived Intangible Assets Indefinite-lived intangible assets consist entirely of acquired in-process research and development technology, or IPR&D. The following table sets forth the Company's activities related to indefinite-lived intangible assets: Nine Months Ended September 30, 2022 2021 (in thousands) Beginning balance $ 2,600 $ 7,200 Transfers to developed technology from IPR&D ( 2,600 ) — Ending balance $ — $ 7,200 The Company performs its annual assessment of indefinite-lived intangible assets on October 31 each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. During the three and nine months ended September 30, 2022 and 2021, no indicators of impairment were identified and, as a result, no IPR&D impairment losses were recorded. 6. Financial Instruments The composition of financial instruments is as follows: September 30, 2022 Net Unrealized Cost Gains Losses Fair Value (in thousands) Assets Marketable equity investments $ 20,005 $ — $ ( 1,418 ) $ 18,587 September 30, 2022 Fair Value (in thousands) Liabilities Contingent consideration (Note 3) $ 2,882 17 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) December 31, 2021 Fair Value (in thousands) Liabilities Contingent consideration (Note 3) 2,700 At September 30, 2022, the Company held marketable equity investments with an aggregate fair value of $ 18.6 million that were in an unrealized loss position for less than 12 months. The net unrealized loss of $ 1.4 million as of September 30, 2022 represents stock price fluctuations in the underlying securities held, and was recorded to other income (expense), net in the consolidated statement of income. The Company evaluates securities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer; including changes in the financial condition of any underlying collateral of the security; any downgrades of the security by analysts or rating agencies; nonpayment of any scheduled interest, or the reduction or elimination of dividends; as well as our intent and ability to hold the security in order to allow for an anticipated recovery in fair value. The fair values of the Company’s financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants and is recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The levels are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities. Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data. Level 3: Unobservable inputs are used when little or no market data is available. The Company classifies its financial instruments within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted market prices or alternate pricing sources and models utilizing market observable inputs, respectively. The marketable equity investment held by the Company has been valued on the basis of quoted market prices and is therefore classified as Level 1. The contingent consideration liability is associated with the Company’s acquisition of Company X (Note 3) and is classified as a Level 3 financial instrument that is subject to the acquired business’s satisfaction of certain financial and personnel objectives by March 31, 2023, under the Purchase Agreement. The fair value of the contingent consideration is based on (1) applying the Monte Carlo simulation method, with underlying forecast mathematics based on Geometric Brownian motion in a risk-neutral framework, to forecast achievement of the acquired business’ financial objectives under various possible contingent consideration events and (2) a probability based methodology using management’s inputs and assumptions to forecast achievement of the acquired business’ personnel objectives which combined may result in up to $ 3.0 million in total payments to the acquired business. Key inputs in the valuation include forecasted revenue, revenue volatility, discount rate and discount term as it relates to the financial objectives and probability of achievement, discount term and discount rate as it relates to the personnel objectives. 18 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Fair Value Measurements at September 30, 2022 Balance at September 30, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Assets Marketable equity securities $ 18,587 $ 18,587 $ — $ — Liabilities Contingent consideration $ 2,882 $ — $ — $ 2,882 Fair Value Measurements at December 31, 2021 Balance at December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) (in thousands) Liabilities Contingent consideration $ 2,700 $ — $ — $ 2,700 The following summarizes the activity in Level 3 financial instruments: Nine Months Ended September 30, 2022 2021 Contingent Consideration Beginning balance $ 2,700 $ — Accretion of discount (1) 182 — Ending balance $ 2,882 $ — _____________________ (1) Changes to the balance associated with the estimated fair value of contingent consideration for the nine months ended September 30, 2022 were primarily due to accretion of the related discount. For the nine months ended September 30, 2022, there were no transfers between Level 1, Level 2, or Level 3 financial instruments. Financial Instruments Not Recorded at Fair Value on a Recurring Basis Some of the Company’s financial instruments are recorded at amounts that approximate fair value due to their liquid or short-term nature or by election on investments in privately-held entities as described below. Such financial assets and financial liabilities include: cash and cash equivalents, restricted cash, net receivables, investments in privately-held entities, certain other assets, accounts payable, accrued price protection liability, accrued expenses, accrued compensation costs, and other current liabilities. The Company’s long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes (Note 8). 19 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Included in other long-term assets are investments in privately held entities of $ 15.1 million and $ 5.0 million as of September 30, 2022 and December 31, 2021, respectively. The Company does not have the ability to exercise significant influence or control over such entity and has accounted for the investments as financial instruments. Given that fair values for such investments are not readily determinable, the Company is electing to measure these investments at cost, less any impairment, and adjust the carrying value to fair value if any observable price changes for similar investments in the same entity are identified. 7. Balance Sheet Details Cash, cash equivalents and restricted cash consist of the following: September 30, 2022 December 31, 2021 (in thousands) Cash and cash equivalents $ 181,496 $ 130,572 Short-term restricted cash 971 105 Long-term restricted cash 26 1,061 Total cash, cash equivalents and restricted cash $ 182,493 $ 131,738 As of September 30, 2022 and December 31, 2021, cash and cash equivalents included money market funds of approximately $ 0.4 million and $ 20.4 million, respectively. As of September 30, 2022 and December 31, 2021, the Company had restricted cash of approximately $ 1.0 million and $ 1.2 million, respectively. The cash is restricted in connection with guarantees for certain import duties and office leases. Inventory consists of the following: September 30, 2022 December 31, 2021 (in thousands) Work-in-process $ 101,637 $ 72,369 Finished goods 64,333 59,334 $ 165,970 $ 131,703 Property and equipment, net consists of the following: Useful Life (in Years) September 30, 2022 December 31, 2021 (in thousands) Furniture and fixtures 5 $ 3,897 $ 3,917 Machinery and equipment 3 - 5 71,383 65,004 Masks and production equipment 2 - 5 38,932 32,099 Software 3 9,977 8,763 Leasehold improvements 1 - 5 33,579 30,889 Construction in progress N/A 4,915 4,647 162,683 145,319 Less: accumulated depreciation and amortization ( 95,602 ) ( 84,395 ) $ 67,081 $ 60,924 Depreciation expense for the three months ended September 30, 2022 and 2021 was $ 5.1 million and $ 4.7 million, respectively. Depreciation expense for the nine months ended September 30, 2022 and 2021 was $ 14.7 million and $ 12.0 million, respectively. In March 2022, the Company entered into a note receivable with a supplier for $ 10.0 million, which is included in other long-term assets on the consolidated balance sheet. Repayments of $ 2.0 million per year are due annually by March 31, in years 2024 through 2027, provided that certain production utilization targets for the prior year are met. 20 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Accrued price protection liability consists of the following activity: Nine Months Ended September 30, 2022 2021 (in thousands) Beginning balance $ 40,509 $ 47,766 Charged as a reduction of revenue 142,473 60,488 Payments ( 66,391 ) ( 58,843 ) Ending balance $ 116,591 $ 49,411 Accrued expenses and other current liabilities consist of the following: September 30, 2022 December 31, 2021 (in thousands) Accrued technology license payments $ 5,878 $ 7,337 Accrued professional fees 3,934 3,651 Accrued engineering and production costs 2,787 2,934 Accrued restructuring 224 320 Accrued royalty 1,346 2,080 Short-term lease liabilities 10,437 8,888 Accrued customer credits 3,118 5,136 Income tax liability 8,435 7,105 Customer contract liabilities 1,028 1,044 Accrued obligations to customers for price adjustments 45,954 6,721 Accrued obligations to customers for stock rotation rights 1,465 2,847 Contingent consideration 2,882 — Other 6,926 9,205 $ 94,414 $ 57,268 The following table summarizes the change in balances of accumulated other comprehensive income (loss) by component: Cumulative Translation Adjustments Pension and Other Defined Benefit Plan Obligation Total (in thousands) Balance at December 31, 2021 $ 21 $ 2,104 $ 2,125 Other comprehensive loss before reclassifications, net of tax ( 7,441 ) — ( 7,441 ) Balance at September 30, 2022 $ ( 7,420 ) $ 2,104 $ ( 5,316 ) 21 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 8. Debt Debt The carrying amount of the Company’s long-term debt consists of the following: September 30, 2022 December 31, 2021 (in thousands) Principal balance: Initial term loan under June 23, 2021 credit agreement $ 175,000 $ 310,000 Total principal balance 175,000 310,000 Less: Unamortized debt discount ( 725 ) ( 816 ) Unamortized debt issuance costs ( 2,668 ) ( 3,031 ) Net carrying amount of long-term debt 171,607 306,153 Less: current portion of long-term debt — — Long-term debt, non-current portion $ 171,607 $ 306,153 As of September 30, 2022 and December 31, 2021, the weighted average effective interest rate on debt was approximately 3.4 % and 3.2 %, respectively. During the three months ended September 30, 2022 and 2021, the Company recognized total amortization of debt discount and debt issuance costs of $ 0.2 million and $ 0.2 million, respectively, to interest expense. During the nine months ended September 30, 2022 and 2021, the Company recognized total amortization of debt discount and debt issuance costs of $ 0.4 million and $ 1.2 million, respectively, to interest expense. The approximate aggregate fair value of the term loans outstanding as of September 30, 2022 and December 31, 2021 was $ 192.4 million and $ 311.0 million, respectively, which was estimated on the basis of inputs that are observable in the market and which is considered a Level 2 measurement method in the fair value hierarchy. As of September 30, 2022, the outstanding principal balance of $ 175.0 million is due in full on June 23, 2028, upon maturity of the loan. Initial Term Loan and Revolving Facility under June 23, 2021 Credit Agreement On June 23, 2021, the Company entered into a Credit Agreement, or the June 23, 2021 Credit Agreement, by and among the Company, the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent and collateral agent, that provides for a senior secured term B loan facility, or the “Initial Term Loan under the June 23, 2021 Credit Agreement,” in an aggregate principal amount of $ 350.0 million and a senior secured revolving credit facility, or the “Revolving Facility,” in an aggregate principal amount of up to $ 100.0 million. The proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement were used (i) to repay in full all outstanding indebtedness under that certain Credit Agreement dated May 12, 2017, by and among the Company, MUFG Bank Ltd., as administrative agent and MUFG Union Bank, N.A., as collateral agent and the lenders from time to time party thereto (as amended by Amendment No. 1, dated July 31, 2020) and (ii) to pay fees and expenses incurred in connection therewith. The remaining proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement are available for general corporate purposes and the proceeds of the Revolving Facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries. As of September 30, 2022, the Revolving Facility was undrawn. Under the amended and restated commitment letter with Wells Fargo Bank and other lenders entered into in connection with the pending merger with Silicon Motion (Note 3), the Company expects to repay the remaining outstanding term loans under this agreement upon closing of the merger. 22 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The June 23, 2021 Credit Agreement 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, 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. Incremental loans are subject to certain additional conditions, including obtaining additional commitments from the lenders then party to the June 23, 2021 Credit Agreement or new lenders. Under the June 23, 2021 Credit Agreement, the Initial Term Loan bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50 %, (y) the prime rate then in effect and (z) an adjusted LIBOR rate determined on the basis of a one-month interest period plus 1.00 %, in each case, plus an applicable margin of 1.25 % or (ii) an adjusted LIBOR rate, subject to a floor of 0.50 %, plus an applicable margin of 2.25 %. Loans under the Revolving Facility initially bear interest, at a per annum rate equal to either (i) a base rate (as calculated above) plus an applicable margin of 0.00 %, or (ii) an adjusted LIBOR rate (as calculated above) plus an applicable margin of 1.00 %. Following delivery of financial statements for the Company’s fiscal quarter ending June 30, 2021, the applicable margin for loans under the Revolving Facility will range from 0.00 % to 0.75 % in the case of base rate loans and 1.00 % to 1.75 % in the case of LIBOR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter. The Company is required to pay commitment fees ranging from 0.175 % to 0.25 % per annum on the daily undrawn commitments under the Revolving Facility, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter. 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 of the Initial Term Loan under the June 23, 2021 Credit Agreement, with the balance payable on the maturity date. The June 23, 2021 Credit Agreement contains customary provisions specifying alternative interest rate calculations to be employed at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings. The Company is required to make mandatory prepayments of the outstanding principal amount of term loans under the June 23, 2021 Credit Agreement with the net cash proceeds from the disposition of certain assets and the receipt of insurance proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow beyond stated threshold amounts, and from the incurrence of certain indebtedness. The Company has the right to prepay its term loans under the June 23, 2021 Credit Agreement, in whole or in part, at any time without premium or penalty, subject to certain limitations and a 1.0 % soft call premium applicable during the first six months following the closing date of the June 23, 2021 Credit Agreement. The Initial Term Loan under the June 23, 2021 Credit Agreement will mature on June 23, 2028, at which time all outstanding principal and accrued and unpaid interest on the Initial Term Loan under the June 23, 2021 Credit Agreement must be repaid. The Revolving Facility will mature on June 23, 2026, at which time all outstanding principal and accrued and unpaid interest under the Revolving Facility must be repaid. The Company is also obligated to pay fees customary for a credit facility of this size and type. 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 June 23, 2021 Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the subsidiary guarantors pursuant to a Security Agreement, dated as of June 23, 2021, by and among the Company, the subsidiary guarantors from time to time party thereto, and Wells Fargo Bank, National Association, as collateral agent. The June 23, 2021 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its restricted subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, and sell assets, in each case, subject to limitations and exceptions set forth in the June 23, 2021 Credit Agreement. The Revolving Facility also prohibits the Company from having a secured net leverage ratio in excess of 3.50 :1.00 (subject to a temporary increase to 3.75 :1.00 following the consummation of certain material permitted acquisitions) as of the last day of any fiscal quarter of the Company (commencing with the fiscal quarter ending September 30, 2021) if the aggregate borrowings under the Revolving Facility exceed 1 % of the aggregate commitments thereunder (subject to certain exceptions set forth in the June 23, 2021 Credit Agreement) as of such date. As of September 30, 2022, the Company was in compliance with such covenants. The June 23, 2021 Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, covenant defaults, change in control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, the lenders may require immediate payment of all obligations under the June 23, 2021 Credit Agreement and may exercise certain other rights and remedies provided for under the June 23, 2021 Credit Agreement , the other loan documents and applicable law. 23 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The debt is carried at its principal amount, net of unamortized debt discount and issuance costs, and is not adjusted to fair value each period. The issuance date fair value of the liability component of the debt in the amount of $ 350.2 million was determined using a discounted cash flow analysis, in which the projected interest and principal payments were discounted back to the issuance date of the term loan at a market interest rate for nonconvertible debt of 3.4 %, which represents a Level 2 fair value measurement. The debt discount of $ 0.9 million and debt issuance costs of $ 2.9 million associated with the Initial Term Loan under the June 23, 2021 Credit Agreement are being amortized to interest expense using the effective interest method over its seven-year term. Debt issuance costs of $ 0.4 million associated with the Revolving Facility are being amortized to interest expense over its five-year term. 9. Stock-Based Compensation Employee Stock-Based Compensation Plans At September 30, 2022, the Company had stock-based compensation awards outstanding under the following plans: the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP. Refer to the Company’s Annual Report for a summary of its stock-based compensation and equity plans as of December 31, 2021. There have been no material changes to the terms of the Company’s equity incentive plans during the nine months ended September 30, 2022. As of September 30, 2022, the number of shares of common stock available for future issuance under the 2010 Plan was 15,425,135 shares. As of September 30, 2022, the number of shares of common stock available for future issuance under the ESPP was 4,977,968 shares. Employee Incentive Bonus The Company mostly settles bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company’s common stock as determined in trading on the applicable stock exchange, on a date approved by the Board of Directors. In connection with the Company’s bonus programs, in February 2022, the Company issued 0.5 million freely-tradable (subject to certain restrictions for affiliates) shares of the Company’s common stock in settlement of bonus awards to employees, including executives, for the 2021 performance period. At September 30, 2022, the Company has an accrual of $ 30.0 million for bonus awards for employees for year-to-date achievement in the 2022 performance period. The Company’s compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock. Stock-Based Compensation The Company recognizes stock-based compensation in the consolidated statements of income, based on the department to which the related employee reports, as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 (in thousands) (in thousands) Cost of net revenue $ 188 $ 151 $ 513 $ 468 Research and development 10,635 7,692 30,294 22,121 Selling, general and administrative 9,308 8,179 27,347 20,354 $ 20,131 $ 16,022 $ 58,154 $ 42,943 The total unrecognized compensation cost related to unvested restricted stock units as of September 30, 2022 was $ 147.1 million, and the weighted average period over which these equity awards are expected to vest is 2.74 years. The total unrecognized compensation cost related to unvested performance-based restricted stock units as of September 30, 2022 was $ 27.8 million, and the weighted average period over which these equity awards are expected to vest is 1.07 years. There was no unrecognized compensation cost related to unvested stock options as of September 30, 2022. 24 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Restricted Stock Units A summary of the Company’s restricted stock unit activity is as follows: Number of Shares (in thousands) Weighted-Average Grant-Date Fair Value per Share Outstanding at December 31, 2021 5,233 $ 25.14 Granted 3,295 50.62 Vested ( 2,050 ) 35.47 Canceled ( 350 ) 32.43 Outstanding at September 30, 2022 6,128 $ 34.97 Performance-Based Restricted Stock Units Performance-based restricted stock units are eligible to vest at the end of each performance year, as defined in the underlying agreement, in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over baseline results relative to the growth rates for a peer group of companies for the same metrics and periods. For the performance-based restricted stock units granted to date, 60 % of each performance-based award is subject to the net sales metric for the performance period and 40 % is subject to the non-GAAP diluted earnings per share metric for the performance period. The maximum percentage for a particular metric is 250 % of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30 % and 100 %, respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period. As of September 30, 2022, the Company believes that it is probable that it will achieve certain performance metrics specified in the respective award agreements based on its expected revenue and non-GAAP diluted EPS results over the performance periods and calculated growth rates relative to its peers’ expected results based on data available, as defined in the respective award agreements. A summary of the Company’s performance-based restricted stock unit activity is as follows: Number of Shares (in thousands) Weighted-Average Grant-Date Fair Value per Share Outstanding at December 31, 2021 2,005 $ 19.80 Granted (1) 654 60.53 Vested ( 701 ) 17.85 Canceled ( 8 ) 40.51 Outstanding at September 30, 2022 1,950 $ 34.07 ________________ (1) Number of shares granted is based on the maximum percentage achievable in the performance-based restricted stock unit award. Employee Stock Purchase Rights and Stock Options Employee Stock Purchase Rights During the nine months ended September 30, 2022 and 2021 there were 83,404 and 113,510 shares, respectively, of common stock purchased under the ESPP at a weighted average price of $ 34.92 and $ 23.21 , respectively. 25 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) The fair values of employee stock purchase rights for the latest ESPP offering period were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions: Nine Months Ended September 30, 2022 2021 Weighted-average grant date fair value per share $ 14.25 $ 10.85 Risk-free interest rate 1.54 % 0.04 % Dividend yield — % — % Expected life (in years) 0.50 0.50 Volatility 69.74 % 61.10 % The risk-free interest rate assumption was based on rates for United States (U.S.) Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term is the duration of the offering period for each grant date. In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company’s daily closing stock prices. Stock Options A summary of the Company’s stock options activity is as follows: Number of Options (in thousands) Weighted-Average Exercise Price Weighted-Average Contractual Term (in years) Aggregate Intrinsic Value (in thousands) Outstanding at December 31, 2021 417 $ 17.05 Exercised ( 24 ) 14.27 Outstanding at September 30, 2022 393 $ 17.22 2.68 $ 6,060 Vested and expected to vest at September 30, 2022 393 $ 17.22 2.68 $ 6,060 Exercisable at September 30, 2022 393 $ 17.22 2.68 $ 6,060 No stock options were granted by the Company during the nine months ended September 30, 2022. The intrinsic value of stock options exercised was $ 0.1 million and $ 0.2 million in the three months ended September 30, 2022 and 2021, respectively. The intrinsic value of stock options exercised was $ 0.9 million and $ 9.2 million in the nine months ended September 30, 2022 and 2021, respectively. Cash received from exercise of stock options was $ 0.1 million and $ 0.2 million during the three months ended September 30, 2022 and 2021, respectively. Cash received from exercise of stock options was $ 0.3 million and $ 4.0 million during the nine months ended September 30, 2022 and 2021, respectively. The tax benefit from stock options exercised was $ 0.2 million and $ 10.0 million during the three months ended September 30, 2022 and 2021, respectively. The tax benefit from stock options exercised was $ 1.2 million and $ 23.4 million during the nine months ended September 30, 2022 and 2021, respectively. 10. Income Taxes The provision for income taxes primarily relates to projected federal, state, and foreign income taxes. To determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. In addition, the tax effects of certain significant or unusual items are recognized discretely in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter. The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the temporary differences reverse. The Company records a valuation allowance to reduce its deferred taxes to the amount it believes is more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence quarterly, including scheduled reversals of 26 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. Based upon the Company’s review of all positive and negative evidence, the Company continues to have a valuation allowance on its state deferred tax assets, certain of its federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where the Company has cumulative losses or otherwise is not expected to utilize certain tax attributes. The Company does not incur expense or benefit in certain tax-free jurisdictions in which it operates. The Company recorded an income tax provision of $ 16.2 million in the three months ended September 30, 2022 and an income tax provision of $ 11.8 million in the three months ended September 30, 2021. The Company recorded an income tax provision of $ 39.5 million in the nine months ended September 30, 2022 and an income tax provision of $ 5.6 million in the nine months ended September 30, 2021. The difference between the Company’s effective tax rate and the 21.0% U.S. federal statutory rate for the nine months ended September 30, 2022 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal research and development credits. The permanent tax item related to global intangible low-taxed income also reflects recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes. The difference between the Company’s effective tax rate and the 21.0% U.S. federal statutory rate for the nine months ended September 30, 2021 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including the tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10. Income tax positions must meet a more-likely-than-not threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first financial reporting period in which that threshold is no longer met. The Company records potential penalties and interest accrued related to unrecognized tax benefits within the consolidated statements of income as income tax expense. During the nine months ended September 30, 2022, the Company’s unrecognized tax benefits increased by $ 0.4 million. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. Accrued interest and penalties associated with uncertain tax positions as of September 30, 2022 were approximately $ 0.4 million and $ 0.03 million, respectively. The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At September 30, 2022, the statutes of limitations for the assessment of federal, state, and foreign income taxes are closed for the years before 2018, 2017, and 2016, respectively. The Company’s subsidiary in Singapore operates under certain tax incentives in Singapore, which are generally effective through March 2027, and are conditional upon meeting certain employment and investment thresholds in Singapore. Under the incentives, qualifying income derived from certain sales of the Company’s integrated circuits is taxed at a concessionary rate over the incentive period, and there are reduced Singapore withholding taxes on certain intercompany royalties during the incentive period. The Company recorded a tax provision in the nine months ended September 30, 2022 at the incentive rate. In the nine months ended September 30, 2021, due to the Company’s Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on the Company’s income tax provision. On August 9, 2022, the CHIPS and Science Act of 2022, or the CHIPS Act, was enacted in the United States. The CHIPS Act will provide financial incentives to the semiconductor industry which are primarily directed at manufacturing activities within the United States for qualifying property placed in service after December 31, 2022. As the Company currently outsources its manufacturing, the CHIPS Act is not expected to have a material impact to the Company’s consolidated tax provision for the year ending December 31, 2023. The Inflation Reduction Act of 2022, or IRA, was signed into law on August 16, 2022. The bill was meant to address the high inflation rate in the United States through various climate, energy, healthcare, and other incentives. These incentives are meant to be paid for by the tax provisions included in the IRA, such as a new 15 percent corporate minimum tax, a 1 percent new excise tax on stock buybacks, additional IRS funding to improve taxpayer compliance, and others. The IRA provisions are 27 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) effective for tax years beginning after December 31, 2022. At this time, none of the IRA tax provisions are expected to have a material impact to the Company’s consolidated tax provision for the year ending December 31, 2023. The Company will continue to monitor updates to its business along with guidance issued with respect to both Acts to determine whether any adjustments are needed to the Company’s consolidated tax provision in future periods. 11. Concentration of Credit Risk, Significant Customers and Geographic Information Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. Collateral is generally not required for customer receivables. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents. Significant Customers The Company markets its products and services to manufacturers of a wide range of electronic devices (Note 1). The Company sells its products both directly to end-customers and through third-party distributors, both of which are referred to as the Company’s customers (Note 12). The Company makes periodic evaluations of the credit worthiness of its customers. Customers comprising greater than 10% of net revenues for each of the periods presented are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Percentage of total net revenue Customer A 31 % 17 % 22 % 16 % Customer B * * * 10 % Customer E * 10 % * * The following table presents balances that are 10% or greater of accounts receivable, based on the Company’s billings to its customers. September 30, December 31, 2022 2021 Percentage of gross accounts receivable Customer B * 14 % Customer C 17 % * Customer D * 17 % Customer F 26 % * Customer G 11 % * ____________________________ * Represents less than 10% of the gross accounts receivable as of the respective period end. 28 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Significant Suppliers Suppliers comprising greater than 10% of total inventory purchases are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Vendor A 24 % 44 % 27 % 44 % Vendor B 26 % 19 % 25 % 20 % Vendor C 13 % 11 % 13 % 11 % Geographic Information The Company’s consolidated net revenues by geographic area based on ship-to location are as follows (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Amount % of total net revenue Amount % of total net revenue Amount % of total net revenue Amount % of total net revenue Asia $ 235,032 82 % $ 191,874 83 % $ 674,352 81 % $ 532,122 83 % United States 10,991 4 % 8,971 4 % 29,543 4 % 27,298 4 % Rest of world 39,707 14 % 28,929 13 % 125,771 15 % 85,089 13 % Total $ 285,730 100 % $ 229,774 100 % $ 829,666 100 % $ 644,509 100 % The products shipped to individual countries or territories representing greater than 10% of net revenue for each of the periods presented are as follows: Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Percentage of total net revenue Hong Kong 51 % 40 % 43 % 40 % China 14 % 12 % 16 % 11 % Vietnam * 11 % * 12 % ____________________________ * Represents less than 10% of the net revenue for the respective period. The determination of which country a particular sale is allocated to is based on the destination of the product shipment. No other individual country accounted for more than 10% of net revenue during these periods. Although a large percentage of the Company’s products is shipped to Asia, and in particular, Hong Kong, China and Vietnam, the Company believes that a significant number of the systems designed by customers and incorporating the Company’s semiconductor products are subsequently sold outside Asia to Europe, Middle East, and Africa markets and North American markets. Long-lived assets, which consists of property and equipment, net, leased right-of-use assets, intangible assets, net, and goodwill by geographic area are as follows (in thousands): September 30, December 31, 2022 2021 Amount % of total Amount % of total United States $ 367,714 70 % $ 382,650 70 % Singapore 114,204 22 % 122,474 22 % Rest of world 44,085 8 % 42,277 8 % Total $ 526,003 100 % $ 547,401 100 % 29 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 12. Revenue from Contracts with Customers Revenue by Market The table below presents disaggregated net revenues by market (in thousands): Three Months Ended September 30, Nine Months Ended September 30, 2022 2021 2022 2021 Broadband $ 120,165 $ 126,106 $ 393,819 $ 363,061 % of net revenue 42 % 55 % 47 % 56 % Connectivity 82,603 37,931 199,182 96,672 % of net revenue 29 % 16 % 24 % 15 % Infrastructure 35,580 29,224 104,650 87,385 % of net revenue 12 % 13 % 13 % 14 % Industrial and multi-market 47,382 36,513 132,015 97,391 % of net revenue 17 % 16 % 16 % 15 % Total net revenue $ 285,730 $ 229,774 $ 829,666 $ 644,509 Revenues from sales through the Company’s distributors accounted for 41 % and 47 % of net revenue for the three months ended September 30, 2022 and 2021, respectively. Revenues from sales through the Company’s distributors accounted for 44 % and 46 % of net revenue for the nine months ended September 30, 2022 and 2021, respectively. Contract Liabilities As of September 30, 2022 and December 31, 2021, customer contract liabilities were approximately $ 1.0 million and $ 1.0 million, respectively, and consisted primarily of advanced payments received for which performance obligations have not been completed. Revenue recognized in each of the three and nine months ended September 30, 2022 and 2021 that was included in the contract liability balance as of the beginning of each of those respective periods was immaterial. There were no material changes in the contract liabilities balance during the nine months ended September 30, 2022 and 2021. Obligations to Customers for Price Adjustments and Returns and Assets for Right-of-Returns As of September 30, 2022 and December 31, 2021, obligations to customers consisting of estimates of price protection rights offered to the Company’s end customers totaled $ 116.6 million and $ 40.5 million, respectively, and are included in accrued price protection liability in the consolidated balance sheets. For activity in this account, including amounts included in net revenue, refer to Note 7. Other obligations to customers representing estimates of price adjustments to be claimed by distributors upon sell-through of their inventory to their end customer and estimates of stock rotation returns to be claimed by distributors on products sold as of September 30, 2022 were $ 46.0 million and $ 1.5 million, respectively, and as of December 31, 2021 were $ 6.7 million and $ 2.8 million, respectively, and are included in accrued expenses and other current liabilities in the consolidated balance sheets (Note 7). The increase in revenue in the three and nine months ended September 30, 2022 and 2021 from net changes in transaction prices for amounts included in obligations to customers for price adjustments as of the beginning of those respective periods was not material. As of September 30, 2022 and December 31, 2021, right of return assets under customer contracts representing the estimates of product inventory the Company expects to receive from customers in stock rotation returns were approximately $ 0.5 million and $ 1.1 million, respectively. Right of return assets are included in inventory in the consolidated balance sheets. As of September 30, 2022 and December 31, 2021, there were no impairment losses recorded on customer accounts receivable. 30 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 13. Leases Operating Leases Operating lease arrangements primarily consist of office leases expiring in various years through 2028. These leases have original terms of approximately 2 to 8 years and some contain options to extend the lease up to 5 years or terminate the lease, which are included in right-of-use assets and lease liabilities when the Company is reasonably certain it will renew the underlying leases. Since the implicit rate of such leases is unknown and the Company is not reasonably certain to renew its leases, the Company has elected to apply a collateralized incremental borrowing rate to facility leases on the original lease term in calculating the present value of future lease payments. As of September 30, 2022 and December 31, 2021, the weighted average discount rate for operating leases was 3.6 % and 3.6 %, respectively, and the weighted average remaining lease term for operating leases was 4.1 years and 4.6 years, respectively, as of the end of each of these periods. The table below presents aggregate future minimum payments due under leases, reconciled to total lease liabilities included in the consolidated balance sheet as of September 30, 2022: Operating Leases (in thousands) 2022 (3 months) $ 2,828 2023 11,193 2024 7,941 2025 7,085 2026 5,036 Thereafter 3,948 Total minimum payments 38,031 Less: imputed interest ( 2,554 ) Total lease liabilities 35,477 Less: short-term lease liabilities ( 10,437 ) Long-term lease liabilities $ 25,040 Operating lease cost was $ 2.9 million and $ 2.3 million for the three months ended September 30, 2022 and 2021, respectively. Operating lease cost was $ 7.7 million and $ 7.1 million for the nine months ended September 30, 2022 and 2021, respectively. Short-term lease costs for the three and nine months ended September 30, 2022 and 2021 were not material. There were $ 0.1 million and $ 2.7 million of right-of-use assets obtained in exchange for new lease liabilities for the three months ended September 30, 2022 and 2021, respectively. There were $ 11.7 million and $ 8.0 million of right-of-use assets obtained in exchange for new lease liabilities for the nine months ended September 30, 2022 and 2021, respectively. 14. Employee Defined Benefit Retirement Plans Pension and Other Defined Benefit Retirement Obligations In connection with a 2020 acquisition, the Company assumed an obligation of $ 7.9 million associated with certain defined benefit retirement plans, including a pension plan. As of September 30, 2022 and December 31, 2021, the defined benefit obligation was $ 4.0 million and $ 4.5 million, respectively. The benefit is based on a formula applied to eligible employee earnings. Net periodic benefit costs were $ 0.1 million and $ 0.1 million for the three months ended September 30, 2022 and 2021 and were recorded to research and development expenses in the consolidated statements of income. 31 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) Net periodic benefit costs were $ 0.2 million and $ 0.3 million for the nine months ended September 30, 2022 and 2021 and were recorded to research and development expenses in the consolidated statements of income. 15. Commitments and Contingencies Inventory Purchase and Other Contractual Obligations As of September 30, 2022, future minimum payments under inventory purchase and other obligations are as follows: Inventory Purchase Obligations Other Obligations Total 2022 (3 months) $ 142,995 $ 14,046 $ 157,041 2023 32,488 17,718 50,206 2024 — 2,217 2,217 2025 — 109 109 Total minimum payments $ 175,483 $ 34,090 $ 209,573 Other obligations consist of contractual payments due for software licenses. Jointly Funded Research and Development From time to time, the Company enters into contracts for jointly funded research and development projects to develop technology that may be commercialized into a product in the future. As the Company may be required to repay all or a portion of the funds provided by the other parties under certain conditions, certain funds received from the other parties of $ 6.0 million have been deferred in other long-term liabilities. Additional amounts under the contracts are tied to certain milestones and will also be recorded as a long-term liability as payment due under such milestones are received. The Company de-recognizes the liabilities when the contingencies associated with the repayment conditions have been resolved. During the three and nine months ended September 30, 2022, the Company recognized $ 0 and $ 3.8 million in previously deferred amounts from other parties due to resolution of such repayment conditions. Other Matters From time to time, the Company is subject to threats of litigation or actual litigation in the ordinary course of business, some of which may be material. The Company is not currently a party to any pending legal proceedings that, if determined adversely to the Company’s interests, would, in management's opinion, have a material effect on the Company’s financial position, results of operations, or cash flows or that would not be covered by the Company’s existing liability insurance. The results of any litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources, and other factors. 32 Table of Contents MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) 16. Stock Repurchases On February 23, 2021, the Company’s board of directors authorized a plan to repurchase up to $ 100 million of the Company’s common stock over a period ending February 16, 2024. The amount and timing of repurchases are subject to a variety of factors including liquidity, share price, market conditions, and legal requirements. Any purchases will be funded from available working capital and may be effected through open market purchases, block transactions, and privately negotiated transactions. The share repurchase program does not obligate the Company to make any repurchases and may be modified, suspended, or terminated by the Company at any time without prior notice. The share repurchase program has been temporarily suspended since July 2022 due to the Company’s pending merger with Silicon Motion. During the three months ended September 30, 2022, the Company did no t repurchase any shares of its common stock under the repurchase program. During the nine months ended September 30, 2022, the Company repurchased 564,449 shares of its common stock at a weighted average price of $ 55.7972 per share at an aggregate value of approximately $ 31.5 million under the repurchase program. At September 30, 2022, the aggregate value of common stock repurchased under the program was approximately $ 55.0 million and approximately $ 45.0 million remained available for repurchase under the program. 33 Table of Contents