What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-04-26 compared with 2022-10-25 · 117 added, 146 removed, 199 unchanged (57% of the section changed)

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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 nine months ended September 30, 2022, revenues of $829.7 million were derived 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 three months ended March 31, 2023, revenues of $248.4 million were 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.

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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and our ability to obtain design wins with device manufacturers, in particular manufacturers of set-top boxes, data modems, and gateways for the broadband service provider, storage networking market, cable infrastructure market, industrial and automotive markets, and optical module and telecommunications infrastructure markets.

Products shipped to Asia accounted for 82% and 83% of net revenue during the three months ended September 30, 2022 and 2021, respectively, including 51% from products shipped to Hong Kong and 14% from products shipped to mainland China during the three months ended September 30, 2022 and 40% from products shipped to Hong Kong, 12% from products shipped to mainland China, and 11% from products shipped to Vietnam during the three months ended September 30, 2021.

Products shipped to Asia accounted for 81% and 83% of net revenue during the nine months ended September 30, 2022 and 2021, respectively, including 43% from products shipped to Hong Kong and 16% from products shipped to mainland China during the nine months ended September 30, 2022 and 40% from products shipped to Hong Kong, 12% from products shipped to Vietnam, and 11% from products shipped to mainland China during the nine months ended September 30, 2021.

Products shipped to Asia accounted for 77% and 80% of net revenue during the three months ended March 31, 2023 and 2022, respectively, including 31% from products shipped to Hong Kong and 16% from products shipped to mainland China during the three months ended March 31, 2023 and 38% from products shipped to Hong Kong, 13% from products shipped to Vietnam, and 11% from products shipped to mainland China during the three months ended March 31, 2022.

Although a large percentage of our products is shipped to Asia, we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside Asia.

For example, revenue generated from sales of our products during the nine months ended September 30, 2022 and 2021 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and North American markets.

For example, revenue generated from sales of our products during the three months ended March 31, 2023 and 2022 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and North American markets.

To date, all of our sales have been denominated in United States dollars.

A significant portion of our net revenue has historically been generated by a limited number of customers.

Sales to customers comprise both direct sales to customers and indirect sales through distributors.

In the three months ended September 30, 2022, one customer accounted for 31% of our net revenue, and our ten largest customers collectively accounted for 68% of our net revenue, of which distributor customers accounted for 18% of our net revenue.

In the nine months ended September 30, 2022, one customer accounted for 22% of our net revenue, and our ten largest customers collectively accounted for 68% of our net revenue, of which distributor customers accounted for 24% of our net revenue.

Sales to customers is comprised of both direct sales to customers and indirect sales through distributors.

In the three months ended March 31, 2023, one customer accounted for 15% of our net revenue, and our ten largest customers collectively accounted for 62% of our net revenue, of which distributor customers accounted for 16% 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.

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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 Supply Shortage

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 our industry.

Consistent with the prior year, we continue to operate in a supply constrained environment and are working closely with our suppliers to mitigate the impact of such shortage.

Furthermore, we believe this supply-constrained environment may continue into 2023.

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

Impact of the Global Economic Downturn

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

In particular, we believe an economic downturn and inventory oversupply, in the channel, due to changes in customer demand will continue to 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, if material, 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.

Recent Developments

Silicon Motion Merger

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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.

The merger is not subject to any financing conditions but is pending satisfaction of customary closing conditions, including antitrust 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;

however, if the merger is not consummated by June 27, 2023, the parties will need to re-file under the HSR Act.

On July 13, 2022, the Form S-4 was declared effective by the SEC.

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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 (“BIS”) of the U.S.

Commerce Department issued an interim final rule to implement additional export controls which primarily has the impact of requiring us to obtain a license to do business with certain customers, semiconductor foundries and outsource assembly and testing (“OSAT”) facilities in China that sell or produce certain advanced computing integrated circuits, among other things, which resulted in expanding the scope of foreign-produced items subject to license requirements to entities on Export Administration Regulations’ (“EAR”) Entity List that are located in China, and also added new entities in China to the EAR’s Unverified List.

We may experience a temporary loss of revenues or supply while we are obtaining licenses with certain customers, semiconductor foundries, and/or OSAT providers recently added to the Entity List, or 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 are currently assessing the impact of the interim final rule and addition of new entities to the Entity List and the Unverified List on our business, financial condition and results of operations.

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.

Recent Developments

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 transaction consideration included $9.7 million in cash.

In addition, Company Y 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, 2024.

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

Critical Accounting Policies and Estimates

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Accordingly, those are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results of operations.

For a summary of our critical accounting policies and estimates, refer to Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2021, which we filed with the Securities and Exchange

Commission, or SEC, on February 2, 2022, or our Annual Report.

There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2022.

There have been no material changes to our critical accounting policies and estimates during the three months ended March 31, 2023.

Recently Issued Accounting Pronouncements

See Note 1 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements not yet adopted as of the date of this report.

See Note 1 to our consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for recently issued accounting pronouncements not yet adopted as of the date of this report.

Results of Operations

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

amortization of acquired developed technology intangible assets;

amortization of certain production mask costs;

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

amortization of certain production mask costs and computer-aided design software license costs;

cost of production load boards and sockets;

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Research and Development.

Research and development expense includes personnel-related expenses, including salaries and benefits, stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs.

Research and development expense includes personnel-related expenses, including salaries and benefits and stock-based compensation, new product engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual property license costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs.

Research and development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance with required specifications.

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Selling, General and Administrative.

Selling, general and administrative expense includes personnel-related expenses, including salaries and benefits, 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.

Impairment losses consist of charges resulting from the impairment of intangible assets.

Restructuring Charges .

Restructuring charges consist of severance, lease and leasehold impairment charges, and other charges related to restructuring plans.

Loss on Extinguishment of Debt.

Loss on extinguishment of debt consists of the charge-off of remaining unamortized debt discount and issuance cost on debt we repaid early with a majority of the proceeds from a new term loan.

Interest and Other Income (Expense), Net.

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

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 2022 2021

Three Months Ended March 31,

Net revenue 100 % 100 %

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Selling, general and administrative 16 15

Impairment losses 1 —

Restructuring charges 2 —

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Interest expense (1) (1)

Loss on extinguishment of debt — — — (1)

Other income (expense), net — —

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Net income 4 % 13 %

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Broadband $ 81,681 $ 134,556 $ (52,875) (39) %

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Total net revenue $ 248,442 $ 263,927 $ (15,485) (6) %

Net revenue increased $56.0 million to $285.7 million for the three months ended September 30, 2022, as compared to $229.8 million for the three months ended September 30, 2021, in significant part due to improvement in supply and market strength attributed to the work-from-home environment.

The decrease in broadband net revenue of $5.9 million was primarily from a decrease in tuner and cable shipments, partially offset by an increase in gateway revenues.

The increase in connectivity revenue of $44.7 million was primarily driven by higher Wi-Fi revenues, and to a lesser extent, ethernet revenues as our supply improved.

The increase in infrastructure revenues of $6.4 million was primarily driven by increased shipments of high-performance analog and wireless backhaul products in this category.

The increase in industrial and multi-market revenue of $10.9 million was related to increased shipments of high-performance analog and component products.

Net revenue increased $185.2 million to $829.7 million for the nine months ended September 30, 2022, as compared to $644.5 million for the nine months ended September 30, 2021, due to improvement in supply and market strength attributed to the work-from-home environment.

The increase in broadband net revenue of $30.8 million was primarily from gateway revenues.

The increase in connectivity revenue of $102.5 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 $17.3 million was primarily driven by an increase in high-performance analog, 5G wireless access and wireless backhaul product shipments.

The increase in industrial and multi-market revenue of $34.6 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, 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 global semiconductor supply shortage, we expect to continue to experience increased volatility in our sales and revenues.

Net revenue decreased $15.5 million to $248.4 million for the three months ended March 31, 2023, as compared to $263.9 million for the three months ended March 31, 2022, due primarily to a decrease in broadband products, as a result of macroeconomic conditions impacting customer demand for such products.

The decrease in broadband net revenue of $52.9 million was primarily from gateway revenues, and to a lesser extent, cable, tuners and satellite.

The increase in connectivity revenue of $6.1 million was primarily driven by higher Wi-Fi revenues.

The increase in infrastructure revenues of $13.1 million was primarily driven by an increase in wireless backhaul and high-performance analog product shipments.

The increase in industrial and multi-market revenue of $18.2 million was related to increased shipments of component and high-performance analog products.

We currently expect that revenue will fluctuate in the future, from period-to-period, due to macroeconomic conditions impacting customer demand for certain products that is consistent with the cyclical nature of our industry.

Cost of Net Revenue and Gross Profit

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Cost of net revenue $ 108,135 109,337 (1,202) (1) %

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% of net revenue 56 % 59 %

Cost of net revenue increased $18.3 million to $118.2 million for the three months ended September 30, 2022, as compared to $100.0 million for the three months ended September 30, 2021.

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

Gross profit percentage improved for the three months ended September 30, 2022, as compared to the three months ended September 30, 2021, due primarily to revenue mix and improved absorption of amortization of intangible assets.

Cost of net revenue increased $52.8 million to $343.2 million for the nine months ended September 30, 2022, as compared to $290.5 million for the nine months ended September 30, 2021.

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

Gross profit percentage improved for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, due primarily to revenue mix and improved absorption of amortization of intangible assets.

Cost of net revenue decreased $1.2 million to $108.1 million for the three months ended March 31, 2023, as compared to $109.3 million for the three months ended March 31, 2022.

The decrease was primarily driven by lower sales and expenses.

Gross profit percentage declined for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, due primarily to revenue mix and decreased 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 supply shortages, we may experience increased volatility in our cost of net revenues as a result.

Research and Development

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Research and development $ 67,291 $ 65,886 $ 1,405 2 %

% of net revenue 27 % 25 %

Research and development expense increased $8.9 million to $76.4 million for the three months ended September 30, 2022 from $67.5 million in the three months ended September 30, 2021.

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

Research and development expense increased $17.6 million to $222.7 million for the nine months ended September 30, 2022 from $205.1 million in the nine months ended September 30, 2021.

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 in future years as we continue to expand our product portfolio and enhance existing products.

Research and development expense increased $1.4 million to $67.3 million for the three months ended March 31, 2023, as compared to $65.9 million for the three months ended March 31, 2022.

The increase was primarily driven by increased design tools expenses, partially offset by the impact from the decrease in headcount from a reduction in force.

We are closely managing our research and development expenses to meet evolving demand;

however, we expect our research and development expenses to increase in future years when we expand our product portfolio and enhance existing products.

Selling, General and Administrative

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Selling, general and administrative $ 38,653 $ 40,577 $ (1,924) (5) %

% of net revenue 16 % 15 %

Selling, general and administrative expense remained flat at $38.5 million for the three months ended September 30, 2022, as compared to $38.5 million for the three months ended September 30, 2021.

Selling, general and administrative expense increased $12.7 million to $123.5 million for the nine months ended September 30, 2022, as compared to $110.8 million for the nine months ended September 30, 2021.

The increase was primarily due to increased headcount as well as increased acquisition and integration costs of $7.6 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.

Selling, general and administrative expense decreased $1.9 million to $38.7 million for the three months ended March 31, 2023, as compared to $40.6 million for the three months ended March 31, 2022.

The decrease was primarily due to decreased amortization of intangibles and stock based-compensation expenses, partially offset by increased professional services and acquisition and integration costs.

We are closely managing our selling, general and administrative expenses;

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

Impairment losses

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Impairment losses $ 2,438 $ — $ 2,438 N/A

% of net revenue 1 % — %

Impairment losses in the three months ended March 31, 2023 related to abandonment of certain intellectual property licenses.

Restructuring Charges

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Restructuring charges $ 4,648 $ — $4,648 N/A

% of net revenue 2 % — %

Restructuring charges increased $0.6 million to $0.6 million for the three months ended September 30, 2022, compared to $0 for the three months ended September 30, 2021.

Restructuring charges in the three months ended September 30, 2022 primarily consisted of $0.6 million of employee severance-related charges.

Restructuring charges decreased $1.1 million to $1.1 million for the nine months ended September 30, 2022, compared to $2.2 million for the nine months ended September 30, 2021.

Restructuring charges in the nine months ended September 30, 2022 consisted of $0.6 million of employee severance-related charges and $0.5 million of lease-related charges, which comprised impairment of leased right-of-use assets from partial abandonment of a facility.

Restructuring charges in the nine months ended September 30, 2021 primarily included $1.3 million in employee severance-related charges and $0.6 million of lease-related charges, which comprised impairment of leased right-of-use assets and leasehold improvements.

Loss on Extinguishment of Debt

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

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

% of net revenue — % — % — % (1) %

Loss on extinguishment of debt in the nine months ended September 30, 2021 consists of the charge-off of remaining unamortized debt discount and issuance costs on debt under a prior term loan which we repaid early with proceeds from a new term loan in June 2021.

Restructuring charges increased $4.6 million to $4.6 million for the three months ended March 31, 2023, compared to $0 for the three months ended March 31, 2022.

Restructuring charges in the three months ended March 31, 2023 consisted primarily of $4.6 million of employee severance-related charges from a reduction in force.

Interest and Other Income (Expense)

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Interest and other income (expense), net $ (2,178) $ (3,088) $ 910 (29) %

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

Interest and other income (expense), net changed by $4.6 million from a net expense of $2.7 million in the three months ended September 30, 2021 to a net expense of $7.4 million for the three months ended September 30, 2022.

The change in interest and other income (expense), net was primarily due to the impact of a $4.6 million change in other income (expense), net, from expense of $0.1 million in the 2021 period to expense of $4.7 million in the 2022 period.

The $4.6 million change in other income (expense), net primarily related to $5.3 million in unrealized holding loss on equity securities that are marked to market value on the balance sheet, partially offset by $0.5 million of foreign currency fluctuations.

Interest and other income (expense), net changed by $5.7 million from a net expense of $11.3 million in the nine months ended September 30, 2021 to a net expense of $5.6 million for the nine months ended September 30, 2022.

The change in interest and other income (expense), net was primarily due to the impact of a $3.1 million decrease in interest expense and a $2.5 million change in other income (expense), net, from expense of $0.7 million in the 2021 period to income of $1.7 million in the 2022 period.

The $3.1 million decrease in interest expense primarily relates to a decrease in interest expense on outstanding debt, mostly related to a lower average balance of term loan debt outstanding.

The $2.5 million change in other income (expense), net primarily related to $3.6 million impact from foreign currency fluctuations, partially offset by $1.4 million in net unrealized holding loss on equity securities that are marked to market value on the balance sheet.

Interest and other income (expense), net changed by $0.9 million from a net expense of $3.1 million in the three months ended March 31, 2022 to a net expense of $2.2 million for the three months ended March 31, 2023.

The change in interest and other income (expense), net was primarily due to the impact of a $0.6 million increase in interest income plus a $0.4 million change in other income (expense), net, from expense of $0.8 million in the 2022 period to expense of $0.3 million in the 2023 period.

The $0.6 million increase in interest income is due to higher interest rates on a higher balance of interest bearing cash equivalents.

The $0.4 million change in other income (expense), net primarily related to $0.7 million impact from foreign currency fluctuations, partially offset by $1.1 million impact of change from $1.0 million in net unrealized holding gain in the 2022 period to net unrealized holding loss of $0.2 million recognized on equity securities that are marked to market value in other income (expense), net.

Income Tax Provision

Three Months Ended September 30, Nine Months Ended September 30,

2022 2021 $ Change % Change 2022 2021 $ Change % Change

(dollars in thousands) (dollars in thousands)

Three Months Ended March 31,

2023 2022 $ Change % Change

(dollars in thousands)

Income tax provision $ 15,566 $ 11,453 $ 4,113 36 %

The income tax provision for the three months ended September 30, 2022 was $16.2 million compared to an income tax provision of $11.8 million for the three months ended September 30, 2021.

The income tax provision for the nine months ended September 30, 2022 was $39.5 million compared to an income tax provision of $5.6 million for the nine months ended September 30, 2021.

The income tax provision for the three months ended March 31, 2023 was $15.6 million compared to an income tax provision of $11.5 million for the three months ended March 31, 2022.

The difference between our 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.

federal statutory rate for the three months ended March 31, 2023 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, research and development credits, stock based compensation, excess tax benefits related to stock-based compensation, and the release of uncertain tax positions under ASC 740-10.

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 our 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.

federal statutory rate for the three months ended March 31, 2022 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, release of certain reserves for uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal R&D credits.

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.

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

We 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 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.

We recorded a tax provision in the three months ended March 31, 2023 and 2022 at the incentive rate.

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

As of September 30, 2022, we had cash and cash equivalents of $181.5 million, restricted cash of $1.0 million and net accounts receivable of $178.1 million.

Additionally, as of September 30, 2022, our working capital was $211.7 million.

As of March 31, 2023, we had cash and cash equivalents of $207.9 million, restricted cash of $1.0 million and net accounts receivable of $188.7 million.

Additionally, as of March 31, 2023, our working capital was $293.4 million.

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.

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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, 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.

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.

As of September 30, 2022, $175.0 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, in an aggregate principal amount of up to $100.0 million which remained undrawn as of

September 30, 2022.

We also use cash to pay down outstanding debt, and from time to time, make investments.

As of March 31, 2023, $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, in an aggregate principal

amount of up to $100.0 million which remained undrawn as of March 31, 2023.

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.

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.

Heightened volatility, global semiconductor supply 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 may be further exacerbated by the impacts of high inflation, and we may experience decreased sales and revenues in the near future.

A material adverse impact from COVID-19 and 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 if we pursue additional acquisitions.

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, and we may decide to issue additional shares of our common stock to reduce our overall leverage ratio.

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.

Issuing additional shares of our common stock, if material, will result in dilution of existing shares outstanding.

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.

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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, stock-based compensation, impairment of leased right-of-use assets and related leasehold improvements and unrealized holding gains or losses on marketable equity securities.

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 and unrealized holding 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 September 30, 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:

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

As of March 31, 2023, 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:

Total Less than 1 year 2-3 years 4-5 years More than 5 years

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Total $ 284,139 $ 121,651 $ 28,172 $ 8,745 $ 125,571

Our planned capital expenditures as of September 30, 2022 were not material.

Our consolidated balance sheet at September 30, 2022 included $5.8 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment.

Our planned capital expenditures as of March 31, 2023 were not material.

Our consolidated balance sheet at March 31, 2023 included $6.4 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.

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

September 30, 2022 December 31, 2021

March 31, 2023 December 31, 2022

(in thousands)

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

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Cash Flows from Operating Activities

Net cash provided by operating activities was $319.4 million for the nine months ended September 30, 2022.

Net cash provided by operating activities was $42.2 million for the three months ended March 31, 2023.

Net cash provided by operating activities consisted of positive impact of net income of $9.5 million, non-cash items of $38.9 million, and changes in operating assets and liabilities of $13.9 million and excess tax benefits and deferred income taxes totaling $7.6 million.

Non-cash items included in net income for the nine months ended September 30, 2022 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $61.9 million and stock-based compensation of $58.2 million.

Net cash provided by operating activities was $152.2 million for the nine months ended September 30, 2021.

Non-cash items included in net income for the three months ended March 31, 2023 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $19.2 million, stock-based compensation of $16.4 million, and impairment losses of $2.4 million.

Net cash provided by operating activities was $134.2 million for the three months ended March 31, 2022.

Net cash provided by operating activities consisted of positive impact of net income of $33.6 million, non-cash items of $43.7 million, and changes in operating assets and liabilities of $57.1 million, partially offset by excess tax benefits and deferred income taxes totaling $0.3 million.

Non-cash items included in net income for the nine months ended September 30, 2021 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $67.4 million, stock-based compensation of $42.9 million, loss on extinguishment of debt of $5.2 million and amortization of issuance costs and discounts on debt and leases of $2.6 million.

Non-cash items included in net income for the three months ended March 31, 2022 primarily consisted of depreciation and amortization of property, equipment, acquired intangible assets and leased right-of-use assets of $23.9 million and stock-based compensation of $18.6 million.

Cash Flows from Investing Activities

Net cash used in investing activities was $74.4 million for the nine months ended September 30, 2022 and consisted of purchases of investments of $29.3 million, purchases of property and equipment of $24.6 million, purchases of intangible assets of $10.4 million, and proceeds loaned under notes receivable of $10.0 million.

Net cash used in investing activities was $73.6 million for the nine months ended September 30, 2021 and consisted of $35.0 million in payments of purchase price that were previously deferred from our 2020 acquisition of NanoSemi, $26.9 million in purchases of property and equipment, $6.6 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 $15.5 million for the three months ended March 31, 2023 and consisted of cash used in acquisition of Company Y of $9.7 million and purchases of property and equipment of $5.2 million.

Net cash used in investing activities was $42.8 million for the three months ended March 31, 2022 and consisted of purchases of long-term investments in a private entity of $23.3 million, proceeds loaned under notes receivable of $10.0 million, purchases of property and equipment of $4.8 million, and purchases of intangible assets of $4.6 million.

Cash Flows from Financing Activities

Net cash used in financing activities was $191.8 million for the nine months ended September 30, 2022.

Net cash used in financing activities consisted primarily of repayments of debt of $135.0 million, common stock repurchases of $31.5 million, and minimum tax withholding paid on behalf of employees for restricted stock units of $28.5 million, partially offset by $3.2 million in net proceeds from issuance of our common stock upon exercise of stock options and purchases made under our employee stock purchase plan.

Net cash used in financing activities was $56.9 million for the nine months ended September 30, 2021.

Net cash used in financing activities consisted primarily of $389.8 million in repayments of debt, $11.1 million in minimum tax withholding paid on behalf of employees for restricted stock units, $8.1 million in common stock repurchases, $4.1 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 $6.3 million.

We believe that our $181.5 million of cash and cash equivalents at September 30, 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 September 30, 2022, our indebtedness totaled $175.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement.

Net cash used in financing activities was $6.2 million for the three months ended March 31, 2023.

Net cash used in financing activities consisted primarily of minimum tax withholding paid on behalf of employees for restricted stock units of $6.2 million.

Net cash used in financing activities was $70.7 million for the three months ended March 31, 2022.

Net cash used in financing activities consisted primarily of common stock repurchases of $26.3 million, minimum tax withholding paid on behalf of employees for restricted stock units of $24.4 million, and repayments of debt of $20.0 million.

We believe that our $207.9 million of cash and cash equivalents at March 31, 2023 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 March 31, 2023, our indebtedness totaled $125.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement.

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 June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of September 30, 2022.

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, which remained undrawn as of March 31, 2023.

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%.

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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-Q

Item 2. Management’s Discussion and Analysis