What changed in this filing

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Item 7. Management’s Discussion and Analysis

2024-01-31 compared with 2023-02-01 · 168 added, 150 removed, 229 unchanged (58% of the section changed)

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

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

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

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

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

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

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

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

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

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

Importantly, our ability to design analog and mixed-signal circuits in CMOS allows us to efficiently combine analog functionality and complex digital signal processing logic in the same integrated circuit.

As a result, we believe our solutions have exceptional levels of functional integration and performance, low manufacturing cost, and reduced power consumption versus competition.

These solutions also enable shorter design cycles, significant design flexibility and low system-level cost across a range of markets.

Our customers include electronics distributors, module makers, OEMs and ODMs, which incorporate our products in a wide range of electronic devices.

Examples of such devices include radio transceivers and modems for 4G/5G base-station and backhaul infrastructure;

optical transceivers targeting hyperscale data centers;

Wi-Fi and wireline routers for home networking;

radio transceivers and modems for 4G/5G base-station and backhaul infrastructure;

fiber-optic modules for data center, metro, and long-haul transport networks;

broadband modems compliant with DOCSIS, PON, and DSL;

as well as power management and interface products used in these and many other markets.

Our highly integrated semiconductor devices and platform-level solutions are primarily manufactured using low-cost CMOS process technology.

CMOS processes are ideally suited for large digital logic implementations targeting high-volume and low-cost consumer applications.

As a result, our solutions have exceptional levels of functional integration and performance, low manufacturing cost, and reduced power consumption.

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

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

In the year ended December 31, 2023, net revenue was $693.3 million, which was derived in part from sales of RF receivers and RF receiver SoC and connectivity solutions into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications.

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

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changes in government trade policies;

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

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

Products shipped to Asia accounted for 75%, 82% and 83% of net revenue during the years ended 2023, 2022 and 2021, respectively, including 37%, 43% and 40%, respectively, from products shipped to Hong Kong and 11%, 16% and 12%, respectively, from products shipped to mainland China and 13% from products shipped to Vietnam in 2021.

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

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

In the year ended December 31, 2023, one customer accounted for 10% of our net revenue, and our ten largest customers collectively accounted for 54% of our net revenue, of which distributor customers accounted for 16% of our net revenue.

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

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

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

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

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

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

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

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

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

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

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

For example, in the broadband data modem and gateway sectors, a design-in can have a product life cycle of 24 to 60 months.

In the industrial and wired and wireless infrastructure markets, a design-in can have a product life cycle of 24 to 84 months and beyond.

Impact of the Global Economic Downturn

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

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

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

Impact of Global Economic Uncertainty and Inventory Build

Inflation and uncertainty in customer demand and the worldwide economy has continued, and we expect to experience continued decline in our sales and revenues in the first quarter of 2024.

In particular, we believe an economic slowdown and inventory oversupply in the channel could continue to add to 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.

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

Recent Developments

Silicon Motion Merger

As supplier lead times continue to stabilize, 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 channel inventory will continue to decline thereafter.

Terminated Silicon Motion Merger

On May 5, 2022, we entered into an agreement and plan of merger, or the Merger Agreement, with Silicon Motion Technology Corporation, or Silicon Motion, an exempted company with limited liability incorporated under the Law of the Cayman Islands, pursuant to which, subject to the terms and conditions thereof, we agreed to acquire Silicon Motion pursuant to a statutory merger of Shark Merger Sub, a wholly-owned subsidiary of MaxLinear, with and into Silicon Motion, with Silicon Motion surviving the merger as a wholly-owned subsidiary of MaxLinear.

Silicon Motion is a provider of NAND flash controllers for solid state drives and other solid state storage devices.

Under the terms of the Merger Agreement, the transaction consideration will consist of $93.54 in cash and 0.388 shares of our stock for each Silicon Motion American Depositary Share, or ADS, and $23.385 in cash and 0.097 shares of our common stock for each Silicon Motion ordinary share not represented by an ADS.

Upon closing of the transaction, our current stockholders will own approximately 86% of the combined company and former Silicon Motion securityholders will own approximately 14% of the combined company.

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

We may fund up to $3.5 billion of cash consideration with cash on hand and fully committed debt financing from Wells Fargo Bank, N.A., or Wells Fargo Bank, and other lenders as described below.

We will also assume Silicon Motion’s vested and unvested employee stock-based compensation awards.

The merger is not subject to any financing conditions but is pending satisfaction of customary closing conditions, including regulatory approval in the People’s Republic of China, or China.

On June 27, 2022, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or HSR, waiting period expired with respect to the pending merger.

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

On August 31, 2022, the Silicon Motion securityholders approved the merger at the extraordinary general meeting.

On June 17, 2022, we entered into an amended and restated commitment letter with Wells Fargo Bank and other lenders pursuant to which, subject to the terms and conditions set forth therein, the lenders have committed to provide (i) a senior secured term B loan facility in an aggregate principal amount of up to $2.7375 billion (ii) a senior secured term A loan facility in an aggregate principal amount of up to $512.5 million and (iii) a senior secured revolving credit facility in an aggregate principal amount of up to $250.0 million, which we collectively refer to as the Senior Secured Credit Facilities.

The funding of the Senior Secured Credit Facilities is contingent on the satisfaction of customary conditions, including (i) the execution and delivery of definitive documentation with respect to credit facilities in accordance with the terms in the amended and restated commitment letter, and (ii) the consummation of the acquisition by us of Silicon Motion in accordance with the Merger Agreement.

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

Expanded U.S.

Export Controls

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

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

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

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

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

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

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

On July 26, 2023, we terminated the Merger Agreement and notified Silicon Motion that we were relieved of our obligations to close because, among other reasons, (i) certain conditions to closing set forth in the Merger Agreement were not satisfied and were incapable of being satisfied, (ii) Silicon Motion had suffered a Material Adverse Effect that was continuing, (iii) Silicon Motion was in material breach of representations, warranties, covenants, and agreements in the Merger Agreement that gave rise to the right of the Company to terminate, and (iv) in any event, the First Extended Outside Date had passed and was not automatically extended because certain conditions in Article 6 of the Merger Agreement were not satisfied or waived as of May 5, 2023.

Under the terms of the Merger Agreement, MaxLinear was not required to pay a break-up fee or other fee as a result of the termination of the Merger Agreement on these grounds.

On August 16, 2023, Silicon Motion delivered 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 to seek damages from us arising from our alleged breaches of the Merger Agreement.

Undefined capitalized terms in this paragraph have the same meaning as in 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.

See Part I, Item 3 (Legal Proceedings) of this report for more information on legal proceedings related to the termination of the Merger Agreement.

The second amended and restated commitment letter dated October 24, 2022 with Wells Fargo Bank, N.A., or Wells Fargo Bank, and other lenders, and related financing commitments for the previously pending (now terminated) merger were also terminated upon termination of the Merger Agreement.

As a result of the termination of the financing, the Company was required to pay to Wells Fargo Bank a ticking fee of $18.3 million, which is included in other income (expense), net in the year ended December 31, 2023.

Acquisition of Company Y

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

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

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

The transaction consideration included $9.8 million in cash.

In addition, Company Y stockholders may receive up to an additional $2.6 million in potential contingent consideration, subject to the acquired business satisfying certain personnel objectives by June 17, 2024.

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

Workforce Reductions

During the year ended December 31, 2023, we entered into two plans of restructuring to reduce our workforce, or the Workforce Reductions.

The Workforce Reductions are intended to align our operational needs with the changes in macroeconomic conditions and the demand environment while continuing to support the long-term business strategy by reducing our operating expenses.

As a result of the Workforce Reductions, in the year ended December 31, 2023, we incurred $19.8 million in restructuring costs primarily related to severance costs and related expenses, and estimate that we will incur approximately $30 million to $40 million in restructuring costs in 2024 upon notice to the remaining affected employees of the Workforce Reductions.

Approximately two-thirds of the cost is estimated to be statutory severance benefits in the jurisdictions in which the terminated employees were employed and a significant amount of the remaining one-third of the cost represents non-cash charges related to exiting facilities and writing off of related assets.

The estimate of costs that we expect to incur, and the timing thereof, are subject to a number of assumptions and actual results may differ.

We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Workforce Reductions.

We expect to complete informing affected employees of the Workforce Reductions by the end of the first quarter of 2024.

Critical Accounting Estimates

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We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.

Materially different results can occur as circumstances change and additional information becomes known.

different results can occur as circumstances change and additional information becomes known.

We believe that the following accounting estimates we have identified as critical involve a greater degree of judgment and complexity than our other accounting policies.

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

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

For example, if the discount rate used in our valuations increased by 1%, it would result in a decrease to the valuation of intangible assets of $3.8M for our 2020 acquisitions and $0.1M for our 2021 acquisition .

When reported amounts are material, they may be sensitive to changes to certain assumptions used in the valuation.

If the discount rate used in our valuations increased by 1%, it would result in a decrease to the valuation of intangible assets of an immaterial amount for our 2023 and 2021 acquisitions .

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

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

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

During the year ended December 31, 2023 and 2022, we recorded impairment of intangible assets of $2.4 million and $2.8 million, respectively, associated with certain acquired licensed technology.

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

Revenue Recognition

Estimates in our revenue recognition that involve a significant level of estimation uncertainty include the estimates of price adjustments and returns under contractual stock rotation rights based on our analysis of expected value of actual price adjustment claims by distributors and product and historical return rates.

Any changes to such estimates, for example differences in actual sell-through activity versus our estimate of sell-through activity in our price adjustments, or actual vs.

historical return rates, may impact our consolidated financial results in periods subsequent to recording those estimates, and such amounts are disclosed in our consolidated financial statements.

Other than our estimates of sell-through activity and customer return rates, there are no assumptions inherent in our estimates in the valuation of inventory that would result in sensitivity of reported amounts to such assumptions.

Other than our estimates of sell-through activity and customer return rates, there are no assumptions inherent in our estimates in the valuation of price adjustments and returns that would result in sensitivity of reported amounts to such assumptions.

During the years ended December 31, 2023, 2022 and 2021 we have not recorded any material adjustments to such estimates.

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Impairment of Goodwill and Long-Lived Assets

Estimates in our assessment of impairment of goodwill and long-lived assets that involve a significant level of estimation uncertainty and management judgment include the comparison of our market capitalization as of the annual impairment assessment date to the carrying value of goodwill, use of forecasted financial information for our projects remaining in IPR&D, including growth rates and margin percentages, and a discount rate as of the annual IPR&D impairment assessment date, and our quarterly assessment of whether indicators of impairment exist with respect to all of our goodwill and long-lived assets.

For example, a decision to abandon a project involving the technology underlying developed technology and IPR&D may result in immediate impairment of such assets in the quarter such decision is made.

As of the October 31 assessment date, the valuation of IPR&D was not sensitive to changes in the underlying discount rate used in our impairment analysis;

for example, if our discount rate increased by 10%, it would not result in impairment of IPR&D .

Estimates in our assessment of impairment of goodwill and long-lived assets that involve a significant level of estimation uncertainty and management judgment include the comparison of our market capitalization as of the annual impairment assessment date to the carrying value of goodwill, use of forecasted financial information for our projects remaining in IPR&D, if any, including growth rates and margin percentages, and a discount rate as of the annual IPR&D impairment assessment date, and our quarterly assessment of whether indicators of impairment exist with respect to all of our goodwill and long-lived assets.

For example, a decision to abandon a project involving the technology underlying developed technology and IPR&D, if any, may result in immediate impairment of such assets in the quarter such decision is made.

As of the October 31 assessment date, we did not have any remaining IPR&D .

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

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

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

During the year ended December 31, 2023 and 2022, we recorded impairment of intangible assets of $2.4 million and $2.8 million, respectively, associated with certain acquired licensed technology.

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

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

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

Recently Adopted Accounting Pronouncements

See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements as of the date of this report, if any.

Recently Issued Accounting Pronouncements

In October 2021, the FASB issued ASU No.

2021-08, Business Combinations (Topic 805):

Accounting for Contract Assets and Contract Liabilities from Contracts with Customers , to provide specific guidance to eliminate diversity in practice on how to recognize and measure acquired contract assets and contract liabilities from revenue contracts from customers in a business combination consistent with revenue contracts with customers not acquired in an acquisition.

The amendments in this update provide that the acquirer should consider the terms of the acquired contracts, such as timing of payment, identify each performance obligation in the contracts, and allocate the total transaction price to each identified performance obligation on a relative standalone selling price basis as of contract inception (that is, the date the acquiree entered into the contracts) or contract modification to determine what should be recorded at the acquisition date.

These amendments are effective for us beginning with fiscal year 2023.

The impact of the adoption of the amendments in this update will depend on the magnitude of any customer contracts assumed in a business combination in 2023 and beyond.

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

Results of Operations

The following describes the line items set forth in our consolidated statements of operations.

A discussion of changes in our results of operations during the year ended December 31, 2021 compared to the year ended December 31, 2020 has been omitted from this Annual Report on Form 10-K, but may be found in “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on February 2, 2022, which discussion is incorporated herein by reference and which is available free of charge on the SEC’s website at www.sec.gov.

Net revenue is generated from sales of radio-frequency, analog, digital, and mixed-signal integrated circuits for access and connectivity, wired and wireless infrastructure, and industrial and multi-market applications.

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

inventory fair value adjustments;

inventory fair value adjustments, if any;

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

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

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

Other income (expense) generally consists of income (expense) generated from non-operating transactions, including a ticking fee paid to lenders following the termination of the Silicon Motion merger, net gains (losses) from sales of investments, and unrealized holding gains (losses) from certain investments required to be marked to market value.

Income tax provision.

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

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

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

Year Ended December 31,

2023 2022 2021

Net revenue 100 % 100 % 100 %

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Total operating expenses 61 42 48

Income from operations 16 7

Income (loss) from operations (6) 16 7

Interest income 1 — —

Interest expense (2) (1) (1)

Loss on extinguishment of debt — (1)

Other income (expense), net (3) — —

Total other income (expense), net (4) (1) (2)

Income before income taxes 16 5

Income (loss) before income taxes (9) 16 5

Income tax provision 1 4 1

Net income 11 % 5 %

Net income (loss) (11) % 11 % 5 %

Year Ended December 31,

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Total net revenue $ 693,263 $ 1,120,252 $ 892,398 $ (426,989) $ 227,854 (38) % 26 %

Net revenue decreased $427.0 million to $693.3 million for the year ended December 31, 2023, as compared to $1.1 billion for the year ended December 31, 2022 primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in the prior year.

As supply shortages eased, the upward pricing pressure eased and was a modest component of revenue growth in the year.

Broadband net revenue decreased by $289.7 million, driven by decreases in the volume of broadband SOC shipments in this category.

Connectivity revenue decreased $165.7 million due to decreased volume of shipments of certain products primarily associated with residential broadband market decline.

The increase in infrastructure revenues of $40.8 million was primarily driven by an increase in the volume of wireless backhaul shipments.

Industrial and multi-market revenue decreased $12.4 million due to a $22.3 million decrease driven by decreased volume of shipments of high-performance analog products, partially offset by a $9.9 million increase driven by increased volume of shipments of component products.

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

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

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

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

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

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

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

Broadband net revenue increased $0.8 million, substantially driven by price increases on our broadband SOC products within this category, which was partially offset by modest decreases in the volume of shipments in this category.

Connectivity revenue increased $154.6 million due to an increased volume of shipments of products toward the latter part of 2022 as our supply improved opening up new opportunities to address the third party router market and was supplemented by some price increases on connectivity products.

More than 50% of the revenue increase was driven by increased revenue from the introduction of our new Wi-Fi 6 product late in 2021.

The increase in infrastructure revenues of $16.9 million was driven by an increase in shipments in the wireless infrastructure market.

Industrial and multi-market revenue increased $55.6 million due to increased demand for our power and interface products and increased prices on products within this category.

This end market also had some modest declines from products that entered end-of-life categorization.

We currently expect that revenue will fluctuate in the future, from period-to-period, consistent with the cyclical nature of our industry.

Cost of Net Revenue and Gross Profit

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% of net revenue 56 % 58 % 56 %

Cost of net revenue decreased $162.9 million to $307.6 million for the year ended December 31, 2023, as compared to $470.5 million for the year ended December 31, 2022.

The decrease was driven by a decreased volume of shipments of broadband SOC and certain connectivity products as a result of macroeconomic conditions impacting customer demand for such products.

Gross profit percentage decreased for the year ended December 31, 2023, as compared to the year ended December 31, 2022, due to reduced absorption of intangible amortization, partially offset by improvement from product mix.

Product mix included higher margin backhaul product contributions relative to total revenues in 2023 as compared to 2022.

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

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

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

The increase was driven by an increased volume of shipments of certain connectivity products toward the latter part of 2022 as our supply improved and increased costs on inventory purchased from suppliers as a result of supply chain constraints, and was partially offset by decreases in the volume of shipments of broadband products.

Gross profit percentage improved for the year ended December 31, 2022, as compared to the year ended December 31, 2021, driven by improved mix of higher margin new products, higher margin infrastructure and industrial and multi-market product contributions, and improved margins from price increases that were passed along on certain products within our broadband, connectivity, and industrial and multi-market categories during the year, and improved absorption of amortization of intangible assets.

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

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% of net revenue 39 % 26 % 31 %

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

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

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

Research and development, or R&D, expense decreased $26.9 million to $269.5 million for the year ended December 31, 2023 from $296.4 million in the year ended December 31, 2022.

The decrease was driven by decreases in bonuses of $21.9 million, payroll and benefits expense of $9.4 million, and consulting expense of $9.2 million, partially offset by the impact of decrease in income from joint R&D projects and governmental R&D grants offsetting our R&D expense of $11.3 million and an increase stock based compensation expense of $3.6 million.

The decrease in bonuses is attributable to a decrease in financial

performance and decreased headcount from the workforce reductions during 2023.

The decrease in payroll and benefits expense is also due to the workforce reductions.

The amount of income from joint R&D projects and governmental R&D grants varies from year to year depending on demand for such projects and availability of governmental R&D programs.

R&D expense increased $18.0 million to $296.4 million for the year ended December 31, 2022 from $278.4 million in the year ended December 31, 2021.

The increase was driven by increases in payroll and employee benefit expenses of $21.8 million, stock-based compensation and bonus expenses of $11.2 million, CAD design tools and other software license expenses of $5.8 million, consulting expenses of $3.1 million, and various other expenses of $6.1 million.

This increase was partially offset by an increase in income from joint R&D projects and governmental R&D grants of $25.6 million and decrease in prototype expenses of $4.6 million.

The increased expenses were due primarily to increased headcount in 2022.

The amount of income from joint R&D projects and governmental grants varies from year to year depending on demand for such projects and availability of governmental R&D programs.

We are closely managing our R&D expenses to meet evolving demand and are in the process of completing a workforce reduction which is anticipated to reduce R&D expense in the first quarter of 2024;

however, we expect our research and development expenses to increase in future years as we develop products to drive future growth.

Selling, General and Administrative

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% of net revenue 19 % 15 % 17 %

Selling, general and administrative expense decreased $35.9 million to $132.2 million for the year ended December 31, 2023, as compared to $168.0 million for the year ended December 31, 2022.

The decrease was a result of decreases in stock-based compensation expenses of $30.1 million, amortization of intangibles of $9.0 million, bonuses of $7.8 million, and supplies and small tools of $1.6 million, partially offset by increases in payroll and other benefits expense of $7.4 million and legal fees of $4.9 million.

The decrease in stock based compensation expense and bonuses is attributable to the payouts for the 2022 period including additional grants to certain employees and a decrease in financial performance impacting the amounts of stock based compensation recognized for performance-based restricted stock units and amounts of bonuses.

The decrease in intangible amortization expense is from acquired assets becoming fully amortized as they reach the end of their useful lives.

The increase in payroll and other benefits is from increase in headcount in certain administrative functions.

The increase in legal fees is due to various legal proceedings including those following the termination of our merger with Silicon Motion, the Comcast litigation, and in settlement of the Bell Semiconductor litigation earlier in the year.

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

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

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

The increase was a result of increases in stock-based compensation expenses of $11.3 million, professional fees of $7.6 million, other expenses of $3.5 million, payroll and benefits of $3.3 million, and various other expenses of $3.3 million, partially offset by a decrease in intangible amortization expense of $11.7 million.

The increase in professional fees was due to an increase in acquisition and integration costs of $6.8 million related to our previously pending (now terminated) merger with Silicon Motion.

The increase in stock-based compensation expenses and payroll employee benefits expenses and the remaining other expenses were mainly due to increased headcount and spending due to higher product demands from customers.

Improved financial performance in 2022 and additional grants to employees of stock-based awards also contributed to the increase in stock-based compensation expense.

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

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

Impairment Losses

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Impairment losses in the year ended December 31, 2023 related to abandonment of certain acquired licensing agreements.

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

Restructuring Charges

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Restructuring charges increased $17.5 million to $19.8 million for the year ended December 31, 2023, compared to $2.3 million for the year ended December 31, 2022.

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

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

Loss on Extinguishment of Debt

Year Ended December 31,

2022 2021 $ Change % Change

(dollars in thousands)

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

% of net revenue — % (1) %

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

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

Restructuring charges for the year ended December 31, 2023 included $17.9 million in employee severance-related charges related to reductions in our workforce and $1.8 million in other charges driven by the abandonment of certain computer-assisted design software licenses used by the terminated workforce.

Approximately two-thirds of the employee severance-related charges are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed, with the remainder representing standard severance benefits.

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

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

Interest and Other Income (Expense )

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% of net revenue (4) % (1) % (1) %

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

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

Income Tax Provision

Interest and other income (expense), net changed by $19.5 million to a net expense of $25.6 million in the year ended December 31, 2023 from a net expense of $6.0 million for the year ended December 31, 2022.

The change in interest and other income (expense), net was primarily due to a $24.4 million change in other income (expense), net, from income of $3.5 million in the 2022 period to expense of $20.9 million in the 2023 period plus an increase in interest expense of $0.9 million, partially offset by the impact of a $5.8 million increase in interest income.

The $24.4 million change in other income (expense), net primarily related to a loan ticking fee of approximately $18.3 million paid to lenders following the termination of the Silicon Motion merger, $4.3 million impact from foreign currency fluctuations, $2.8 million impact of realized and unrealized holding losses recognized on equity securities that were sold at the end of 2023 that were previously marked to market value in other income (expense), net, and partially offset by a gain of $1.0 million related to partial curtailment of defined benefit pension obligations.

The $0.9 million increase in interest

expense is due to higher interest rates on our outstanding debt in 2023.

The $5.8 million increase in interest income is due to higher interest rates on our interest-bearing cash equivalents.

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

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

Income Tax Provision (Benefit)

Year Ended December 31,

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% of pre-tax income (loss) (15) % 28 % 11 %

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

The income tax provision for the year ended December 31, 2023 was $9.3 million compared to an income tax provision of $49.2 million for the year ended December 31, 2022, and an income tax provision of $5.9 million for the year ended December 31, 2021.

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

federal statutory rate for the year ended December 31, 2022 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal research and development credits.

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

The permanent tax item related to global intangible low-taxed income, or GILTI, also reflects recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

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

federal statutory rate for the year ended December 31, 2022 resulted primarily from the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, release of uncertain tax positions under ASC 740-10, and release of the valuation allowance on certain federal research and development credits.

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

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

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

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

We recorded a tax provision in the year ended December 31, 2023 and year ended December 31, 2022 at the incentive rate.

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

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

The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore

over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period.

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

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

The CHIPS Act will provide financial incentives to the semiconductor industry which are primarily directed at manufacturing activities within the United States for qualifying property placed in service after December 31, 2022.

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

The Inflation Reduction Act of 2022, or IRA, was signed into law on August 16, 2022.

The bill was meant to address the high inflation rate in the United States through various climate, energy, healthcare, and other incentives.

These incentives are meant to be paid for by the tax provisions included in the IRA, such as a new 15 percent corporate minimum tax, a 1 percent new excise tax on stock buybacks, additional IRS funding to improve taxpayer compliance, and others.

The IRA provisions are effective for tax years beginning after December 31, 2022.

At this time, none of the IRA tax provisions are expected to have a material impact to our consolidated tax provision for the year ending December 31, 2023.

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

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Additionally, as of December 31, 2023, our working capital, which we define as current assets less current liabilities, was $265.9 million.

Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable.

Collateral is generally not required for customer receivables.

We limit our exposure to credit loss by placing our cash with high credit quality financial institutions.

At times, such deposits may be in excess of insured limits.

We have not experienced any losses on our deposits of cash and cash equivalents.

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

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

As described in Note 3 to our consolidated financial statements, the implied value of the total transaction consideration for Silicon Motion is approximately $4.3 billion.

MaxLinear may fund up to $3.5 billion of cash consideration with cash on hand and fully committed debt financing from Wells Fargo Bank and other lenders.

In June 2022 and October 2022, we amended and restated the commitment letter with Wells Fargo Bank and other lenders pursuant to which, subject to the terms and conditions set forth therein, the lenders have committed to provide (i) a senior secured term B loan facility in an aggregate principal amount of up to $2.7375 billion (ii) a senior secured term A loan facility in an aggregate principal amount of up to $512.5 million and (iii) a senior secured revolving credit facility in an aggregate principal amount of up to $250.0 million.

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

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

However, on July 26, 2023, we terminated the Merger Agreement and were relieved of our obligations to close.

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

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

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

As of December 31, 2023, $125.0 million of principal was outstanding under a senior secured term B loan facility, or the “Initial Term Loan under the June 23, 2021 Credit Agreement.” The Company also has available a senior secured revolving credit facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of December 31, 2023.

The proceeds of the revolving facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries.

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

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

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

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

The loan agreement is also expected to contain financial and operational covenants that would adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interests of stockholders, including obtaining additional indebtedness to finance such transactions ” for a discussion for a discussion of how our indebtedness could have a material adverse effect on our liquidity and capital resources.

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

While we had been mitigating the impact of rising interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it could have a material adverse effect on our operating results and affect our ability to service the indebtedness.

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

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

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

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

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

equity securities.

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

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

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

Our consolidated balance sheet at December 31, 2023 included in other long-term liabilities $5.4 million for uncertain tax positions, some of which may result in cash payment and $15.0 million received from other parties for jointly funded research and development projects which will be recognized into income when the contingencies associated with the repayment conditions have been resolved.

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

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

December 31, December 31,

(in thousands)

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Total cash, cash equivalents, and restricted cash $ 188,356 $ 188,357

We believe that our $187.3 million of cash and cash equivalents at December 31, 2023 will be sufficient to fund our projected operating requirements for at least the next twelve months.

As of December 31, 2023, our indebtedness totaled $125.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement.

The June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of December 31, 2023.

The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted LIBOR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25% or (ii) an adjusted LIBOR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%.

Loans under the Revolving Facility initially bear interest, at a per annum rate equal to either (i) a base rate (as calculated above) plus an applicable margin of 0.00%, or (ii) an adjusted LIBOR rate (as calculated above) plus an applicable margin of 1.00%.

Following delivery of financial statements for the Company’s fiscal quarter ending June 30, 2021, the applicable margin for loans under the Revolving Facility will range from 0.00% to 0.75% in the case of base rate loans and 1.00% to 1.75% in the case of LIBOR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter.

The Company is required to pay commitment fees ranging from 0.175% to 0.25% per annum on the daily undrawn commitments under the Revolving Facility, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter.

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

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

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

Year Ended December 31,

2023 2022 2021

(in thousands)

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Cash Flows from Operating Activities

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

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

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

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

In the year ended December 31, 2023, net cash provided by operating activities was $43.4 million, compared to net cash provided by operating activities of $388.7 million for the year ended December 31, 2022.

The decline in operating cash flows was driven by a decline in revenue from decreased volume of shipments of broadband SOC and certain connectivity products as a result of macroeconomic conditions impacting customer demand for such products (as discussed under the heading, “Results of Operations,” above).

Operating cash flows were also impacted by changes in our working capital, which decreased $101.4 million, in particular, in 2023 we made $104.2 million in payments against our price protection liability and $11.8 million in severance and related payments from our workforce reductions.

In the year ended December 31, 2022, net cash provided by operating activities was $388.7 million, compared to net cash flow provided by operating activities of $168.2 million for the year ended December 31, 2021.

The increase in operating cash flows was driven by an increase in revenue from various factors as discussed under the heading, “Results of Operations,” above).

Operating cash flows were also impacted by changes in working capital, which increased $110.3 million, in particular in 2022, the price protection liability increased by $113.3 million in 2022, due to a significant increase in revenues from customers with price protection rights and a delay in the timing of payments and certain price protection claims submitted by customers since certain claims are not made until after a customer has utilized a complete bundle of products.

Such delay was caused by the supply chain shortages in the industry over an 18-month period beginning in 2021 and extending into 2022.

Cash Flows from Investing Activities

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

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

Our use of cash in investing activities declined, as we moved from heavier investing in infrastructure, securities and private companies in 2022 to lighter investment activity in 2023.

Net cash used in investing activities was $15.9 million for the year ended December 31, 2023 and included purchases of property and equipment of $13.5 million, payments to acquire Company Y of $9.8 million, purchases of intangible assets of $6.4 million, and payments of contingent consideration related to our acquisition of Company X of $3.0 million.

Cash Flows from Financing Activities

Our use of cash in financing activities declined, as we moved from early paydown of debt to mitigate rising interest rates in 2022 to cash conservation in 2023 following the general slowdown in the market environment.

Net cash used in financing activities was $26.4 million for the year ended December 31, 2023.

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

Net cash used in financing activities consisted of payment of a ticking fee to lenders of $18.3 million associated with the termination of our debt commitment associated with the terminated Silicon Motion merger and repayments of minimum tax withholding paid on behalf of employees for restricted stock units of $12.6 million, partially offset by cash inflows from net proceeds from the issuance of common stock upon exercise of stock options of $4.6 million.

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

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

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

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

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

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

The June 23, 2021 Credit Agreement contains customary provisions specifying alternative interest rate calculations to be employed at such time as LIBOR ceases to be available as a benchmark for establishing the interest rate on floating interest rate borrowings.

Our cash and cash equivalents in recent years have been favorably affected by our implementation of an equity-based bonus program for our employees, including executives.

In connection with that bonus program, in February 2022, we issued 0.5 million freely-tradable shares of our common stock in settlement of bonus awards for the 2021 performance period.

We expect to implement a similar equity-based plan for fiscal 2022, but our compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.

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

Warranties and Indemnifications

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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-K

Item 7. Management’s Discussion and Analysis