What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-02-01 compared with 2022-02-02 · 141 added, 165 removed, 238 unchanged (56% of the section changed)

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The following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidated financial statements and related notes included elsewhere in this report.

This discussion contains forward-looking statements that involve risks and uncertainties.

Our actual results could differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this report.

We are a provider of communications systems-on-chip solutions used in broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications.

We are 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.

In most cases, these products are designed on a single silicon-die, using standard digital complementary metal oxide semiconductor (CMOS) processes and conventional packaging technologies.

We believe this approach enables our

solutions to achieve superior power, performance, and cost relative to our industry competition.

Our customers include electronics distributors, module makers, original equipment manufacturers (OEMs), and original design manufacturers (ODMs), who incorporate our products in a wide range of electronic devices.

Examples of such devices include cable Data Over Cable Service Interface Specifications (DOCSIS), fiber and DSL broadband modems and gateways;

This discussion contains forward-looking statements that involve a number of risks, uncertainties, and assumptions that could cause our actual results to differ materially from those discussed below.

Factors that could cause or contribute to such differences include, but are not limited to, those identified below, and those discussed in the sections titled “Business” and “Risk Factors” included elsewhere in this report.

We are a provider of communications systems-on-chip, or SoC, solutions used in broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications.

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

In most cases, these products are designed on a single silicon-die, using standard digital complementary metal oxide semiconductor, or CMOS, processes and conventional packaging technologies.

We believe this approach enables our solutions to achieve superior power, performance, and cost relative to our industry competition.

Our customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate our products in a wide range of electronic devices.

Examples of such devices include cable Data Over Cable Service Interface Specifications, or DOCSIS, fiber and DSL broadband modems and gateways;

Wi-Fi and wireline routers for home networking;

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In addition, our proprietary CMOS-based radio and digital system architectures also enable shorter design cycles, significant design flexibility and low system-level cost across a wide range of broadband communications, wired and wireless infrastructure, and industrial and multi-market customer applications.

In the year ended December 31, 2021, net revenue was $892.4 million, which was derived in part from sales of RF receivers and RF receiver systems-on-chip and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications.

In the year ended December 31, 2022, net revenue was $1.1 billion, which was derived in part from sales of RF receivers and RF receiver SoC and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications.

Our ability to achieve revenue growth in the future will depend, among other factors, on our ability to further penetrate existing markets;

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In the year ended December 31, 2022, our top two customers accounted for 31% of our net revenue, and our ten largest customers collectively accounted for 65% of our net revenue, of which distributor customers accounted for 18% of our net revenue.

In the year ended December 31, 2021, two of our customers accounted for 26% of our net revenue, and our ten largest customers collectively accounted for 69% of our net revenue, of which distributor customers comprised 27% of our net revenue.

In the year ended December 31, 2020, two of our direct customers accounted for 28% of our net revenue, and our ten largest customers collectively accounted for 68% of our net revenue, of which distributor customers comprised 41% of our net revenue.

In the year ended December 31, 2019, one of our direct customers accounted for 14% of our net revenue, and our ten largest customers collectively accounted for 63% of our net revenue, of which distributor customers comprised 38% of our net revenue.

For certain customers, we sell multiple products into disparate end user applications such as cable modems, satellite set-top boxes and broadband gateways.

Our business depends on winning competitive bid selection processes, known as design wins, to develop integrated circuits for use in our customers’ products.

These selection processes are typically lengthy, and as a result, our sales cycles will vary based on the specific market served, whether the design win is with an existing or a new customer and whether our product being designed in our customer’s device is a first generation or subsequent generation product.

These selection processes are typically lengthy, and as a result, our sales cycles will

vary based on the specific market served, whether the design win is with an existing or a new customer and whether our product being designed in our customer’s device is a first generation or subsequent generation product.

Our customers’ products can be complex and, if our engagement results in a design win, can require significant time to define, design and result in volume production.

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Once one of our products is incorporated into a customer’s design, however, we believe that our product is likely to remain a component of the customer’s product for its life cycle because of the time and expense associated with redesigning the product or substituting an alternative chip.

life cycles in our target markets will vary by application.

Product life cycles in our target markets will vary by application.

For example, in the cable operator modem and gateway sectors, a design-in can have a product life cycle of 24 to 48 months.

In the industrial and wired and wireless infrastructure markets, a design-in can have a product life cycle of 24 to 60 months and beyond.

Impact of COVID-19 and the Global Semiconductor Chip Shortage

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

This resulted in a temporary delay in our product shipments in the first quarter of 2020.

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

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

In many of these jurisdictions, local authorities have instituted various restrictions relating to COVID-19.

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

As of December 31, 2021, much of our workforce has received COVID-19 vaccinations and subsequently, most of our employees have returned to the office at full or reduced capacity adhering to local health authority guidelines in the jurisdictions in which we operate.

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

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

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

Some chip manufacturers are estimating this supply shortage may continue into 2023.

While these chip manufacturers are working to increase capacity in the future, and we are continuing to work closely with our suppliers and customers to minimize the potential adverse impacts of the supply shortage, such shortage may have a near-term impact on our ability to meet increased demand on certain products which may continue into 2023.

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

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

Impact of the Global Economic Downturn

Inflation, and uncertainty in customer demand and the worldwide economy has continued, and we may experience continued volatility in our sales and revenues in the near future.

In particular, we believe an economic downturn and inventory oversupply due to changes in customer demand will add to volatility in managing the business.

In addition, inventory oversupply could also lead to inventory write-downs, including charges for any excess or obsolete inventory which could negatively impact our gross margins.

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

Acquisition of Home Gateway Platform Division of Intel Corporation

On July 31, 2020, we completed our acquisition of the Home Gateway Platform Division, which we refer to as the Wi-Fi and Broadband assets business, pursuant to an Asset Purchase Agreement with Intel, dated April 5, 2020, and related agreements.

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

The transaction was funded with a portion of the proceeds from a secured incremental term loan with an aggregate principal amount of $350.0 million (Note 8).

Acquisition of NanoSemi, Inc.

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

pursuant to a merger agreement.

The initial closing transaction consideration consisted of $10 million in cash and 804,163 shares of our common stock.

In addition, the NanoSemi stockholders received $35 million in deferred cash payments in 2021, and certain NanoSemi stockholders may also receive up to an additional $35 million in potential contingent consideration, subject to the acquired business’s satisfying certain financial objectives from July 1, 2020 through December 31, 2022.

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

In connection with the acquisition, on

September 9, 2020, we filed a registration statement registering the resale of the shares of our common stock received by the NanoSemi stockholders in the acquisition.

For more information, please refer to Note 3 of our consolidated financial statements.

Stock Repurchase Program

On February 23, 2021, our board of directors authorized a plan to repurchase up to $100 million of our 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 us to make any repurchases and may be modified, suspended, or terminated by us at any time without prior notice.

For more information, please refer to Note 16 of our consolidated financial statements.

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 or as amended by Amendment No.

1, dated July 31, 2020 and as further amended, amended and restated, waived, supplemented or otherwise modified from time to time, the May 12, 2017 Credit Agreement 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 December 31, 2021, the Revolving Facility was undrawn.

In connection with the settlement of the indebtedness under the May 12, 2017 Credit Agreement, during the year ended December 31, 2021, the Company recognized an aggregate loss on debt extinguishment of $5.2 million consisting of unamortized debt issuance costs and discounts.

For more information, please refer to Note 8 of our consolidated financial statements.

Recent Developments

Business Acquisition

On December 8, 2021, we completed our acquisition of a business pursuant to a purchase agreement.

Silicon Motion Merger

On May 5, 2022, we 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, we 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 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 our stock for each Silicon Motion American Depositary Share, or ADS, and $23.385 in cash and 0.097 shares of our common stock for each Silicon Motion ordinary share not represented by an ADS.

Upon closing of the transaction, our current 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 our common shares on May 4, 2022, the implied value of the total transaction consideration for Silicon Motion is approximately $4.3 billion.

We 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.

We 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 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.

On June 17, 2022, we 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 (ii) a senior secured term A loan facility in an aggregate principal amount of up to $512.5 million 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 us 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 in full.

Expanded U.S.

Export Controls

In October 2022, the Bureau of Industry and Security, or BIS, of the U.S.

Commerce Department issued an interim final rule to implement additional export controls on advanced computing integrated circuits and related products.

The primary impact of these rules is that we may be required to obtain a license to do business with certain customers, semiconductor foundries and outsource assembly and testing, or OSAT, facilities in China.

The BIS rule also expanded the scope of foreign-produced items subject to license requirements when intended for certain entities located in China, and also added new entities in China to the EAR’s Unverified List.

We are currently in the process of securing any licenses or other approvals that may be required as result of the October 2022 BIS rule.

We may experience a temporary loss of revenues or supply while we are obtaining licenses needed to do business with certain customers and other partners recently added to the Entity List, and failure to obtain any required license could result in a reduction of anticipated revenues or supply until an alternate source of supply can be obtained.

We have assessed the impact of the interim final rule and addition of new entities to the Entity List and the Unverified List, and we believe they do not have a material impact on our business, financial condition and results of operations.

Acquisition of Company Y

On January 17, 2023, the Company completed its acquisition of a business, or Company Y, pursuant to a Purchase and Sale Agreement, or the Purchase Agreement.

The initial closing transaction consideration consisted of $9.9 million in cash.

In addition, the agreement provides for an additional $3 million to be paid out in cash if certain financial and personnel targets are met by March 31, 2023.

For more information, please refer to Note 3 of our consolidated financial statements.

In addition, their stockholders may receive up to an additional $2.6 million in potential contingent consideration, subject to the acquired business satisfying certain personnel objectives by June 17, 2023.

Company Y is headquartered in Bangalore, India and operates as a provider of engineering design services.

Critical Accounting Estimates

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Business Combinations

Estimates in our business combination accounting that involve a significant level of estimation uncertainty include the valuation of identifiable intangible and tangible assets such as inventory, property and equipment, and intangible assets including IPR&D and contingent consideration, which involve the use of forecasted financial information available at the acquisition date, including application of revenue growth rates and margin percentages, and use of a discount rate and various other assumptions as described in more detail in the notes 1 and 3 to our consolidated financial statements.

Estimates in our business combination accounting that involve a significant level of estimation uncertainty include the valuation of identifiable intangible and tangible assets such as inventory, property and equipment, and intangible assets including in-process research and development, or IPR&D, and contingent consideration, which involve the use of forecasted financial information available at the acquisition date, including application of revenue growth rates and margin percentages, and use of a discount rate and various other assumptions as described in more detail in notes 1 and 3 to our consolidated financial statements.

The reported amounts are sensitive to changes to certain assumptions used in the valuation.

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The amortization and depreciation of such assets, and change in fair value of contingent consideration, impact our consolidated financial results in periods subsequent to the acquisition, and such amounts are disclosed in our consolidated financial statements.

During the years ended December 31, 2021 and 2020, we have not recorded any material adjustments to the valuation of such assets, goodwill, or subsequent period adjustments to the consolidated statements of operations associated with our 2020 and 2021 business combinations, including impairment.

During the year ended December 31, 2022, we recorded impairment of intangible assets of $2.8 million associated with a 2021 acquisition.

During the years ended December 31, 2021 and 2020, we did not record any material adjustments to the valuation of such assets, goodwill, or subsequent period adjustments to the consolidated statements of operations associated with our other business combinations.

Revenue Recognition

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During the years ended December 31, 2022, 2021 and 2020, we have not recorded any material net adjustments for such changes in estimates.

Production Masks

Estimates in the capitalization of production masks that involve a significant level of estimation uncertainty include our judgment of whether the technology underlying the product to be produced using the production masks will have future benefit based on our forecasts of future demand for such technology.

Any changes in circumstances affecting capitalization, for example, a decision to abandon a project associated with those production masks, may result in impairment of the production mask and therefore impact our consolidated financial results in periods subsequent to capitalizing a production mask.

Other than our forecasts of future demand, there are no assumptions inherent in our estimates in the capitalization of production masks that would result in sensitivity of reported amounts to such assumptions.

During the years ended December 31, 2021, 2020, and 2019, we have not recorded any material impairment of production masks.

Impairment of Goodwill and Long-Lived Assets

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Impairment of goodwill and long-lived assets impact our consolidated financial results in periods subsequent to their acquisition, and such amounts are disclosed in our consolidated financial statements.

During the years ended December 31, 2021, 2020 and 2019, we have not recorded any material adjustments to the valuation of such assets.

During the year ended December 31, 2022, we recorded impairment of intangible assets of $2.8 million associated with a 2021 acquisition.

During the years ended December 31, 2021 and 2020, we did not record any material adjustments to the valuation of such assets.

Estimates in our assessment of realizability of deferred tax assets that involve a significant level of estimation uncertainty and management judgment include projected future taxable income.

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If projected future taxable income in the U.S., for example, were to increase from what we assumed in our estimates, in periods subsequent to recording valuation allowances, it may be more likely than not that a proportional amount of the valuation against deferred tax assets will be released, resulting in an impact to our tax provision (benefit).

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No.

2019-12 Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes , to remove certain exceptions related to the approach for intraperiod tax allocation, recognition of deferred tax liabilities for outside basis differences and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date.

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

Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis.

The adoption of the amendments in this update did not have a material impact on our consolidated financial position and results of operations as of and for the year ended December 31, 2021.

In October 2020, the FASB issued ASU No.

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

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

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

The adoption of the amendments in this update did not have a material impact on our financial disclosures as of and for the year ended December 31, 2021.

Recently Issued Accounting Pronouncements

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2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilties 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.

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.

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costs associated with our outsourced packaging and assembly, test and shipping;

costs of personnel, including stock-based compensation, and equipment associated with manufacturing support, logistics and quality assurance;

costs of personnel, including salaries, benefits and stock-based compensation;

equipment associated with manufacturing support, logistics and quality assurance;

amortization of acquired developed technology and purchased licensed technology intangible assets;

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Selling, General and Administrative.

Selling, general and administrative expense includes personnel-related expenses, including stock-based compensation, amortization of certain acquired intangible assets, merger, acquisition and integration costs, third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legal fees, depreciation expense and allocated occupancy costs.

Selling, general and administrative expense includes personnel-related expenses, including salaries and benefits and stock-based compensation, amortization of certain acquired intangible assets, merger, acquisition and integration costs, third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legal fees, depreciation expense and allocated occupancy costs.

Impairment Losses.

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Interest income consists of interest earned on our cash, cash equivalents and restricted cash balances.

Interest expense consists of interest accrued on debt.

Other income (expense) generally consists of income (expense) generated from non-operating transactions.

Income tax provision (benefit).

Interest expense consists of interest accrued on debt and amortization of discounts on debt and other liabilities.

Other income (expense) generally consists of income (expense) generated from non-operating transactions, including sales of investments, and unrealized holding gains (losses) from certain investments required to be marked to market value.

Income tax provision.

We make certain estimates and judgments in determining income taxes for financial statement purposes.

These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognition of revenue and expenses for tax and financial statement purposes and the realizability of assets in future years.

The following table sets forth our consolidated statement of operations data as a percentage of net revenue for the periods indicated:

The following table sets forth our consolidated statement of income data as a percentage of net revenue for the periods indicated:

Year Ended December 31,

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Total operating expenses 42 48

Income (loss) from operations 7 (21)

Income from operations 16 7

Interest income — —

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Total other income (expense), net (1) (2)

Income (loss) before income taxes 5 (24)

Income tax provision (benefit) 1 (3)

Net income (loss) 5 % (21) %

Income before income taxes 16 5

Income tax provision 4 1

Net income 11 % 5 %

Year Ended December 31,

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Total net revenue $ 1,120,252 $ 892,398 $ 227,854 26 %

Net revenue increased $413.8 million to $892.4 million for the year ended December 31, 2021, as compared to $478.6 million for the year ended December 31, 2020.

The increase in broadband net revenue of $248.1 million was primarily the result of a full-year contribution of gateway revenues attributable to our acquisition of the Wi-Fi and Broadband assets business on July 31, 2020 compared to partial-year contribution in the prior year, and, to a lesser extent, improvements in cable front-end, tuner and satellite shipments.

The increase in connectivity revenue of $78.5 million was primarily driven by a full-year contribution of Wi-Fi and ethernet revenues attributable to our Wi-Fi and Broadband assets business acquisition compared to partial-year contribution in the prior year, further supplemented by increases in MoCA and G.hn product shipments.

The increase in infrastructure revenues of $43.3 million was primarily driven by an increase in shipments of high-performance analog, wireless backhaul and wireless access deployments driven by the ramp-up of 5G, and to a lesser extent, increased MoCA and G.hn last-mile Access product shipments in this category.

The revenues in this category in part increased due to recovery in demand for high-performance analog and wireless backhaul, which saw weaker demand in 2020 during the first year of the COVID-19 pandemic.

The increase in industrial and multi-market revenue of $43.9 million was related to increased shipments of high-performance analog products and component products attributable to our Wi-Fi and Broadband assets business acquisition.

We currently expect that revenue will fluctuate in the future, from period-to-period, based on evolving customer demand for existing products, the pace of adoption of newer products, and macroeconomic conditions.

Further, due to heightened volatility and uncertainty in customer demand resulting from the COVID-19 pandemic, as well as uncertainty in supply from the global semiconductor chip shortage, we may experience increased volatility in our sales and revenues.

Net revenue increased $227.9 million to $1.1 billion for the year ended December 31, 2022, as compared to $892.4 million for the year ended December 31, 2021.

The increase in broadband net revenue of $0.8 million was primarily from gateway revenues.

The increase in connectivity revenue of $154.6 million was primarily driven by higher Wi-Fi and ethernet revenues as our supply improved and an increase in MoCA product shipments.

The increase in infrastructure revenues of $16.9 million was primarily driven by an increase in high-performance analog, wireless access and wireless backhaul shipments.

The increase in industrial and multi-market revenue of $55.6 million was related to increased shipments of high-performance analog and component products.

We currently expect that revenue will fluctuate in the future, from period-to-period.

In the first quarter of 2023, certain of our product lines will likely experience a decrease in revenues due to macroeconomic conditions impacting customer demand for such products, which is consistent with the cyclical nature of our industry.

Cost of Net Revenue and Gross Profit

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Cost of net revenue increased $73.9 million to $470.5 million for the year ended December 31, 2022, as compared to $396.6 million for the year ended December 31, 2021.

The increase was primarily driven by higher sales and incremental expenses, primarily driven by our acquisition of the Wi-Fi and Broadband assets business.

Gross profit percentage improved for the year ended December 31, 2021, as compared to the year ended December 31, 2020, due primarily to a reduction in acquisition-related amortization of inventory fair value adjustments of $32.9 million and improved absorption of amortization of intangible costs.

The increase was primarily driven by higher sales and incremental expense.

Gross profit percentage improved for the year ended December 31, 2022, as compared to the year ended December 31, 2021, due primarily to revenue mix and improved absorption of amortization of intangible assets.

We currently expect that gross profit percentage will fluctuate in the future, from period-to-period, based on changes in product mix, average selling prices, and average manufacturing costs.

Further, due to heightened volatility and uncertainty in customer demand resulting from the COVID-19 pandemic and global semiconductor chip shortages, we may experience increased volatility in our cost of net revenues and gross profit as a result.

Research and Development

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Research and development expense increased $18.0 million to $296.4 million for the year ended December 31, 2022 from $278.4 million in the year ended December 31, 2021.

The increase was primarily due to a full year impact from our 2020 business acquisitions, which resulted in added engineering headcount, facilities, and related expenses, as well as an increase in bonuses and performance stock-based compensation expenses, compared to a partial year impact in 2020.

There were increases in personnel-related expense of $66.8 million, of which $19.7 million is from performance-based bonus accruals and stock-based compensation expense, outside services of $14.6 million which primarily includes consulting and computer aided design

expense of $9.2 million and consulting expense of $4.1 million, prototype expense of $7.1 million, depreciation expense of $4.5 million, occupancy expenses of $4.3 million, and supplies expenses totaling $0.6 million.

We expect our research and development expenses to increase in future years as we continue to expand our product portfolio and enhance existing products.

The increase was primarily driven by increased headcount to support increased R&D projects this year.

We expect our research and development expenses to increase next quarter due to increased personnel costs, and increase in future years as we continue to expand our product portfolio and enhance existing products.

Selling, General and Administrative

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Selling, general and administrative expense increased $18.1 million to $168.0 million for the year ended December 31, 2022, as compared to $149.9 million for the year ended December 31, 2021.

The increase was primarily due to a full year impact from our 2020 business acquisitions, which resulted in added personnel, facilities, and related expenses as well as an increase in performance-based bonuses and stock-based compensation expenses, compared to a partial year impact in 2020.

There were increases in personnel expense of $21.9 million, including $8.2 million from performance-based bonus accruals and stock-based compensation expenses, outside services of $3.4 million primarily consisting of consulting fees, occupancy expenses of $2.3 million, professional fees of $2.1 million, supplies expense of $1.3 million, depreciation expense of $0.5 million.

These increases were partially offset by a decrease in acquisition transaction and integration expenses of $12.4 million.

We expect selling, general and administrative expenses to increase in future years as we grow our sales and marketing organization to expand into existing and new markets.

The increase was primarily due to increased headcount as well as increased acquisition and integration costs of $6.8 million.

We expect selling, general and administrative expenses to increase next quarter due to increased personnel costs and increase in future years as we grow our sales and marketing organization to expand into existing and new markets.

Impairment Losses

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(dollars in thousands)

Impairment losses $ — $ 86 $(86) (100)%

Impairment losses $ 2,811 $ — $2,811 n/a

% of net revenue — % — %

Impairment losses in the year ended December 31, 2020 related to abandonment of a license of intellectual property.

Impairment losses in the year ended December 31, 2022 related to abandonment of certain acquired licensing agreements.

Restructuring Charges

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% of net revenue — % — %

Restructuring charges decreased $1.6 million to $2.2 million for the year ended December 31, 2021, compared to $3.8 million for the year ended December 31, 2020.

Restructuring charges for the year ended December 31, 2021 primarily consisted of $1.3 million in employee severance-related charges and $0.6 million of lease-related charges, which primarily consisted of impairment of leased right-of-use assets and leasehold improvements.

Restructuring charges in the year ended December 31, 2020 primarily consisted of lease restructuring charges of $2.0 million, which included impairment of leased right-of-use assets of $1.5 million, and $1.6 million in employee severance-related charges.

Restructuring charges increased $0.1 million to $2.3 million for the year ended December 31, 2022, compared to $2.2 million for the year ended December 31, 2021.

Restructuring charges for the year ended December 31, 2022 primarily consisted of $1.8 million in employee severance-related charges and $0.5 million of lease-related charges, which is comprised of impairment of leased right-of-use assets from partial abandonment of a facility.

Restructuring charges in the year ended December 31, 2021 primarily consisted of $1.3 million in employee severance-related charges and $0.6 million of lease-related charges, which primarily consisted of impairment of leased right-of-use assets and leasehold improvements.

Loss on Extinguishment of Debt

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(dollars in thousands)

Loss on extinguishment of debt $ (5,221) $ — $(5,221) N/A

Loss on extinguishment of debt $ — $ (5,221) $5,221 (100)%

% of net revenue — % (1) %

Loss on extinguishment of debt in the year ended December 31, 2021 consists of the charge-off of remaining unamortized debt discount and issuance costs on debt under our prior term loan which we repaid early with proceeds from a new term loan in June 2021.

Loss on extinguishment of debt in the year ended December 31, 2021 consisted of the charge-off of remaining unamortized debt discount and issuance costs on debt under our prior term loan which we repaid early with proceeds from a new term loan in June 2021.

Interest and Other Income (Expense )

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% of net revenue (1) % (1) %

Interest and other income (expense), net changed by $1.6 million from a net expense of $13.7 million in the year ended December 31, 2020 to a net expense of $12.2 million for the year ended December 31, 2021.

The change in interest and other income (expense), net was primarily due to the impact of a non-recurring gain on sale of a privately held investment of $1.9 million, partially offset by impacts from foreign currency exchange rate fluctuations.

Income Tax Provision (Benefit)

Interest and other income (expense), net decreased by $6.1 million to a net expense of $6.0 million in the year ended December 31, 2022 from a net expense of $12.2 million for the year ended December 31, 2021.

The change in interest and other income (expense), net was primarily due to the positive impact of a non-recurring gain on sale of privately held investments of $3.4 million and decreased interest expense of $3.2 million associated with a lower outstanding principal balance of debt, partially offset by unrealized losses on investments and impacts from foreign currency exchange rate fluctuations.

Income Tax Provision

Year Ended December 31,

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(dollars in thousands)

Income tax provision (benefit) $ 5,901 $ (16,259) $ 22,160 (136) %

The income tax provision for the year ended December 31, 2021 was $5.9 million compared to an income tax benefit of $16.3 million for the year ended December 31, 2020.

Income tax provision $ 49,158 $ 5,901 $ 43,257 733 %

% of pre-tax income (loss) 28 % 12 %

The income tax provision for the year ended December 31, 2022 was $49.2 million compared to an income tax provision of $5.9 million for the year ended December 31, 2021.

The difference between our effective tax rate and the 21.0% U.S.

federal statutory rate for the year ended December 31, 2021 resulted primarily from a tax on global intangible low-taxed income (“GILTI”) and non-deductible foreign stock-based compensation, offset by a benefit related to research and development tax credits, foreign earnings taxed at rates other than the federal statutory rate and the effect of a release of valuation allowance against certain Singapore deferred tax assets pertaining to usage of net operating losses.

federal statutory rate for the year ended December 31, 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, or GILTI, 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 our effective tax rate and the 21.0% U.S.

federal statutory rate for the year ended December 31, 2020 resulted primarily from foreign earnings taxed at rates other than the federal statutory rate, a benefit related to release of uncertain tax positions under ASC 740-10, and excess tax benefits related to stock-based compensation.

Also included in income tax benefit for the year ended December 31, 2020 was a tax benefit related to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, enacted effective March 27, 2020, and a tax provision related to a change in judgment regarding the final outcome of the Altera tax case.

Such tax benefit relates to our ability to carry back our 2019 net operating loss, originally valued at a 21% federal tax rate, to offset income taxes paid in prior periods at the 35% federal tax rate in effect at that time.

federal statutory rate for the year ended December 31, 2021 resulted primarily from a tax on GILTI, and non-deductible foreign stock-based compensation, offset by a benefit related to research and development tax credits, foreign earnings taxed at rates other than the federal statutory rate and the effect of a release of valuation allowance against certain Singapore deferred tax assets pertaining to usage of net operating losses.

We continue to maintain a valuation allowance to offset state and certain federal and foreign deferred tax assets, as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines.

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

quarter ended December 31, 2021, we released the beginning of the year valuation allowance of $8.3 million against our Singapore deferred tax assets.

This release is a result of our Singapore operations showing cumulative profits for the prior three years, and the use of prior year carry forward attributes in the current period.

Based upon our review of all positive and negative evidence, we continue to have a valuation allowance on state deferred tax assets, certain federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where we have cumulative losses or otherwise are not expected to utilize certain tax attributes.

We do not incur income tax expense or benefit in certain tax-free jurisdictions in which we operate.

Our subsidiary in Singapore operates under certain tax incentives in Singapore, which are generally effective through March 2022 and may be extended through March 2027.

Our subsidiary in Singapore operates under certain tax incentives in Singapore, which are effective through March 2027.

Under these incentives, qualifying income derived from certain sales of our integrated circuits is taxed at a concessionary rate over the incentive period.

We also receive a reduced withholding tax rate on certain intercompany royalty payments made by our Singapore subsidiary during the incentive period.

Such incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period.

We recorded a tax provision in the year ended December 31, 2022 at the incentive rate.

In the year ended December 31, 2021, due to our Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on our income tax provision.

The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period.

We currently believe that we will be able to satisfy these conditions without material risk.

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 we currently outsource our manufacturing, the CHIPS Act is not expected to have a material impact to our 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 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 our consolidated tax provision for the year ending December 31, 2023.

We will continue to monitor updates to our business along with guidance issued with respect to both Acts to determine whether any adjustments are needed to our consolidated tax provision in future periods.

Liquidity and Capital Resources

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Our primary uses of cash are to fund operating expenses and purchases of inventory, property and equipment, and from time to time, the acquisition of businesses.

In May 2022, we entered into the Merger Agreement to acquire Silicon Motion.

As described in Note 3 to our consolidated financial statements, 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 and other lenders.

In June 2022 and October 2022, we amended and restated the 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 (ii) a senior secured term A loan facility in an aggregate principal amount of up to $512.5 million and (iii) a senior secured revolving credit facility in an aggregate principal amount of up to $250.0 million.

Funding of the Senior Secured Credit Facilities is contingent on customary conditions, including, but not limited to the consummation of the merger and execution of definitive loan agreements.

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

We also use cash to pay down outstanding debt, repurchase our common stock under our stock repurchase plan, and from time to time, make investments.

In June 2021, the Company used a portion of funds from a new 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 to repay in full all outstanding indebtedness under the May 12, 2017 Credit Agreement and related fees and expenses incurred.

The remaining proceeds of $11.0 million of the Initial Term Loan under the June 23, 2021 Credit Agreement are available for general corporate purposes.

The Company also entered into a senior secured revolving credit facility, in an aggregate principal amount of up to $100.0 million which remained undrawn as of December 31, 2021.

As of December 31, 2022, $125.0 million of principal was outstanding under a senior secured term B loan facility, or the Initial Term Loan under the June 23, 2021 Credit Agreement.

The Company also has available a senior secured revolving credit facility, or the Revolving Facility, in an aggregate principal amount of up to $100.0 million which remained undrawn as of December 31, 2022.

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.

In July 2020, we funded our $150.0 million acquisition of the Wi-Fi and Broadband assets business with a portion of the net proceeds of an $175.0 million incremental term loan under the May 12, 2017 Credit Agreement, which loan we repaid with the proceeds under the Initial Term Loan under the June 23, 2021 Credit Agreement as described above.

In September 2020, we paid $10.0 million in cash to acquire NanoSemi and in the year ended December 31, 2021, we paid an aggregate of $35.0 million in additional cash payments to stockholders of NanoSemi, which were previously deferred under the terms of the merger agreement.

In December 2021, we paid $5.0 million in cash to acquire a business.

Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement amortizes 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.

We have exercised our right to prepay a portion of the principal amount due.

As of December 31, 2021, the debt outstanding of $310.0 million is due and payable on June 23, 2028.

Heightened volatility, global semiconductor chip shortages, and uncertainty in customer demand and the worldwide economy in general continues to impact business and financial markets as a result of the COVID-19 pandemic, and we may experience decreased sales and revenues in the near future.

A material adverse impact from COVID-19 and the global semiconductor chip shortage could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if we pursue additional acquisitions.

Our future capital requirements will depend on many factors, including changes in revenue, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products and potential material investments in, or acquisitions of, complementary businesses, services or technologies.

Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement has amortized 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 June 23, 2028.

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.

While we are mitigating the impact of rising interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, particularly with respect to our anticipated debt associated with the Silicon Motion merger, it would have a material adverse effect our operating results and could affect our ability to service the indebtedness.

Please refer to the Risk Factor entitled “ 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 ” for a discussion for a discussion of how our indebtedness could have a material adverse effect on our liquidity and capital resources.

Our future capital requirements will depend on many factors, including changes in revenue, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products, our pending merger with Silicon Motion, and any other potential material investments in, or acquisitions of, complementary businesses, services or technologies.

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

1 unchanged sentence

Our cash and cash equivalents are impacted by the timing of when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, inventory fair value adjustments, stock-based compensation, loss on extinguishment of debt and impairment of leased right-of-use assets and related leasehold improvements.

Cash used to fund

capital purchases and acquisitions of businesses and investments are included in investing activities in our consolidated statements of cash flows.

Cash proceeds from debt and issuance of common stock and cash used to pay down outstanding debt or repurchase common stock is included in financing activities in our consolidated statements of cash flows.

Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of intangible assets, impairment of leased right-of-use assets and related leasehold improvements and unrealized holding or realized gains or losses on marketable equity securities.

Cash used to fund capital purchases and acquisitions of businesses and investments are included in investing activities in our consolidated statements of cash flows.

Cash proceeds from issuance of common stock and debt and cash used to pay down outstanding debt or repurchase common stock are included in financing activities in our consolidated statements of cash flows.

As of December 31, 2022, our material cash requirements include long-term debt, non-cancelable operating leases, inventory purchase obligations and other obligations, which primarily consist of contractual payments due for computer-aided design software, as follows:

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Our planned capital expenditures as of December 31, 2022 were not material.

Our consolidated balance sheet at December 31, 2021 included $6.0 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment, and $2.7 million in contingent consideration associated with a business acquisition (see Note 3 for details).

The future payments related to uncertain tax positions recorded as other long-term liabilities and the contingent consideration have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities and shareholders of the acquired business.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers, and through January 2021, from billings made on our behalf to customers for products sold by Intel under a transition services agreement.

Our consolidated balance sheet at December 31, 2022 included $6.0 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment.

The future payments related to uncertain tax positions recorded as other long-term liabilities have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.

Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers.

Aside from the amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, which can vary from period to period depending on the payment cycles of our major distributor customers, and relative linearity of shipments period-to-period.

Additionally, the June 23, 2021 Credit Agreement, under which we entered into a senior secured term B loan facility and a $100.0 million revolving credit facility (undrawn as of December 31, 2021), permits us 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.

Following is a summary of our working capital, cash and cash equivalents, and restricted cash for the periods indicated:

The June 23, 2021 Credit Agreement, under which we entered into a senior secured term B loan facility and a revolving credit facility, permits us 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.

The following is a summary of our working capital, cash and cash equivalents, and restricted cash for the periods indicated:

December 31, December 31,

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Total cash, cash equivalents, and restricted cash $ 188,357 $ 131,738

Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

The following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periods indicated:

Year Ended December 31,

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Net cash used in investing activities (91,762) (91,757)

Net cash provided by (used in) financing activities (91,903) 159,649

Net cash used in financing activities (240,401) (91,903)

Effect of exchange rate changes on cash, cash equivalents and restricted cash 56 (2,869)

1 unchanged sentence

Cash Flows from Operating Activities

Net cash provided by operating activities was $168.2 million for the year ended December 31, 2021 and consisted of positive impact of net income of $42.0 million and non-cash items of $161.2 million, partially offset by changes in operating assets and liabilities of $24.3 million, excess tax benefits and deferred income taxes totaling $10.7 million.

Net cash provided by operating activities was $388.7 million for the year ended December 31, 2022 and consisted of positive impact of net income of $125.0 million and non-cash items of $164.1 million, changes in operating assets and liabilities of $86.0 million, and excess tax benefits and deferred income taxes totaling $13.5 million.

Non-cash items included in net income for the year ended December 31, 2022 primarily consisted of stock-based compensation of $81.7 million, depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $80.7 million, and intangible impairment loss of $2.8 million.

Net cash provided by operating activities was $168.2 million for the year ended December 31, 2021 and primarily consisted of the positive impact from net income of $42.0 million and non-cash items of $161.2 million, partially offset by changes in operating assets and liabilities of $24.3 million and deferred income taxes and excess tax benefits totaling $10.7 million.

Non-cash items included in net income for the year ended December 31, 2021 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $91.8 million, stock-based compensation of $59.4 million, loss on extinguishment of debt of $5.2 million, and amortization of debt issuance costs and discounts of $3.0 million.

Net cash provided by operating activities was $73.6 million for the year ended December 31, 2020 and primarily consisted of the positive impact from $162.5 million in non-cash items and $28.9 million in changes in operating assets and liabilities, partially offset by the negative impact of net loss of $98.6 million and deferred income taxes and excess tax benefits totaling $19.2 million.

Non-cash items included in net loss for the year ended December 31, 2020 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $76.5 million, stock-based compensation of $47.6 million, and inventory fair value adjustments of $32.9 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $91.8 million for the year ended December 31, 2021 and consisted of $40.0 million in cash used for acquisitions, comprising $35.0 million in payments of purchase price from our 2020 acquisition of NanoSemi that were previously deferred under the terms of the merger agreement and $5.0 million to purchase a business, $39.2 million in purchases of property and equipment, $7.6 million in purchases of intangible assets, and $5.0 million in purchases of long-term investments in a private entity.

Net cash used in investing activities was $175.3 million for the year ended December 31, 2020 and consisted of $160.0 million in cash used in the acquisitions, comprising $150.0 million for the WiFi and Broadband assets business and $10.0 million in initial cash for NanoSemi, $12.5 million in purchases of property and equipment, and $2.8 million in purchase of intangible assets.

Net cash used in investing activities was $91.8 million for the year ended December 31, 2022 and consisted of purchases of property and equipment of $41.3 million, purchases of investments of $29.3 million, purchases of intangible assets of $11.2 million and proceeds loaned under notes receivable of $10.0 million.

Net cash used in investing activities was $91.8 million for the year ended December 31, 2021 and consisted of cash used in the acquisitions of $40.0 million comprising $35.0 million in payments of purchase price from our 2020 acquisition of NanoSemi that were previously deferred under the terms of the merger agreement and $5.0 million to purchase a business, purchases of property and equipment of $39.2 million, purchases of intangible assets of $7.6 million, and purchases of investments in a private entity of $5.0 million.

Cash Flows from Financing Activities

Net cash used in financing activities was $240.4 million for the year ended December 31, 2022.

Net cash used in financing activities consisted of $409.8 million in repayments of debt, $23.5 million in common stock repurchases, $13.1 million in minimum tax withholding paid on behalf of employees for restricted stock units, and $4.2 million in debt issuance costs, partially offset by cash inflows from net proceeds from the issuance of debt of $350.0 million and from issuance of common stock upon exercise of stock options of $8.8 million.

Net cash provided by financing activities was $159.6 million for the year ended December 31, 2020.

Net cash provided by financing activities consisted primarily of $175.0 million in proceeds from borrowings under an incremental term loan we entered into in July 2020 in part in connection with the acquisition of the WiFi and Broadband assets business, and cash inflows from net proceeds from issuance of common stock upon exercise of stock options of $8.1 million, partially offset by aggregate repayments of principal on outstanding debt of $17.2 million, minimum tax withholding paid on behalf of employees for restricted stock units of $3.5 million, and payments of debt issuance costs of $2.7 million.

We believe that our $130.6 million of cash and cash equivalents at December 31, 2021 will be sufficient to fund our projected operating requirements for at least the next twelve months.

Net cash used in financing activities consisted of repayments of debt of $185.0 million, common stock repurchases of $31.5 million, minimum tax withholding paid on behalf of employees for restricted stock units of $28.9 million, partially offset by cash inflows from net proceeds from the issuance of common stock upon exercise of stock options of $5.0 million.

Net cash used in financing activities was $91.9 million for the year ended December 31, 2021.

Net cash used in financing activities consisted primarily of repayments of principal on outstanding debt of $409.8 million, common stock repurchases of $23.5 million, minimum tax withholding paid on behalf of employees for restricted stock units of $13.1 million, and payments of debt issuance costs of $4.2 million, partially offset by cash inflows from net proceeds from the issuance of debt of $350.0 million and from issuance of common stock upon exercise of stock options of $8.8 million.

We believe that our $187.4 million of cash and cash equivalents at December 31, 2022 will be sufficient to fund our projected operating requirements for at least the next twelve months, excluding anticipated cash expenditures for the pending merger and related integration costs which will be financed primarily through additional debt under the Senior Secured Credit Facilities.

As of December 31, 2022, our indebtedness totaled $125.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million.

Upon consummation of our merger with Silicon Motion and execution of related merger financing agreements, we expect that a portion of the proceeds from the Senior Secured Credit Facilities associated with the merger, described in more detail above, will be used to repay our existing indebtedness in full, and our indebtedness may increase up to $3.5 billion under the Senior Secured Credit Facilities.

The Revolving Facility in an aggregate principal amount of up to $100.0 million remained undrawn as of December 31, 2022.

The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and 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 care of LIBOR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter.

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.

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Further, our certificate of incorporation and bylaws require us to indemnify our officers and directors against any action that may arise out of their services in that capacity, and we have also entered into indemnification agreements with respect to all of our directors and certain controlling persons.

Off-Balance Sheet Arrangements

As part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, or SPEs, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As of December 31, 2021, we were not involved in any unconsolidated SPE transactions.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis