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Item 1A. Risk Factors

2023-10-25 compared with 2023-07-27 · 218 added, 300 removed, 745 unchanged (41% of the section changed)

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

For the risks relating to our previously pending merger with Silicon Motion, please refer to the section of these risk factors captioned “Risks Relating to the Previously Pending Merger with Silicon Motion.”

For the risks relating to our terminated merger with Silicon Motion, please refer to the section of these risk factors captioned “Risks Relating to the Terminated Merger with Silicon Motion.”

Risk Factor Summary

Risks Relating to the Previously Pending Merger with Silicon Motion

• Although we terminated the merger, Silicon Motion could challenge the validity of our termination, including by commencing a dispute proceeding pursuant to the terms of the agreement and plan of merger, or the Merger Agreement, requiring us to consummate the merger.

• If we are required to consummate the merger, our actual results could differ materially from any expectations or guidance, including with respect to any cost savings and other potential synergies.

• If we are required to consummate the merger, failure to integrate Silicon Motion with our business successfully in the expected timeframe may adversely affect our results and financial condition.

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

• Motivating and retaining senior management and other key personnel may be difficult in light of the previously pending merger.

• If we are required to consummate the merger, we will be required to seek and obtain debt financing and/or equity financing, which may not be available, given that the prior commitments from Wells Fargo Bank and other lenders have been terminated and we will materially increase our indebtedness which adversely affects our operating results and cash flows and our new loan agreements will likely contain covenants that could adversely affect our operational freedom and ability to pursue strategic transactions.

• If we are required to consummate the merger and we finance such merger through the incurrence of additional indebtedness, servicing our materially increased indebtedness will require a significant amount of cash, and we may not have sufficient cash flow from our business to pay such indebtedness.

• Any dispute proceedings with Silicon Motion or additional securityholder lawsuits may cause us and/or Silicon Motion to incur substantial defense or settlement costs, or otherwise adversely affect us or Silicon Motion.

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

• Counterparties of Silicon Motion may acquire certain rights which could negatively affect us following the merger, if we are required to consummate the merger.

• If the merger is consummated, the ownership percentage interests of our stockholders will be reduced.

• If we are required to consummate the merger, we will be exposed to additional risks associated with doing business in Taiwan.

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

• The market value of our common stock could decline if large amounts of our common stock are sold if we are required to consummate the merger.

Risks Relating to the Terminated Merger with Silicon Motion

• The termination of the Merger Agreement and any arbitration or other dispute with Silicon Motion in connection with the Merger Agreement could cause us to incur substantial costs, may divert management’s attention from our business and could otherwise adversely affect our business, financial results and operations.

• If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Risks Related to Our Business

• Intense and increasing competition could have a material adverse effect on our revenue growth and market share.

• Global economic conditions, including factors such as high inflation and recession, could adversely affect our revenues, margins, and operating results.

• Intense and increasing competition could have a material adverse effect on our revenue, any revenue growth rate and market share.

• Global economic conditions, including factors such as high inflation or a recession, could continue to adversely affect our business, financial condition and operating results.

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

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The impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

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

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

• We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology or if such authorizations are revoked, and we will be subject to legal and regulatory consequences for any noncompliance with applicable export laws.

• We are subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments.

For example, as more entities are added to restricted export control lists, our need to seek authorizations from the U.S.

• Our business, financial condition and results of operations could continue to be adversely affected by geopolitical and economic tensions among countries in which we conduct business, including between the United States and China, among other countries.

For example, as more entities are added to restricted export control lists, or as semiconductor technology exports to other countries are further controlled, our need to seek authorization from the U.S.

government may impact our ability to do business.

• Increased tariffs, export controls, or the imposition of additional trade barriers could have a material adverse effect on our revenues and operating results.

• Increasing geopolitical tensions between the United States and China may lead to additional export controls or restrictions with respect to customers and business partners located in China or other jurisdictions.

We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology or if export licenses are delayed, denied, or revoked, and we will be subject to legal and regulatory consequences for any noncompliance with applicable laws.

• We also are subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments such as China and Russia.

• The loss of, or a significant reduction in orders from major customers has had and could continue to have a material adverse effect on our revenue and operating results.

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• If we fail to timely develop and introduce new or enhanced products, our ability to attract and retain customers and compete could be harmed.

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

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

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

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

• We are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future as we satisfy our underlying interest and principal payment obligations.

Our loan agreements contain financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions.

In addition, rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service their interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors' business.

Risks Relating to Intellectual Property

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

• We may become involved in litigation as a result of our intellectual property, including patents we have divested.

Any such litigation may be time consuming, costly, and a distraction to key engineers and management.

• We face risks related to security vulnerabilities in our products.

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

Risks Relating to Reliance on Third Parties

7 unchanged sentences

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

Risks Relating to our Previously Pending Merger with Silicon Motion

Although we terminated the merger, Silicon Motion could challenge the validity of our termination, including by commencing a dispute proceeding pursuant to the terms of the agreement and plan of merger, or the Merger Agreement, requiring us to consummate the merger.

We intend to vigorously defend against any legal proceedings related to the merger, but due to the uncertainties inherent in any legal proceedings, we cannot predict the outcome of any legal proceedings and could be required to consummate the merger according to the terms of the Merger Agreement and/or pay certain costs to Silicon Motion.

If we are required to consummate the merger, we will be required to obtain new debt financing and/or equity financing to finance the merger and we may be unable to secure financing related to the merger.

Legal proceedings are expensive and time-consuming, and may divert management’s attention from our business.

If we are required to consummate the merger, we will need to re-file under the HSR Act.

In addition, if we are required to consummate the merger, we could be required to obtain approval from Silicon Motion’s shareholders to approve the merger.

In such an event, governmental authorities could impose conditions on the completion of the merger that could delay consummation of the acquisition or have a material adverse effect on our business following the acquisition.

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

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

We have incurred and will incur substantial costs in connection with the previously pending merger.

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

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

Risks Relating to our Terminated Merger with Silicon Motion

The termination of the Merger Agreement and any arbitration or other dispute with Silicon Motion in connection with the Merger Agreement could cause us to incur substantial costs, may divert management’s attention from our business and could otherwise adversely affect our business, financial results and operations.

We terminated the Merger Agreement on July 26, 2023.

Silicon Motion has challenged the validity of that termination.

On August 16, 2023, Silicon Motion delivered to a notice to us, which Silicon Motion publicly disclosed, that it was purporting to terminate the Merger Agreement and that Silicon Motion would be commencing an arbitration before the Singapore International Arbitration Centre to seek damages from us arising from our alleged breaches of the Merger Agreement.

On October 5, 2023, Silicon Motion filed a Notice of Arbitration with the Singapore International Arbitration Centre alleging that we breached the Merger Agreement.

Additionally, a class action lawsuit has been filed against us and certain of our current officers, and potential plaintiffs may file additional lawsuits related to the previously contemplated merger.

See Part II, Item 1 (Legal Proceedings) of this report for more information on the Silicon Motion arbitration and the class action lawsuit.

We intend to vigorously defend against any legal proceedings related to the merger and the termination of the Merger Agreement and any alleged breaches of the Merger Agreement, but due to the uncertainties inherent in any legal proceedings, we cannot predict the outcome of any legal proceedings.

Legal proceedings are time-consuming, and may divert management’s attention from our business.

Legal proceedings are also expensive and could result in substantial costs to us, including any damages we are required to pay and costs associated with the indemnification of directors and officers.

Please refer to the Risk Factor entitled “If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any material increase in our indebtedness would 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.

Any 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.

We have already incurred, and expect to continue to incur, substantial costs in connection with the previously pending merger and the termination of the Merger Agreement and the dispute with Silicon Motion.

Aside from any damages or settlement amounts we may be required to pay, these costs are primarily associated with the fees of our financial advisors, accountants, lenders, and legal counsel and, with limited exceptions relating to a portion of our financial advisor fees.

Since the merger has been terminated, we will have received little or no benefit in respect of such costs incurred.

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

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

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

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

• projections of Silicon Motion’s future revenues;

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

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

• our capital structure after the merger;

• the amount of goodwill and intangibles that would have resulted from the merger;

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

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

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

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

Silicon Motion has recently experienced a decline in its financial results and we cannot provide any assurances with respect to the accuracy of our assumptions, including our assumptions with respect to future revenues or revenue growth rates, if any, of Silicon Motion, and we cannot provide assurances with respect to our ability to realize the cost savings that we anticipated.

If we are required to consummate the merger, risks and uncertainties that could potentially impact our future operating results and cause our actual results to differ materially from currently anticipated results include, but are not limited to, risks relating to our ability to integrate Silicon Motion successfully;

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

risks relating to our ability to realize incremental revenues from the merger in the amounts that we anticipated including a decline in Silicon Motion’s revenues as a result of a global economic downturn and its impacts on customer demand for their products;

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

risks related to changes in government regulations, including those related to export controls;

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

If we are required to consummate the merger, any failure to integrate Silicon Motion successfully and to realize the financial benefits we anticipated from the merger would have a material adverse impact on our future operating results and financial condition and could materially and adversely affect the trading price or trading volume of our common stock.

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

The success of the previously pending merger with Silicon Motion was dependent, in substantial part, on our ability to integrate Silicon Motion’s business and operations successfully with those of MaxLinear and to realize fully the anticipated benefits and potential synergies from combining our companies, including, among others, currently expected cost savings from duplicative functions;

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

and potential revenue growth resulting from the addition of Silicon Motion’s product portfolio.

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

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

If we are required to consummate the merger, we may face significant challenges in consolidating our operations with Silicon

Motion, integrating the two companies’ business processes, technologies, operations and addressing the different corporate cultures of the two companies.

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

If we are required to consummate the merger and the companies are not successfully integrated, the anticipated benefits of the merger may not be realized fully or at all or may take longer to realize than expected and there could be increased compliance risks.

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

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

Customers, vendors, licensors, and other third parties with whom we or Silicon Motion do business or otherwise have relationships may experience uncertainty associated with the previously pending merger, and this uncertainty could materially affect their decisions with respect to existing or future business relationships with MaxLinear or Silicon Motion.

As a result, we were in many instances unable to evaluate the impact of the previously pending merger on certain assumed contractual rights and obligations, including intellectual property rights.

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

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

These disruptions could have a material adverse effect on our business, operating results, and financial condition.

The adverse effect of any such disruptions could be exacerbated as a result of us providing notice of termination to Silicon Motion.

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

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

Uncertainty about the effect of the previously pending merger on our employees and those of Silicon Motion may have a material adverse effect on MaxLinear or Silicon Motion.

This uncertainty may impair our or Silicon Motion’s ability to retain and motivate key personnel and our ability to retain and motivate them if the merger is consummated.

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

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

Furthermore, after the merger is consummated, we must be successful at retaining and motivating key employees in order for the benefits of the transaction to be fully realized.

If key employees depart, we may incur significant costs in identifying, hiring, and retaining replacements, which could have a material adverse effect on our business, operating results, and financial condition.

If we are required to consummate the merger and distribute the cash consideration payable to Silicon Motion securityholders, we will be required to seek and obtain debt financing and/or equity financing 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.

If we finance the merger through the incurrence of additional indebtedness, 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.

If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

Even if we are able to finance such payments through the incurrence of additional indebtedness, any 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.

If we are required to consummate the merger and we finance the merger through the incurrence of additional indebtedness, the material increase in our indebtedness will adversely affect our interest payment obligations and will adversely affect our ability to use cash generated from operations as we repay interest and principal under the term loans and revolving credit facility, as applicable.

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

In addition, the loan agreements will contain financial and operational covenants that may adversely affect our

ability to engage in certain activities, including certain financing and acquisition transactions, stock repurchases, guarantees, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

Such financial and operational covenants will include compliance with a secured net leverage ratio test.

If we are required to pay damages from legal proceedings related to the termination of the Merger Agreement or alleged breaches of the Merger Agreement, or we agree to pay amounts in settlement, the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

However, if we finance all or a portion of the payment of damages or settlement amounts through the incurrence of additional indebtedness, any material payment and increase in our indebtedness would adversely affect our ability to use cash generated from operations as we repay interest and principal under the term loans and revolving credit facility, as applicable.

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

In addition, our current credit agreement, and any new loan agreements, contain and would likely contain financial and operational covenants that may adversely affect our ability to engage in certain activities, including certain financing and acquisition transactions, stock repurchases, guarantees, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

Such financial and operational covenants include compliance with a secured net leverage ratio test.

Accordingly, outstanding indebtedness could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders.

Specifically, if we are required to consummate the merger and we finance the merger through the incurrence of additional indebtedness, our materially increased indebtedness could have important consequences to investors in our common stock, including the following:

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

While we may mitigate 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;

Specifically, if we are required to pay damages from legal proceedings related to the termination of the Merger Agreement or alleged breaches of the Merger Agreement, or we agree to pay amounts in settlement, and we finance all or a portion of the payment of damages through the incurrence of additional indebtedness, any materially increased indebtedness could have important consequences to investors in our common stock, including the following:

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

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

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

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

• rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service our respective interest and debt obligations, which in turn has an impact on customer demand for our products as well as the business of our distributors;

• 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 (such as for the Initial Term Loan under the June 23, 2021 Credit Agreement) or an adjusted base rate.

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

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

• our level of indebtedness, combined with rising interest rates, could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate, including limiting our future investments or ability to enter into acquisitions and strategic partnerships, and obtain financing for such transactions;

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

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

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

MaxLinear stockholders or Silicon Motion securityholders could file additional lawsuits in the future related to the previously contemplated merger, which could cause us and/or Silicon Motion to incur substantial defense or settlement costs, or otherwise adversely affect us or Silicon Motion.

As of the date of this filing of our quarterly report on Form 10-Q, we are aware of four lawsuits challenging the merger with Silicon Motion that have been dismissed.

However, Silicon Motion has received several shareholder demand letters, and potential plaintiffs may file additional lawsuits related to the previously contemplated merger.

The outcome of any current demand letters or future litigation is uncertain.

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

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

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

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

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

The consummation of the merger is subject to certain customary closing conditions such as antitrust approval from SAMR, and the expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

If we cannot demonstrate that we validly terminated the merger agreement, we could be required to pay Silicon Motion a termination fee.

In addition, under the merger agreement, if the merger agreement is terminated by MaxLinear or Silicon Motion as a result of a court or other competent authority issuing an order pursuant to regulatory law permanently prohibiting the consummation of the merger, or the merger is not consummated by the Outside Date, which, under the terms of the Merger Agreement, would have been automatically extended to August 7, 2023, if, as of May 5, 2023, all conditions to closing were met, other than certain exceptions related to regulatory matters.

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

Although we have terminated the merger, any uncertainty could materially harm our or Silicon Motion’s businesses and results of operations.

We and Silicon Motion are subject to a number of risks that may harm our business and results of operations, including:

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

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

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

• the potential inability to respond effectively to competitive pressures, industry developments and future opportunities;

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

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

If the merger is consummated, counterparties of Silicon Motion may acquire certain rights upon the merger, which could negatively affect us following the merger.

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

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

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

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

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

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

If we are required to consummate the merger with Silicon Motion, the issuance of shares of our common stock to Silicon Motion securityholders will reduce the ownership percentage interests of our stockholders.

If the merger with Silicon Motion is consummated, we expect to issue shares of our common stock to former Silicon Motion securityholders entitled to receive consideration pursuant to the Merger Agreement.

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

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

If we are required to consummate the merger with Silicon Motion, we will be exposed to additional risks associated with doing business in Taiwan because of tense regional geopolitical risk with China.

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

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

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

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

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

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

We expect to incur substantial expenses in connection with the pending merger and if the merger is required to be consummated, subsequent integration of Silicon Motion’s business with MaxLinear.

We expect operational integration to require substantial management attention.

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

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

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

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

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

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

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

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

If we are required to consummate the merger, we will record goodwill in connection with the Silicon Motion merger that could become impaired and adversely affect our future operating results.

If we are required to consummate the merger, the merger with Silicon Motion will be accounted for as a business combination using the acquisition method of accounting by MaxLinear in accordance with accounting principles generally accepted in the United States.

Under the acquisition method of accounting, the assets and liabilities of Silicon Motion will be recorded, as of completion, at their respective fair values and added to our assets and liabilities.

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

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

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

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

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

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

Any such impairment charge could have a material impact on our operating results in future periods, and the announcement of a material impairment could have a material adverse effect on the trading price and trading volume of our common stock.

Risks Related to Our Business

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

In addition, a number of other public and private companies are in the process of developing competing products for our current and target markets.

In addition, other companies are in the process of developing competing products for our current and target markets.

Because our products often are building block semiconductors which provide functions that in some cases can be integrated into more complex integrated circuits, we also face competition from manufacturers of integrated circuits, some of which may be existing customers or platform partners that develop their own integrated circuit products.

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

Global economic conditions, including factors such as high inflation or a recession could adversely affect our business, financial condition, and results of operations.

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

Global economic conditions, including factors such as high inflation or a recession, could continue to adversely affect our business, financial condition, and results of operations.

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 particular, we believe an economic slowdown and inventory oversupply will continue to add volatility in managing the business.

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

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

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Global economic volatility and economic volatility in the specific markets in which the devices that incorporate our products are ultimately sold, including the impacts of current high rates of inflation and recession, can cause extreme difficulties for our customers and third-party vendors in accurately forecasting and planning future business activities.

For example, on March 10, 2023, Silicon Valley Bank, or SVB was placed into receivership with the Federal Deposit Insurance Corporation, or FDIC, which resulted in all funds held at SVB being temporarily inaccessible by SVB’s customers.

If banks and financial institutions with whom we have banking relationships enter receivership or become insolvent in the future, we may be unable to access, and we may lose, some or all of our existing cash, cash equivalents and investments to the extent those funds are not insured or otherwise protected by the FDIC.

This unpredictability could cause our customers to delay or reduce their capital expenditures and spending on our products, which would delay and lengthen sales cycles and negatively affect the overall demand for our products.

Worsening economic instability could result in a cancellation of such orders or otherwise adversely affect spending for information technology and limit our ability to forecast future demand for our products, which could reduce expected revenues or result in a write-down of any excess or obsolete inventory.

Worsening economic instability could continue to result in a cancellation of such orders or otherwise adversely affect spending for information technology and limit our ability to forecast future demand for our products, which could reduce expected revenues or result in a write-down of any excess or obsolete inventory.

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

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

The current downturn, or any future downturns, may result in diminished product demand, production overcapacity, high inventory levels and accelerated erosion of our average selling prices.

The current downturn, or any future downturns, has and may in the future result in diminished product demand, production overcapacity, high inventory levels and accelerated erosion of our average selling prices.

Furthermore, any future upturn in the semiconductor industry could result in increased competition for access to third-party foundry and assembly capacity.

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

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

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

Our revenue has declined, and we may not sustain our current level of revenue, which has declined, and/or manage future growth effectively.

The impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

Our net revenue decreased from $280.0 million in the six months ended June 30, 2022 to $183.9 million in the six months ended June 30, 2023 and the decline in net revenue could continue in future periods.

The decrease is as a result of macroeconomic conditions impacting customer demand.

Our net revenue decreased from $829.7 million in the nine months ended September 30, 2022 to $567.9 million in the nine months ended September 30, 2023 and the decline in net revenue could continue in future periods.

Among other factors, the decrease is as a result of macroeconomic conditions impacting customer demand.

Prior to 2023, our net revenues grew to $1.1 billion for the year ended December 31, 2022.

Continued uncertainty in customer demand as well as the global economy could continue to result in increased volatility in our sales and revenues, and we may not sustain our current level of revenue.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry, and we may experience further decline in revenue due to current macroeconomic conditions impacting customer demand for various products.

Further, the impact of excess inventory in the channel has continued to influence our customers’ expected demand for certain of our products.

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If we are unable to resume and manage our growth effectively, we may not be able to take advantage of market opportunities or develop new products and we may fail to satisfy customer requirements, maintain product quality, execute our business plan, or respond to competitive pressures.

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

Our business, financial condition and results of operations could continue to be adversely affected by the geopolitical and economic tensions among countries in which we conduct business, including between the United States and China, among other countries.

government may impact our ability to do business.

We sell our products throughout the world.

Products shipped to Asia accounted for 74% of our net revenue in the six months ended June 30, 2023.

In addition, as of June 30, 2023, approximately 78% of our employees are located outside of the United States.

Products shipped to Asia accounted for 74% of our net revenue in the nine months ended September 30, 2023.

In addition, as of September 30, 2023, approximately 79% of our employees are located outside of the United States.

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

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• changes in political, regulatory, legal or economic conditions;

• geopolitical conflicts and tensions, especially as between the United States and China, that could destabilize trading relationships and economic activity;

• restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protection measures, including export controls and restrictions, duties and quotas and customs duties and tariffs;

• disruptions of capital and trading markets;

• changes in import or export licensing requirements;

• changes in import or export licensing requirements, including as a result of ongoing armed conflict and geopolitical tensions among the United States, China, Russia, Ukraine and other countries;

• transportation delays;

• civil disturbances or political instability;

• geopolitical turmoil, including terrorism, war or political or military coups;

• other unpredictable geopolitical turmoil, including terrorism, war or political or military coups, including the current conflict in Israel and any obligations of our Israeli employees to perform military service;

• public health emergencies, such as an outbreak of COVID-19;

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

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

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

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

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

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

We have experienced weakening demand in China, and continuing changes in government trade policies create a heightened risk of further increased tariffs that impose barriers to international trade and could further decrease international demand.

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

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

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

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

Furthermore, compliance with export controls and implementation of additional tariffs can increase compliance costs and further affect our business and operating results.

We will lose sales if we are unable to obtain or retain government authorization to export certain of our products or technology related to the development or production of our products or if such authorizations are revoked, and we will be subject to legal and regulatory consequences if we do not comply with applicable export control laws and regulations.

Certain of our products and technologies are subject to export and/or import controls imposed by countries in which we do business.

In certain instances, these regulations may require pre-shipment authorization approval from a government authority;

depending on the country and/or individual or entity involved, approval may not be granted.

For products subject to the Export Administration Regulations, or EAR, administered by the U.S.

Department of Commerce’s Bureau of Industry and Security, or BIS, a license may be required, depending on one or more factors including the type of product or technology at issue, the intended end use, the identity of the end user, the identity of other companies involved in the production process, and whether a license exception might apply.

Certain of our products and technologies are subject to the EAR.

Certain of our products and technologies are subject to export and/or import controls imposed by countries in which we do business, including the United States Export Administration Regulations, or EAR, administered by the U.S.

Department of Commerce’s Bureau of Industry and Security, or BIS.

Certain of our products and technologies are subject to the EAR, which may require a license authorization from BIS prior to the shipment or sharing of certain products and technologies with certain end users or destinations.

Such approval may be delayed, denied, or even revoked after initially being granted, depending on one or more factors including the type of product or technology at issue, the intended end use, the identity of the end user, the identity of other companies involved in the production process, and whether a license exception might apply.

We are subject to similar export controls regulations in other jurisdictions where we operate, including the European Union, Singapore, and Taiwan, among others.

Export control laws, regulations, and orders are complex, change frequently and with limited or no notice, have generally become more stringent over time and have intensified as U.S.-China geopolitical tensions worsen.

Since October 2022, the United States has announced export control restrictions on a number of entities based in China due to national security concerns and additional, potentially more severe, restrictions may be possible.

The addition of new entities to restricted party lists can further increase the scope of export restrictions applicable to our business.

Failure to obtain required export licenses for our products or the placement of one or more of our customers on any restricted parties lists could significantly reduce our revenue and harm our business.

Obtaining export licenses can be difficult, costly and time-consuming and we may not always be successful in obtaining necessary export licenses.

Our failure to obtain required import or export approval for our products may adversely affect our

business, and other limitations imposed on our ability to export or sell our products may also harm our international and domestic revenue.

Our failure to obtain required import or export approval for our products may adversely affect our business, and other limitations imposed on our ability to export or sell our products may also harm our international and domestic revenue.

In addition, it is possible that BIS can revoke licenses that have been granted or decline to re-issue such licenses upon their expiration.

Although our policies, controls, and procedures are designed to maintain ongoing compliance with applicable export controls laws, we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations.

Although our policies, procedures, and controls are designed to detect and prevent potential violations and maintain ongoing compliance with applicable export controls laws, we cannot assure you that we have been or will be at all times in complete compliance with such laws and regulations.

For example, our products could be diverted to bad actors.

In addition, if our customers or business partners fail to comply with applicable regulations and laws, we may be subject to liability and may be required to suspend sales or take other action which could damage our reputation and negatively impact our results of operations.

If we violate or fail to comply with any of them, a range of consequences could result, including fines, import/export restrictions, sales limitations, criminal and civil liabilities or other sanctions.

In addition, if our customers fail to comply with these regulations and laws, we may be required to suspend sales to these customers, which could damage our reputation and negatively impact our results of operations.

The absence of comparable restrictions imposed on competitors based in other countries may adversely affect our competitive position.

To the extent that we do business with parties on the Entity List under export licenses, our business could be affected if the government does not grant or renew required licenses.

We currently have licenses from BIS that permit our transactions with two restricted parties, but those licenses may be revoked at any time or denied for renewal when the license expires.

The addition of new entities to restricted party lists can further increase the scope of export restrictions applicable to our business.

To the extent that we do business with parties on the Entity List under approved export licenses, our business could be affected if the government delays, denies, or otherwise does not grant or renew required licenses.

We currently have licenses from BIS that permit certain of our transactions with two restricted parties, but those licenses may be revoked at any time or denied for renewal when the license expires.

One of the Company's third party foundry partners, Semiconductor Manufacturing International Corporation, or SMIC, was added to the BIS Entity list in December 2020.

As a result of that Entity List listing, we must obtain export licenses from BIS for the export or reexport to SMIC of any technology for the development or production (fabrication) of the Company's products.

Although we have obtained export licenses in order to have SMIC manufacture certain products for us, those export licenses could be revoked at any time.

Revocation of any of those export licenses could significantly disrupt our ability to obtain the products in question and fulfill customer requirements.

Moreover, the issuance of export licenses for other technology transfers to SMIC is a matter of discretion with the U.S.

government, and it is uncertain whether we will be able to obtain export licenses, in a timely manner, for the transfer of technology required by SMIC to produce semiconductor wafers for us.

If we are unable to obtain those export licenses, it may be necessary to have the products fabricated by other semiconductor foundries, which may be more costly alternatives to SMIC, and which may have limited capacity to fabricate sufficient products to meet our requirements.

Additionally, current and future business with parties subject to significant export restrictions, including those named on the Entity List may be limited in scope or suspended entirely in order to comply with the EAR or other applicable laws or regulations and, as a result, our revenue could be adversely impacted until a license is granted or renewed.

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In September 2022, we self-identified a potential violation of the EAR related to certain transactions with one of our foundry partners in China on the Entity List in which limited technology was furnished to our Specific Foundry Partner without authorization under the EAR.

Upon discovery, (1) we took immediate action to remediate, including by preventing recurrence and (2) our Audit Committee engaged outside counsel to conduct a privileged investigation.

Upon discovery, we took immediate action to remediate, including by implementing additional measures to prevent recurrence.

Our Audit Committee engaged outside counsel to conduct a privileged investigation.

On March 3, 2023, we submitted a comprehensive voluntary self-disclosure to BIS regarding the potential EAR violation described above and other potential export control violations.

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and other governments such as China and Russia.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China), the Russia-Ukraine conflict, and increased political tensions in Russia, Europe and Asia.

Currently, significant uncertainty surrounds the future trade relationship between the United States, China, and Russia.

Our business has been impacted and may continue to be impacted by geopolitical conditions such as international trade wars (including between the United States and China), the conflict in Israel, the Russia-Ukraine conflict, and increased political tensions in Russia, Europe and Asia.

Currently, significant uncertainty surrounds the future trade relationships among the United States, China, and Russia.

government continues to make significant changes in U.S.

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

Since October 2022, the United States government has taken steps to restrict the export of certain advanced semiconductor products and technology to the People’s Republic of China and/or certain companies located in China due to national security and human rights concerns.

In October 2022, BIS announced additional restrictions on products and/or technology destined for use in the People’s Republic of China, including additional export controls and/or requirements on (1) certain advanced computing integrated circuits (ICs), computer commodities that contain such ICs and certain semiconductor manufacturing items;

(2) products and/or technologies that may be destined for facilities capable of producing certain advanced node ICs;

and (3) transactions involving items for supercomputer and semiconductor manufacturing end uses.

In October 2023, BIS announced additional restrictions on the export of certain advanced semiconductors and semiconductor manufacturing technology to China, primarily focused on ICs with military, data center, or artificial intelligence (AI) applications.

those October 2023 export control amendments, which become effective on November 17, 2023, various categories of

integrated circuits, which were not covered by the October 2022 amendments, are now subject to export licensing and export

control restrictions for export or reexport to China and certain other countries.

We are currently analyzing whether any of our

products may be subject to those new export control restrictions and requirements.

BIS also announced restrictions on exports to (1) companies headquartered in China or Macau, and (2) end users in certain countries of concern, in order to prevent diversion of controlled products or technology to China.

The United States government has also continued to add Chinese entities to the Entity List, most recently on October 18, 2023 when BIS added 13 Chinese entities to the Entity List.

We regularly monitor changes to applicable export control regulations to assess the impact to our business, if any.

To date, no material customer of MaxLinear located in China has been added to the Entity List or other restricted party list.

The BIS continues to add many new entities to the Entity List and Unverified List.

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We are required to obtain special licenses to conduct business with entities on the Entity List and to conduct additional diligence and recordkeeping, including obtaining user statements from entities on the Unverified List.

Failure to obtain any

required license would likely result in a loss of business and a corresponding negative impact on our financial position and results of operations.

In October 2022, the BIS issued an interim final rule to implement (1) additional export controls on advanced computing integrated circuits (ICs), computer commodities that contain such ICs and certain semiconductor manufacturing items;

(2) additional export control requirements for products and/or technologies that may be destined for facilities meeting certain criteria;

and (3) additional export controls on transactions involving items for supercomputer and semiconductor manufacturing end uses.

The additional export controls on certain manufacturing end-uses expanded the scope of items subject to license requirements for 28 Chinese entities already on the Entity List, which includes one immaterial customer of MaxLinear located in China and one customer of Silicon Motion.

Failure to obtain any required license would likely result in a loss of business and a corresponding negative impact on our financial position and results of operations.

We cannot predict what actions may ultimately be taken with respect to trade relations between the United States and China or other countries, which products may be subject to such actions or what actions may be taken by other countries in retaliation.

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companies and may impact MaxLinear and related entities.

Such future developments related to U.S.-China relations may have an impact on our supply chain.

We have experienced weakening demand in China, and such future developments related to U.S.-China relations may also have an impact on our supply chain.

Additionally, the geopolitical developments in relations between Taiwan and China could affect the supply of our products from Taiwan, including from Taiwan Semiconductor Manufacturing Company, Limited, or TSMC.

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We depend on a limited number of customers for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from one or more of our major customers has had and could continue to have a material adverse effect on our revenue and operating results.

In the six months ended June 30, 2023, one customer accounted for 11% of our net revenue, and our ten largest customers collectively accounted for 58% of our net revenue, of which distributor customers accounted for 10% of our net revenue.

In the six months ended June 30, 2023, we have experienced a decrease in customer demand, and consequently a reduction in orders, primarily due to macroeconomic factors and excess inventory in the channel following the industry-wide supply shortage in 2021 and 2022.

In the nine months ended September 30, 2023, one customer accounted for 11% of our net revenue, and our ten largest customers collectively accounted for 55% of our net revenue, of which distributor customers accounted for 11% of our net revenue.

In the nine months ended September 30, 2023, we have experienced a decrease in customer demand, and consequently a reduction in orders, primarily due to macroeconomic factors and excess inventory in the channel following the industry-wide supply shortage in 2021 and 2022.

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

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

Products shipped to mainland China accounted for 12% of our net revenue during the nine months ended September 30, 2023 compared to 16% during the nine months ended September 30, 2023.

Our current and future operating results could be materially and adversely affected by limitations on our ability to sell to one or more Chinese customers, as described in the section “Risks Related to Our Business” under the risk factor “ We are also subject to risks associated with international geopolitical conflicts involving the U.S.

and other governments such as China and Russia ”, and by tariffs and other trade barriers that may be implemented by governmental authorities.

Despite a relatively short-term positive pricing environment, average selling prices of our products could decrease rapidly, which would have a material adverse effect on our revenue and gross margins.

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

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

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

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

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

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

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

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

long-haul optical modules, telecommunications wireless infrastructure, and cable DOCSIS 3.1 network infrastructure products.

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

Each of these markets presents distinct and substantial risks.

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

For the six months ended June 30, 2023 and 2022, revenue directly attributable to broadband applications accounted for approximately 31% and 50% of our net revenue, respectively.

We have experienced a decrease in broadband net revenue of $138.4 million for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, and the decline in revenue could continue in future periods.

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

For the nine months ended September 30, 2023 and 2022, revenue directly attributable to broadband applications accounted for approximately 30% and 47% of our net revenue, respectively.

We have experienced a decrease in broadband net revenue of $224.2 million for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, and the decline in revenue could continue in future periods.

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

In addition, consolidation trends among Pay-TV and broadband operators may continue, which could delay or lead to cancellations of major spending programs and have a material adverse effect on our future operating results and financial condition.

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

For six months ended June 30, 2023 and 2022, our research and development expense was $137.9 million and $146.3 million, respectively.

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

For nine months ended September 30, 2023 and 2022, our research and development expense was $204.3 million and $222.7 million, respectively.

While we are closely monitoring our current research and development expenses, we expect our research and development expenses to increase in future years when we return to expanding our product portfolio and enhancing existing products.

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

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

Consequently, our reputation may be damaged and customers may be

reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers, and our financial results.

Consequently, our reputation may be damaged and customers may be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers, and our financial results.

In addition, these defects or bugs could interrupt or delay sales to our customers.

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In addition, in making employment decisions, particularly in the high-technology industry, job candidates often consider the value of the stock-based compensation they are to receive in connection with their employment.

We have recently experienced fluctuations, including declines, in the market price of our stock, and a reduction in force which could adversely affect our ability to attract, motivate or retain key employees.

We have experienced fluctuations, including declines, in the market price of our stock, and reductions in force which could adversely affect our ability to attract, motivate or retain key employees.

In addition, our future performance also depends on the continued services and continuing contributions of our senior management to execute our business plan and to identify and pursue new opportunities and product innovations.

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To compete successfully, we must design, develop, market and sell new or enhanced products that provide increasingly higher levels of performance and reliability and meet the cost expectations of our customers.

The introduction of new products by our competitors, the market acceptance of products based on new or alternative technologies,

or the emergence of new industry standards could render our existing or future products obsolete.

The introduction of new products by our competitors, the market acceptance of products based on new or alternative technologies, or the emergence of new industry standards could render our existing or future products obsolete.

Our failure to anticipate or timely develop new or enhanced products or technologies in response to technological shifts has resulted, and could in the future, result in decreased revenue and our competitors winning more competitive bid processes, known as “design wins.” In particular, we may experience difficulties with product design, manufacturing, marketing or certification that could delay or prevent our development, introduction or marketing of new or enhanced products.

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

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

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

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

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

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

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

Our revenue is generated on the basis of shipments of products under purchase orders with our customers rather than long-term purchase commitments.

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

Also, as customer lead times improve more broadly, we have seen and expect to continue to see a commensurate reduction in visibility to customer demand and a gradual return to a somewhat shorter demand-planning horizon.

While inventory and working capital levels may continue to increase and remain elevated in the near term, we expect that purchase commitments will continue to decline as supplier lead times begin to shorten, and we are closely monitoring our inventory in channel.

Also, as customer lead times continue to improve, we have seen and expect to continue to see a more normalized demand-planning horizon.

While we expect inventory to remain elevated in the near term, we expect that channel inventory will continue to decline over the coming quarters.

Moreover, because our target markets are relatively new, many of our customers have difficulty accurately forecasting their product requirements and estimating the timing of their new product introductions, which ultimately affects their demand for our products.

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For example, we expanded into the markets for Wi-Fi, Ethernet and Broadband Gateway Processor SoCs and intellectual property that utilizes patented machine learning techniques to improve signal integrity and power efficiency in SoCs, ASICs, and FPGAs used in next-generation communication and artificial intelligence systems.

Our limited operating experience in new markets or potential markets we may enter, combined

with the rapidly evolving nature of our markets in general, substantial uncertainty concerning how these markets may develop and other factors beyond our control reduces our ability to accurately forecast quarterly or annual revenue.

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

If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if we are not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.

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labor and employment;

import and customs;

export controls;

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These laws and regulations are complex, change frequently and with little or no notice, occasionally are conflicting or ambiguous, and have generally become more stringent over time.

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

Complying with these laws and regulations can be costly and we may be required to incur significant costs to remedy any potential gaps or violations that are identified.

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

Although our policies, controls, and procedures are designed to maintain ongoing compliance with applicable laws, we cannot assure you that we have been or will be at all times in compliance with such laws and regulations.

Although our policies, procedures, and controls are designed to detect and prevent potential violations and maintain ongoing compliance with applicable laws, we cannot assure you that we have been or will be at all times in compliance with such laws and regulations.

The costs of complying with these laws (including the costs of any investigations, auditing and monitoring) could adversely affect our current or future business.

The costs of complying with these laws (including the costs of any investigations, remediation, auditing and monitoring) could adversely affect our current or future business.

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

There has been a substantial focus by regulators in the United States and Europe on the business practices of certain major Chinese technology companies.

Since October 2022, the United States has taken steps to restrict the export of certain advanced semiconductor products and technology to the People's Republic of China as well as a number of specific Chinese companies, due to national security and human rights concerns.

There has also been a substantial focus by regulators in the United States and Europe on the business practices of certain major Chinese technology companies.

Complying with changing export control laws may require us to develop additional policies, procedures, and controls, or incur additional costs, including in connection with the development or performance of additional due diligence in order to prevent diversion of restricted products or technology to China, Russia, or other destinations.

Compliance with these laws and regulations may also result in the loss of revenue.

In October 2022, we restricted shipments and exports to certain major Chinese technology companies, including a semiconductor foundry and OSAT providers.

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At times, we may discover issues that we bring to the attention of the relevant government agencies, as we did on March 3, 2023, when we submitted a comprehensive voluntary self-disclosure to BIS regarding the potential EAR violation described above and other potential export control violations.

We could incur increased administrative and legal costs in order to respond to any inquiries or prepare voluntary self-disclosures to the appropriate government agency.

We could incur increased administrative and legal costs in order to remediate any potential compliance gaps or violations, to respond to any inquiries, or in connection with the preparation and submission of any voluntary self-disclosures to the government agencies, as appropriate.

Any failure to comply with applicable laws could adversely affect our business and operating results.

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

Since that time, our internal information technology team, supplemented by a leading cyber defense firm, took steps aimed at containing and assessing this incident, including implementing enhanced security controls aimed at protecting our information technology systems.

Since that time, our internal information

technology team, supplemented by a leading cyber defense firm, took steps aimed at containing and assessing this incident, including implementing enhanced security controls aimed at protecting our information technology systems.

Since that event, security breaches and incidents, computer malware and computer hacking attacks have continued to become more prevalent and sophisticated.

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A cybersecurity incident or other compromise of our information technology systems could result in unauthorized publication of confidential business or proprietary information belonging to us, a customer, supplier, employee or other third party, including personal data, result in violations of privacy or other laws, expose us to a risk of litigation, cause us to incur direct losses if attackers initiate wire transfers or access our bank or investment accounts, or damage our reputation.

More generally, any theft, loss, misuse, or other unauthorized processing of any confidential business or proprietary information, including personal data, collected, used, stored, transferred, or otherwise processed by us or on our behalf could result in significantly increased costs, expenses, damage to our reputation, and claims, litigation, demands, and regulatory investigations

or other proceedings.

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

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Any of the foregoing, or the perception any of them has occurred, could have a material adverse impact on our business, operations and financial results.

Additionally, we cannot be certain that our insurance coverage will be adequate or otherwise protect us with respect to claims, expenses, fines, penalties, business loss, data loss, litigation, regulatory actions, or other impacts arising from any of the security breaches or incidents outlined above, or that such coverage will continue to be available on acceptable terms or at all.

security breaches or incidents outlined above, or that such coverage will continue to be available on acceptable terms or at all.

Any of these results could adversely affect our business, operations and financial results, potentially in a material manner.

As of September 30, 2023, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future.

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

In addition, rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service our respective interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors' business.

As of September 30, 2023, our aggregate indebtedness was $125.0 million from an initial secured term B loan facility, or the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides for a revolving credit facility of up to $100.0 million, or the Revolving Facility, which remains undrawn as of September 30, 2023.

The credit agreement also 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 June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.

The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest at either an Adjusted Term SOFR plus a fixed applicable margin of 2.25% or an Adjusted Base Rate plus a fixed applicable margin of 1.25%, at our option.

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

We are subject to commitment fees ranging from 0.175% to 0.25% on the undrawn portion of the Revolving Facility, and any outstanding loans under the Revolving Facility will bear interest at either an Adjusted Term SOFR plus a margin of 1.00% to 1.75% or an Adjusted Base Rate plus a margin of 0% to 0.75%.

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

Such obligations, including the guaranties, are secured by substantially all of our assets and those of the subsidiary guarantors.

Our material indebtedness adversely affects our operating expenses through increased interest payment obligations and adversely affects our ability to use cash generated from operations as we repay interest at a variable rate, which has been increasing, and principal under the term loans.

In addition, the Revolving Facility provisions under the June 23, 2021 Credit Agreement include financial covenants such as an initial maximum secured net leverage ratio of 3.5 to 1, which temporarily increases to 3.75 to 1 following the consummation of certain material permitted acquisitions, and operational covenants that may adversely affect our ability to engage in certain activities, including obtaining additional financing, granting liens, undergoing certain fundamental changes, or making investments or certain restricted payments, and selling assets, and similar transactions, without obtaining the consent of the lenders, which may or may not be forthcoming.

The Initial Term Loan under the June 23, 2021 Credit Agreement is only subject to operational covenants.

Lastly, our borrowing costs can be affected by periodic credit ratings from independent rating agencies.

Such ratings are largely based on our performance, which may be measured by credit metrics such as leverage and interest coverage ratios.

Specifically, our indebtedness and rising interest rates have important consequences to investors in our common stock, including the following:

• we are subject to variable interest rate risk because our interest rate under the Initial Term Loan under the June 23, 2021 Credit Agreement varies based on a fixed margin of 2.25% per annum over an adjusted Term SOFR rate or 1.25% per annum over an adjusted base rate and our interest rate for any outstanding principal under the revolving credit facility varies based a margin of 0% to 0.75% over adjusted base rate or a margin of 1.00% to 1.75% over an adjusted Term SOFR rate, and we are also subject to commitment fees ranging from 0.175% to 0.25% on the

undrawn portion of the Revolving Facility.

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

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

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

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

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

Please refer to the Risk Factor entitled “ If we are required to pay any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement the amount could be significant and require us to draw down on all our existing lines of credit and use our cash resources, which may not be sufficient to cover any payments to Silicon Motion and could have a material adverse effect on our business, operating results, and financial condition.

We expect that we may not be able to obtain financing on favorable terms if at all or raise additional capital for any such payments.

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

We are subject to governmental laws, regulations and other legal obligations related to privacy, data protection, and cybersecurity.

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

As of June 30, 2023, our aggregate indebtedness was $125.0 million.

As of June 30, 2023, our aggregate indebtedness was $125.0 million from an initial secured term B loan facility, or the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides for a revolving credit facility of up to $100.0 million, or the Revolving Facility, which remains undrawn as of June 30, 2023.

The June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.

Our obligations under the

June 23, 2021 Credit Agreement are required to be guaranteed by certain of our domestic subsidiaries meeting materiality thresholds set forth in the credit agreement.

Such obligations, including the guaranties, are secured by substantially all of our assets and those of the subsidiary guarantors.

The Initial Term Loan under the June 23, 2021 Credit Agreement is only subject to operational covenants.

Lastly, our borrowing costs can be affected by periodic credit ratings from independent rating agencies.

Such ratings are largely based on our performance, which may be measured by credit metrics such as leverage and interest coverage ratios.

Specifically, our indebtedness has important consequences to investors in our common stock, including the following:

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

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

• our level of indebtedness could limit our flexibility in planning for, or reacting to, changes in our business and the markets in which we operate, including limiting our future investments or ability to enter into acquisitions and strategic partnerships;

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

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

If we are required to consummate the merger, we will be required to seek and obtain debt financing and/or equity financing, which may not be available.

We had intended to finance the cash portion of the purchase price of the merger with Silicon Motion with cash on hand and a portion of new debt of up to $3.5 billion.

In connection with entering into the Merger Agreement, we entered into a commitment letter, dated as of May 5, 2022, and amended on June 17, 2022 and October 24, 2022 with Wells Fargo Bank, N.A.

and Wells Fargo Securities, LLC, or collectively, Wells Fargo, pursuant to which, subject to the terms and conditions set forth therein, Wells Fargo committed to provide us (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.

The funding of these secured credit facilities provided for in the commitment letter was contingent on the satisfaction of customary conditions, including (i) the execution and delivery of definitive documentation with respect to such credit facilities in accordance with the terms sets forth in the commitment letter and (ii) the consummation of the merger in accordance with the Merger Agreement.

The commitments under the second amended and restated commitment letter terminated concurrently with the termination of the Merger Agreement.

In connection with the termination of the merger agreement, the second amended and restated commitment letter with Wells Fargo Bank and other lenders was terminated.

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

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Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our reputation regardless of the outcome.

We are subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, product liability, employment, class action, customer claims, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings.

In addition to the legal proceedings related to the termination of the Merger Agreement with Silicon Motion or alleged breaches of the Merger Agreement (see Part II, Item 1 (Legal Proceedings) of this report for more information on these proceedings), we are subject to legal proceedings and claims that arise in the ordinary course of business, including intellectual property, product liability, employment, class action, customer claims, whistleblower and other litigation claims, and governmental and other regulatory investigations and proceedings.

In addition, we have implemented a reduction in force and the attendant layoffs has resulted and could result in the risk of claims being made by or on behalf of affected employees.

Such matters can be time-consuming, divert management's attention and resources, cause us to incur significant expenses or liability, or require us to change our business practices.

we have implemented a reduction in force and the attendant layoffs has resulted and could result in the risk of claims being made by or on behalf of affected employees.

In addition, the expense of litigation and the timing of this expense from period to period are difficult to estimate, subject to change, and could adversely affect our financial condition and results of operations.

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

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

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

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

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

When we originally settled a trademark dispute with Analog Devices International Unlimited Company (ADIUC) and its predecessor, Linear Technology Corporation, we agreed not to register the “MAXLINEAR” mark or any other marks containing the term “LINEAR”.

Pursuant to the original settlement agreement, we agreed not to use the “MAXLINEAR” mark on our products.

We recently entered into another settlement agreement with ADIUC that now allows us to use and register the “MAXLINEAR” mark on our products, in addition to continuing to use “MAXLINEAR” as a corporate identifier, including to

advertise our products and services.

We intend to register the “MAXLINEAR” mark, but prior to registration, our ability to effectively prevent third parties from using the “MAXLINEAR” mark in connection with similar products or technology will be based on our common law rights in the mark, which may make enforcement challenging.

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

We face risks related to security vulnerabilities in our products.

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

In addition, certain open source software licenses require the user of such

software to make any derivative works of the open source code available to others on unfavorable terms or at no cost.

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

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

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For example, we have experienced and could continue to experience inventory oversupply in certain of our products due to changes in customer demand which has added to volatility in managing the business.

Inventory oversupply has also led and could continue to lead to inventory write-downs, including charges for any excess or obsolete inventory which, if material, could negatively impact our gross margins;

Inventory oversupply has also led and could continue to lead to inventory write-downs, including charges for any excess or obsolete inventory, which could negatively impact our gross margins;

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

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• potential increases in prices;

• our use of ASE, which is currently a restricted party on the BIS entity list, to manufacture certain of our products may be impaired if one or more of the following were to occur:

• our use of foundry partners who are currently subject to BIS restrictions, to manufacture certain of our products may be impaired if one or more of the following were to occur:

(1) we are unable to obtain U.S.

export licenses authorizing its interactions and technology exchanges with ASE, or (2) if BIS increases export control restrictions to ASE without the ability for us to obtain a U.S.

export licenses authorizing its interactions and technology exchanges with these foundry partners, or (2) if BIS increases export control restrictions to Chinese foundries without the ability for us to obtain a U.S.

export license, or (3) U.S.

providers of semiconductor manufacturer equipment are unable to export such equipment or related spare or replacement parts used in the manufacture of our products, or obtain a license to export such equipment and parts, to ASE.

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

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

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

Any disruption resulting from similar events on a larger scale or over a prolonged period could cause significant delays in shipments

of our products until we are able to resume such shipments, or shift our manufacturing, assembly, or test from the affected contractor to another third-party vendor, if needed.

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

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

Sales to distributors accounted for approximately 47% and 46% of our net revenue in the six months ended June 30, 2023 and 2022, respectively.

Sales to distributors accounted for approximately 47% and 44% of our net revenue in the nine months ended September 30, 2023 and 2022, respectively.

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

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

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

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

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

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

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

In addition, we do not know whether we will be able to collect on any award of

damages or that these damages would be sufficient to cover the actual costs we would incur as a result of any vendor’s failure to perform under its agreement with us.

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

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

For example, in the six months ended June 30, 2023, the trading price of our common stock ranged from a low of $23.05 to a high of $43.66.

For example, in the nine months ended September 30, 2023, the trading price of our common stock ranged from a low of $21.17 to a high of $43.66.

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

• any developments related to our previously pending merger with Silicon Motion;

• any developments related to our terminated merger with Silicon Motion;

• actual or anticipated fluctuations in our financial condition and operating results;

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• sales of our common stock by us or our stockholders;

• general economic and market conditions, including the impacts from sanctions against Russia and the military conflict in Ukraine, increased inflationary pressures, interest rate changes, and the global COVID-19 pandemic.

• general economic and market conditions, including the impacts from sanctions against Russia and the military conflict in Ukraine and Israel, increased inflationary pressures, interest rate changes, and the global COVID-19 pandemic.

Furthermore, the stock markets have experienced extreme price and volume fluctuations that have affected the market prices of equity securities of many companies.

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however, any future decisions to reduce or discontinue purchasing our common stock pursuant to our stock repurchase programs could cause the market price for our common stock to decline.

Our share repurchase program has been temporarily suspended since July 2022 due to our previously pending merger with Silicon Motion.

Our share repurchase program has been temporarily suspended since July 2022 due to our previously pending (now terminated) merger with Silicon Motion.

Although our board of directors has authorized a stock repurchase program, any determination to resume our stock repurchase program and execute our stock repurchase program will be subject to, among other things, our financial position and results of operations, available cash and cash flow, capital requirements, and other factors, as well as our board of director’s continuing determination that the repurchase program are in the best interests of our shareholders and is in compliance with all laws and agreements applicable to the repurchase program.

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

As of June 30, 2023, we had approximately 80.9 million shares of common stock outstanding.

As of September 30, 2023, we had approximately 81.6 million shares of common stock outstanding.

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

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

As of June 30, 2023, our balance sheet reflected goodwill of $318.5 million and other intangible assets of $91.2 million.

As of September 30, 2023, our balance sheet reflected goodwill of $318.5 million and other intangible assets of $82.6 million.

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

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This has increased our effective tax rate and our cash tax payable in 2022.

If the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our

cash tax liability in future years.

If the requirement to capitalize Section 174 expenditures is not modified, it may also impact our effective tax rate and our cash tax liability in future years.

On August 9, 2022, the CHIPS and Science Act of 2022, or the CHIPS Act, was enacted in the United States.

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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.

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.

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

Based upon our review of all positive and negative evidence, as of June 30, 2023, 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.

Based upon our review of all positive and negative evidence, as of September 30, 2023, 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.

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

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

Our interpretations and conclusions regarding the tax incentives are not binding on

any taxing authority, and if our assumptions about tax and other laws are incorrect or if these tax incentives are substantially modified or rescinded we could suffer material adverse tax and other financial consequences, which would increase our expenses, reduce our profitability and adversely affect our cash flows.

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

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

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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 1A. Risk Factors