mxl-20210331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☑			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2021


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From to

Commission file number: 001-34666

MaxLinear Inc.

(Exact name of Registrant as specified in its charter)

Delaware

14-1896129

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification No.)

5966 La Place Court, Suite 100,

Carlsbad

California

92008

(Address of principal executive offices)

(Zip Code)

(760) 692-0711

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common stock	MXL	New York Stock Exchange

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☑

Accelerated filer

☐

Emerging growth company

☐

Non-accelerated filer

☐

Smaller reporting company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of April 21, 2021, the registrant had 75,378,012 shares of common stock, par value $0.0001, outstanding.

Table of Contents

MAXLINEAR, INC.

QUARTERLY REPORT ON FORM 10-Q

TABLE OF CONTENTS


		Page
Part I	FINANCIAL INFORMATION	3
Item 1.	Financial Statements (unaudited)	4
	Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020	4
	Consolidated Statements of Consolidated Statements of Operations for the Three Months Ended March 31, 2021 and 2020	5
	Consolidated Statements of Comprehensive Income (Loss) for the Three Months Ended March 31, 2021 and 2020	6
	Consolidated Statements of Stockholders' Equity for the Three Months Ended March 31, 2021 and 2020	7
	Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2021 and 2020	9
	Notes to Consolidated Financial Statements	10
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43
Item 4.	Controls and Procedures	45
Part II	OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	73
Item 3.	Defaults Upon Senior Securities	73
Item 4.	Mine Safety Disclosures	73
Item 5.	Other Information	73
Item 6.	Exhibits	74
	Signatures	75

Table of Contents

PART I — FINANCIAL INFORMATION

Table of Contents

ITEM 1. FINANCIAL STATEMENTS

MAXLINEAR, INC.

CONSOLIDATED BALANCE SHEETS

(unaudited; in thousands, except par value amounts)


	March 31, 2021		December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	148,095	$	148,901
Short-term restricted cash	114		115

Accounts receivable, net	87,521		67,442
Inventory	92,154		97,839
Prepaid expenses and other current assets	17,096		47,421
Total current assets	344,980		361,718
Long-term restricted cash	984		1,018

Property and equipment, net	40,787		39,470
Leased right-of-use assets	24,403		21,886
Intangible assets, net	191,542		207,266
Goodwill	302,828		302,828
Deferred tax assets	85,524		86,065
Other long-term assets	7,551		2,191
Total assets	$	998,599	$	1,022,442
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	39,061	$	32,751

Accrued price protection liability	55,029		47,766
Accrued expenses and other current liabilities	77,755		105,842
Accrued compensation	25,792		47,302


Total current liabilities	197,637		233,661
Long-term lease liabilities	22,419		20,862
Long-term debt	344,116		363,592
Other long-term liabilities	13,649		13,210
Total liabilities	577,821		631,325

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.0001 par value; 25,000 shares authorized, no shares issued or outstanding	—		—
Common stock, $0.0001 par value; 550,000 shares authorized; 75,378 shares issued and outstanding at March 31, 2021 and 74,536 shares issued and outstanding December 31, 2020	8		7


Additional paid-in capital	628,911		602,064
Accumulated other comprehensive income	446		1,435
Accumulated deficit	(208,587)		(212,389)
Total stockholders’ equity	420,778		391,117
Total liabilities and stockholders’ equity	$	998,599	$	1,022,442

See accompanying notes.

Table of Contents

MAXLINEAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited; in thousands, except per share data)



	Three Months Ended March 31,
		2021		2020
Net revenue		$	209,359	$	62,027
Cost of net revenue		97,640		31,265
Gross profit		111,719		30,762
Operating expenses:
Research and development		63,166		25,689
Selling, general and administrative		36,469		24,632
Impairment losses		—		86
Restructuring charges		2,166		489
Total operating expenses		101,801		50,896
Income (loss) from operations		9,918		(20,134)
Interest income		—		225
Interest expense		(4,206)		(2,476)
Other income (expense), net		(104)		180
Total interest and other income (expense), net		(4,310)		(2,071)
Income (loss) before income taxes		5,608		(22,205)
Income tax provision (benefit)		1,806		(6,736)
Net income (loss)		$	3,802	$	(15,469)
Net income (loss) per share:
Basic		$	0.05	$	(0.21)
Diluted		$	0.05	$	(0.21)
Shares used to compute net income (loss) per share:
Basic		74,852		72,039
Diluted		78,283		72,039

See accompanying notes.

Table of Contents

MAXLINEAR, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(unaudited; in thousands)


	Three Months Ended March 31,
		2021		2020
Net income (loss)		$	3,802	$	(15,469)
Other comprehensive income (loss), net of tax:



Foreign currency translation adjustments, net of tax expense of $376 and tax benefit of $9 for the three months ended March 31, 2021 and 2020, respectively		(989)		(580)


Unrealized gain (loss) on interest rate swap, net of tax expense of $— and tax benefit of $41 for the three months ended March 31, 2021 and 2020, respectively		—		(153)

Other comprehensive income (loss)		(989)		(733)
Total comprehensive income (loss)		$	2,813	$	(16,202)

See accompanying notes.

Table of Contents

MAXLINEAR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2021

(unaudited; in thousands)


	Common Stock				Additional Paid-In Capital	Accumulated Other Comprehensive Income	Accumulated Deficit	Total Stockholders’ Equity
		Shares	Amount
Balance at December 31, 2020		74,536	$	7				$	602,064	$	1,435	$	(212,389)	$	391,117



Common stock issued pursuant to equity awards, net		917	1					16,565		—		—		16,566
Repurchase of common stock		(75)	—					(2,673)		—		—		(2,673)

Stock-based compensation		—	—					12,955		—		—		12,955

Other comprehensive loss		—	—					—		(989)		—		(989)
Net income		—	—					—		—		3,802		3,802
Balance at March 31, 2021		75,378	$	8				$	628,911	$	446	$	(208,587)	$	420,778

See accompanying notes.

Table of Contents

MAXLINEAR, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

THREE MONTHS ENDED MARCH 31, 2020

(unaudited; in thousands)


	Common Stock				Additional Paid-In Capital	Accumulated Other Comprehensive Loss	Accumulated Deficit	Total Stockholders’ Equity
		Shares	Amount
Balance at December 31, 2019		71,931	$	7				$	529,596	$	(887)	$	(113,796)	$	414,920



Common stock issued pursuant to equity awards, net		414	—					2,612		—		—		2,612


Stock-based compensation		—	—					6,827		—		—		6,827

Other comprehensive loss		—	—					—		(733)		—		(733)
Net loss		—	—					—		—		(15,469)		(15,469)
Balance at March 31, 2020		72,345	$	7				$	539,035	$	(1,620)	$	(129,265)	$	408,157

See accompanying notes.

Table of Contents

MAXLINEAR, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited; in thousands)



	Three Months Ended March 31,
	2021		2020
Operating Activities
Net income (loss)	$	3,802	$	(15,469)
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Amortization and depreciation	22,325		16,733
Impairment losses	—		86




Amortization of debt issuance costs and accretion of discount on debt and leases	844		410
Stock-based compensation	12,955		6,827
Deferred income taxes	541		(6,208)
Loss on disposal of property and equipment	368		—

Impairment of leasehold improvements	226		163
Impairment of leased right-of-use assets	429		44

(Gain) loss on foreign currency	21		(246)

Excess tax (benefits) deficiencies on stock-based awards	(1,809)		94
Changes in operating assets and liabilities, net of effects of acquisitions:
Accounts receivable	(20,079)		5,615
Inventory	5,658		353
Prepaid expenses and other assets	29,860		1,443
Leased right-of-use assets	36		640
Accounts payable, accrued expenses and other current liabilities	(22,032)		(785)
Accrued compensation	1,376		3,361

Accrued price protection liability	7,299		(4,537)
Lease liabilities	(2,002)		(1,430)
Other long-term liabilities	454		(446)
Net cash provided by operating activities	40,272		6,648

Investing Activities
Purchases of property and equipment	(6,152)		(1,035)

Purchases of intangible assets	(1,112)		—

Purchases of long-term investments	(5,000)		—

Net cash used in investing activities	(12,264)		(1,035)

Financing Activities



Repayment of debt	(20,000)		—
Net proceeds from issuance of common stock	1,298		488
Minimum tax withholding paid on behalf of employees for restricted stock units	(7,442)		(475)
Repurchase of common stock	(2,673)		—

Net cash provided by (used in) financing activities	(28,817)		13
Effect of exchange rate changes on cash and cash equivalents	(32)		(303)
Increase (decrease) in cash, cash equivalents and restricted cash	(841)		5,323
Cash, cash equivalents and restricted cash at beginning of period	150,034		93,117
Cash, cash equivalents and restricted cash at end of period	$	149,193	$	98,440

Supplemental disclosures of cash flow information:
Cash paid for interest	$	3,309	$	2,246
Cash paid for income taxes	$	593	$	557

Supplemental disclosures of non-cash activities:

Issuance of shares for payment of bonuses	$	22,710	$	2,599

See accompanying notes.


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

1. Organization and Summary of Significant Accounting Policies

Description of Business

MaxLinear, Inc. was incorporated in Delaware in September 2003. MaxLinear, Inc., together with its wholly owned subsidiaries, collectively referred to as MaxLinear, or the Company, is a provider of communications systems-on-chip (SoC) solutions used in broadband, mobile and wireline infrastructure, data center, and industrial and multi-market applications. MaxLinear is a fabless integrated circuit design company whose products integrate all or substantial portions of a high-speed communication system, including radio frequency (RF), high-performance analog, mixed-signal, digital signal processing, security engines, data compression and networking layers, and power management. MaxLinear’s customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in a wide range of electronic devices, including cable Data Over Cable Service Interface Specifications (DOCSIS) fiber and DSL broadband modems and gateways; Wi-Fi and wireline routers for home networking; radio transceivers and modems for 4G/5G base-station and backhaul infrastructure; fiber-optic modules for data center, metro, and long-haul transport networks; as well as power management and interface products used in these and many other markets.

Basis of Presentation and Principles of Consolidation

The accompanying unaudited consolidated financial statements include the accounts of MaxLinear, Inc. and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. All intercompany transactions and investments have been eliminated in consolidation.

In the opinion of management, the Company’s unaudited consolidated interim financial statements contain adjustments, including normal recurring accruals necessary to present fairly the Company’s consolidated financial position, results of operations, comprehensive income (loss), stockholders’ equity, and cash flows.

The consolidated balance sheet as of December 31, 2020 was derived from the Company’s audited consolidated financial statements at that date. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission, or the SEC, on February 11, 2021, or the Annual Report. Interim results for the three months ended March 31, 2021 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2021.

Use of Estimates and Significant Risks and Uncertainties

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes.

Last year, the Company’s revenues were impacted by the novel coronavirus disease, or COVID-19, pandemic. In particular, the Company experienced some negative impact to its revenue and gross profits in the first half of 2020 due to several industry-wide dynamics related to COVID-19 including supply constraints as well as customer requests to temporarily delay shipments. Although the Company has benefited from increased demand for certain of our products from the work-from-home environment in the second half of 2020 and the first quarter of 2021, a sudden increase in demand for electronics containing semiconductor chips and stockpiling of chips by certain firms in China blacklisted by the U.S. has exacerbated bottlenecks in the supply chain, resulting in a global semiconductor chip shortage impacting the Company’s industry. Some chip manufacturers are estimating this supply shortage may continue into 2022. While these chip manufacturers are working to increase capacity in the future, and the Company is continuing to work closely with our suppliers and customers to minimize the potential adverse impacts of the supply shortage, such shortage may have a near-term impact on the Company’s ability to meet increased demand on certain products and have a negative impact on its operating results beginning in the second quarter of 2021 which may continue into 2022. Heightened volatility, global supply shortages, and uncertainty in customer demand and the worldwide economy in general has continued, and the Company may experience increased volatility in its sales and revenues in the near future. However, the magnitude of such volatility on the Company’s business and its duration is uncertain and cannot be reasonably estimated at this time.


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The Company also believes that its $149.2 million of cash and cash equivalents at March 31, 2021 will be sufficient to fund its projected operating requirements for at least the next twelve months. A material adverse impact from COVID-19 and the global semiconductor chip shortage could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if the Company pursues additional acquisitions. The Company’s future capital requirements will depend on many factors, including the Company’s efforts to complete the integration of the acquired WiFi and Broadband assets business and NanoSemi, Inc. (Note 3), changes in revenue, the expansion of engineering, sales and marketing activities, the timing and extent of expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of the Company’s products and potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to the Company or at all. If the Company is unable to raise additional funds when needed, it may not be able to sustain its operations or execute its strategic plans.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of April 28, 2021, the issuance date of this Quarterly Report on Form 10-Q. Actual results could differ from those estimates, particularly if the Company experiences material impacts from COVID-19.

Summary of Significant Accounting Policies

Refer to the Company’s Annual Report for a summary of significant accounting policies. There have been no other significant changes to the Company’s significant accounting policies during the three months ended March 31, 2021.

Recently Adopted Accounting Pronouncements

In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, to remove certain exceptions related to the approach for intraperiod tax allocation, recognition of deferred tax liabilities for outside basis differences and requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The amendments in this update are effective for the Company beginning with fiscal year 2021. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of the amendments in this update did not have a material impact on the Company’s consolidated financial position and results of operations as of and for the three months ended March 31, 2021, and is also not expected to have a material impact on the Company’s financial position and results of operations as of and for the year ending December 31, 2021.

In October 2020, the FASB issued ASU No. 2020-10 Codification Improvements, to make incremental improvements to GAAP and address stakeholder suggestions, including, among other things, clarifying that the requirement to provide comparative information in the financial statements extends to the corresponding disclosures section. The amendments in this update are effective for the Company beginning with fiscal year 2021. The amendments in this update should be applied retrospectively and at the beginning of the period that includes the adoption date. The adoption of the amendments in this update did not have a material impact on the Company’s financial disclosures as of and for the three months ended March 31, 2021, and is also not expected to have a material impact on the Company's financial disclosures for the year ending December 31, 2021.

2. Net Income (Loss) Per Share

Basic earnings per share, or EPS, is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock options, restricted stock units and restricted stock awards are considered to be common stock equivalents and are only included in the calculation of diluted EPS when their effect is dilutive. In periods in which the Company has a net loss, dilutive common stock equivalents are excluded from the calculation of diluted EPS.


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The table below presents the computation of basic and diluted EPS:


	Three Months Ended March 31,
	2021		2020
	(in thousands, except per share amounts)
Numerator:
Net income (loss)	$	3,802	$	(15,469)
Denominator:
Weighted average common shares outstanding—basic	74,852		72,039
Dilutive common stock equivalents	3,431		—
Weighted average common shares outstanding—diluted	78,283		72,039
Net income (loss) per share:
Basic	$	0.05	$	(0.21)
Diluted	$	0.05	$	(0.21)

For the three months ended March 31, 2021 and 2020, the Company excluded common stock equivalents for outstanding stock-based awards, which represented potentially dilutive securities of 0.1 million and 3.3 million, respectively, from the calculation of diluted net income (loss) per share due to their anti-dilutive nature.

3. Business Combinations

Acquisition of the WiFi and Broadband assets business

On July 31, 2020, the Company and certain of its designated subsidiaries completed their acquisition of the Home Gateway Platform Division, which the Company refers to as the Wi-Fi and Broadband assets business, pursuant to an Asset Purchase Agreement with Intel Corporation, or Intel, dated April 5, 2020 (the “Asset Purchase Agreement”), and related agreements. The Company paid cash consideration of $150.0 million for the purchase of certain assets of the Wi-Fi and Broadband assets business, and assumed certain liabilities related to specified employment matters. The transaction was funded with a portion of the net proceeds from a secured incremental term loan with an aggregate principal amount of $175.0 million (Note 8).

The Wi-Fi and Broadband assets business develops a broad portfolio of connected home products, including WiFi, Ethernet and Broadband Gateway Processor SoCs, which enables the Company to strengthen its existing connected home portfolio by bringing together a complete, scalable, and complementary platform of connectivity and access solutions to address its customers’ needs across target end-markets.

The acquired assets and assumed liabilities, together with the employees who joined the Company and its subsidiaries as a result of the transaction, represent a business as defined in ASC 805, Business Combinations. The Company is integrating the acquired assets and rehired employees into the Company’s existing business.

The Asset Purchase Agreement also contains customary representations, warranties and covenants, including indemnification provisions set forth therein. Pursuant to the Purchase Agreement, Intel has retained, and will be obligated to indemnify MaxLinear for, certain liabilities, including but not limited to those relating to the Home Gateway Platform Division for pre-closing taxes and specified employment matters, and MaxLinear has assumed, and will indemnify Intel for, certain liabilities, including but not limited to those relating to the Home Gateway Platform Division and the Transferred Assets for certain pre-closing and post-closing actions, events and periods (including certain product-related liabilities for products sold prior to the Closing for up to a $25.0 million cap), and specified employment matters.


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

In connection with the transaction, the Company and Intel have entered into as of the closing certain other ancillary agreements, including (i) an intellectual property matters agreement, pursuant to which Intel will grant to the Company a license to certain intellectual property rights for use by the Company in connection with the acquired assets and the Company will grant back to Intel a license to the intellectual property rights in the acquired assets, (ii) a supply agreement, pursuant to which Intel will manufacture and fabricate certain products for the Company that are part of the acquired assets, (iii) an ethernet network controller services agreement, pursuant to which the Company will provide Intel with certain development services with respect to certain Intel ethernet network controller products, (iv) a transition services agreement, pursuant to which Intel will provide certain services on a transitional basis for up to a 12-month period after the closing, the scope of which includes services relating to real estate and facilities, information technology, and supply chain, procurement, sales operations, and engineering support, and (v) a side letter regarding the delayed transfer of certain inventory. Pursuant to the delayed inventory side letter, the Company has control and economic benefits of the inventory, but the title and possession of the inventory has been delayed until the last day that Intel provides services under the transition services agreement.

Acquisition Consideration

The following table summarizes the fair value of purchase price consideration to acquire the WiFi and Broadband assets business (in thousands):


Description	Amount
Fair value of purchase consideration:
Cash	$	150,000

Purchase Price Allocation

The following is an allocation of purchase price as of the July 31, 2020 acquisition closing date based upon an estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition (in thousands):


Description	Amount
Fair value of consideration transferred:
Cash	$	150,000

Purchase price allocation:
Inventory	$	67,100
Property and equipment	17,641

Identifiable intangible assets	58,000
Deferred tax assets	457
Accrued expenses	(68)
Accrued price protection liability	(413)
Accrued compensation	(7,916)

Other long-term liabilities	(8,197)
Identifiable net assets acquired	126,604
Goodwill	23,396
Total purchase price	$	150,000


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets (in thousands):


Category	Estimated Life in Years	Fair Value
Finite-lived intangible assets:
Developed technology	7	$	43,200

Customer-related intangible	5	6,800

Product backlog	0.58	800
		50,800
Indefinite-lived intangible assets:
IPR&D	N/A	7,200
Total identifiable intangible assets acquired		$	58,000

Acquisition of NanoSemi, Inc.

On September 9, 2020, the Company completed its acquisition of NanoSemi, Inc. or NanoSemi, pursuant to an Agreement and Plan of Merger (the “Merger Agreement”) with NanoSemi, dated September 9, 2020. The initial closing transaction consideration consisted of $10.0 million in cash and 804,163 shares of MaxLinear’s common stock. In addition, the NanoSemi stockholders will receive $35.0 million in deferred cash payments payable in 2021, and certain NanoSemi stockholders may also receive up to an additional $35.0 million in potential contingent consideration, subject to the acquired business’s satisfying certain financial objectives from July 1, 2020 through December 31, 2022. As of March 31, 2021, the Company has made $20 million of $35.0 million in deferred cash payments. The stock consideration was issued in reliance on exemptions from the registration requirements of the Securities Act of 1933, as amended. In connection with the acquisition, MaxLinear agreed to provide the NanoSemi stockholders with certain registration rights with respect to the shares of MaxLinear common stock they received in the acquisition.

NanoSemi is an industry-leading provider of intellectual property that utilizes patented machine learning techniques to improve signal integrity and power efficiency in systems-on-chip, or SoCs, application-specific integrated circuits, or ASICs, and field-programmable gate arrays, or FPGAs, used in next-generation communication and artificial intelligence systems. Its technology enables higher throughput connections for 5G, Wi-Fi, and WiGig smartphones and base stations while simultaneously reducing energy consumption.

Acquisition Consideration

The following table summarizes the fair value of purchase price consideration to acquire NanoSemi (in thousands):


Description	Amount
Fair value of purchase consideration:
Cash	$	10,000
Common stock issued(1)	17,080
Deferred payments(2)	34,100
Contingent consideration(3)	—




Total purchase price	$	61,180

_________________

(1) The fair value of common stock issued in the merger is based on 804,163 shares issued on the September 9, 2020 acquisition date at the closing price of the Company’s common stock of $21.24 per share.

(2) The fair value of the deferred payments was determined by discounting to present value payments totaling $35.0 million expected to be made to NanoSemi stockholders throughout 2021.

(3) The fair value of contingent consideration is zero as the applicable financial objectives from July 1, 2020 through December 31, 2022 are not expected to be met based on the Company’s forecast.


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Preliminary Purchase Price Allocation

The following is an allocation of purchase price as of the September 9, 2020 acquisition closing date based upon a preliminary estimate of the fair value of the assets acquired and the liabilities assumed by the Company in the acquisition (in thousands):


Description	Amount











Purchase price allocation:
Accounts receivable	$	175
Prepaid expenses and other current assets	879
Property and equipment	177
Leased right-of-use assets	1,805
Identifiable intangible assets	19,900
Accounts payable	(602)
Accrued expenses and other current liabilities	(323)
Accrued compensation	(223)
Long-term lease liabilities	(1,546)
Other long-term liabilities	(164)
Identifiable net assets acquired	20,078
Goodwill	41,102
Total purchase price	$	61,180

The following is a summary of identifiable intangible assets acquired and the related expected lives for the finite-lived intangible assets (in thousands):


Category	Estimated Life in Years	Fair Value
Finite-lived intangible assets:
Developed technology	7	$	17,500
Trademarks and tradenames	7	1,000
Customer-related intangible	5	900
Product backlog	5.33	500
Total identifiable intangible assets acquired		$	19,900

Assumptions in the Allocations of Purchase Price

Management prepared the purchase price allocations for the Wi-Fi and Broadband assets business and NanoSemi, and in doing so considered or relied in part upon reports of a third party valuation expert to calculate the fair value of certain acquired assets, which primarily included identifiable intangible assets, inventory, and property and equipment, and the portions of the purchase consideration for NanoSemi expected to be paid to NanoSemi stockholders in the future, as described above. Certain NanoSemi stockholders that are employees are not required to remain employed in order to receive the deferred payments and contingent consideration; accordingly, the fair value of the deferred payments and contingent consideration have been accounted for as a portion of the purchase consideration.

Estimates of fair value require management to make significant estimates and assumptions which are preliminary and subject to change upon finalization of the valuation analysis. The goodwill recognized is attributable primarily to the acquired workforce, expected synergies, and other benefits that MaxLinear believes will result from integrating the operations of the Wi-Fi and Broadband assets business and NanoSemi with the operations of MaxLinear. Certain liabilities included in the purchase price allocations are based on management’s best estimates of the amounts to be paid or settled and based on information available at the time the purchase price allocations were prepared. There have been no adjustments between the preliminary purchase price allocations reflected as of December 31, 2020 and March 31, 2021. Updates to the valuations of certain assets acquired and liabilities assumed and our evaluation of certain income tax positions may result in changes to the recorded


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

amounts of assets and liabilities, with corresponding adjustments to goodwill amounts in subsequent periods. We expect to complete the purchase price allocations within 12 months of the respective acquisition dates.

The fair value of the identified intangible assets acquired from the Wi-Fi and Broadband assets business and NanoSemi was estimated using an income approach. Under the income approach, an intangible asset’s fair value is equal to the present value of future economic benefits to be derived from ownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. More specifically, the fair value of the developed technology, IPR&D and backlog assets was determined using the multi-period excess earnings method, or MPEEM. MPEEM is an income approach to fair value measurement attributable to a specific intangible asset being valued from the asset grouping’s overall cash-flow stream. MPEEM isolates the expected future discounted cash-flow stream to its net present value. Significant factors considered in the calculation of the developed technology and IPR&D intangible assets were the risks inherent in the development process, including the likelihood of achieving technological success and market acceptance. Each project was analyzed to determine the unique technological innovations, the existence and reliance on core technology, the existence of any alternative future use or current technological feasibility and the complexity, cost, and time to complete the remaining development. Future cash flows for each project were estimated based on forecasted revenue and costs, taking into account the expected product life cycles, market penetration, and growth rates. Developed technology will begin amortization immediately and IPR&D will begin amortization upon the completion of each project. If any of the projects are abandoned, the Company will be required to impair the related IPR&D asset.

In connection with the acquisition of the Wi-Fi and Broadband assets business, the Company has assumed liabilities which primarily consist of accrued employee compensation and benefits in jurisdictions where such transfer is required either by law or by work council agreement. In connection with the acquisition of NanoSemi, the Company assumed certain operating liabilities. The liabilities assumed in these acquisitions are included in the respective purchase price allocations above.

Goodwill recorded in connection with the Wi-Fi and Broadband assets business and NanoSemi was $23.4 million and $41.1 million, respectively. The Company does not expect to deduct any of the acquired goodwill for tax purposes.

4. Restructuring Activity

From time to time, the Company approves and implements restructuring plans as a result of internal resource alignment and cost saving measures. Such restructuring plans include terminating employees, vacating certain leased facilities, and cancellation of contracts.

The following table presents the activity related to the restructuring plans, which is included in restructuring charges in the consolidated statements of operations:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Employee separation expenses	$	1,253	$	44
Lease related charges	608		275
Other	305		170
	$	2,166	$	489

Lease related charges for the three months ended March 31, 2021 included the impairment of leased right-of-use assets and leasehold improvements of $0.4 million and $0.2 million, respectively, related to exiting a redundant facility.


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The following table presents a roll-forward of the Company’s restructuring liability for the three months ended March 31, 2021. The restructuring liability is included in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.


	Employee Separation Expenses		Lease Related Charges		Other		Total
	(in thousands)
Liability as of December 31, 2020	$	3,274	$	720	$	3	$	3,997
Restructuring charges	1,253		608		305		2,166
Cash payments	(1,659)		(83)		(7)		(1,749)
Reimbursement from Intel	(2,337)		—		—		(2,337)
Non-cash charges and adjustments	—		(547)		(301)		(848)

Liability as of March 31, 2021	531		698		—		1,229
Less: current portion as of March 31, 2021	(531)		(379)		—		(910)
Long-term portion as of March 31, 2021	$	—	$	319	$	—	$	319

As of March 31, 2021, the remaining lease related charges primarily consist of common area maintenance obligations. The Company does not expect to incur additional material costs related to current restructuring plans.

5. Goodwill and Intangible Assets

Goodwill

Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company’s estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date).

During the three months ended March 31, 2021, there were no changes in the carrying value of goodwill.

The Company performs an annual goodwill impairment assessment on October 31st each year, using a quantitative assessment comparing the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the carrying amount of a reporting unit exceeds its fair value, an impairment loss is recorded.

In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the three months ended March 31, 2021 and 2020, there were no indications of impairment of the Company’s goodwill balances.


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Acquired Intangibles

Finite-lived Intangible Assets

The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases, which are amortized over their estimated useful lives:


		March 31, 2021						December 31, 2020
	Weighted Average Useful Life (in Years)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount		Gross Carrying Value		Accumulated Amortization		Net Carrying Amount
		(in thousands)
Licensed technology	6.1	$	5,981	$	(2,025)	$	3,956	$	4,869	$	(2,006)	$	2,863
Developed technology	6.9	304,061		(156,999)		147,062		304,061		(146,252)		157,809
Trademarks and trade names	6.2	14,800		(9,419)		5,381		14,800		(8,818)		5,982
Customer relationships	4.6	128,800		(101,247)		27,553		128,800		(96,047)		32,753
Non-compete covenants	3.0	1,100		(1,100)		—		1,100		(1,100)		—
Backlog	2.4	1,300		(910)		390		1,300		(641)		659
	6.2	$	456,042	$	(271,700)	$	184,342	$	454,930	$	(254,864)	$	200,066

The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Cost of net revenue	$	10,765	$	8,591
Research and development	1		1
Selling, general and administrative	6,070		5,723
	$	16,836	$	14,315

Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.

The following table sets forth the activity related to finite-lived intangible assets:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Beginning balance	$	200,066	$	187,971

Additions	1,112		—

Amortization	(16,836)		(14,315)
Impairment losses	—		(86)
Ending balance	$	184,342	$	173,570

The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value. During the three months ended March 31, 2021 and 2020, the Company recognized impairment losses related to finite-lived intangible assets of $0 and $0.1 million, respectively.


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The following table presents future amortization of the Company’s finite-lived intangible assets at March 31, 2021:


	Amount
	(in thousands)
2021 (9 months)	$	49,939
2022	48,973
2023	36,876
2024	20,930
2025	10,832
Thereafter	16,792
Total	$	184,342

Indefinite-lived Intangible Assets

Indefinite-lived intangible assets consisted entirely of acquired in-process research and development technology, or IPR&D. There was no activity related to the Company’s indefinite-lived intangible assets during the three months ended March 31, 2021 and 2020.

The Company performs its annual assessment of indefinite-lived intangible assets on October 31 each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. During three months ended March 31, 2021 and 2020, no indicators of impairment were identified and, as a result, no IPR&D impairment losses were recorded.

6. Financial Instruments

Financial Instruments Not Recorded at Fair Value on a Recurring Basis

The Company currently does not have any financial instruments measured at fair value on a recurring basis. Some of the Company’s financial instruments are recorded at amounts that approximate fair value due to their liquid or short-term nature or by election on investments in privately-held entities (Note 7). Such financial assets and financial liabilities include: cash and cash equivalents, restricted cash, net receivables, investments in privately-held entities, certain other assets, accounts payable, accrued price protection liability, accrued expenses, accrued compensation costs, and other current liabilities.

The Company’s long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes (Note 8).

7. Balance Sheet Details

Cash, cash equivalents and restricted cash consist of the following:


	March 31, 2021		December 31, 2020
	(in thousands)
Cash and cash equivalents	$	148,095	$	148,901
Short-term restricted cash	114		115
Long-term restricted cash	984		1,018
Total cash, cash equivalents and restricted cash	$	149,193	$	150,034

As of March 31, 2021 and December 31, 2020, cash and cash equivalents included money market funds of approximately $20.4 million. As of March 31, 2021 and December 31, 2020, the Company has restricted cash of approximately $1.1 million. The cash is restricted in connection with guarantees for certain import duties and office leases.


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Inventory consists of the following:


	March 31, 2021		December 31, 2020
	(in thousands)

Work-in-process	$	46,901	$	35,852
Finished goods	45,253		61,987


	$	92,154	$	97,839

Prepaid and other current assets consist of the following:


	March 31, 2021		December 31, 2020
	(in thousands)
Prepaid expenses	$	7,864	$	7,674
Other receivables	4,472		32,762
Other current assets	4,760		6,985
	$	17,096	$	47,421

As of March 31, 2021, other receivables of $4.5 million consists primarily of amounts due from Intel for reimbursement of certain employee-related costs pursuant to the Asset Purchase Agreement (Note 3).

As of December 31, 2020, other receivables of $32.8 million consist of amounts due from Intel of $28.4 million for amounts collected on the Company’s behalf from customers on sales of the Company’s products under the transition services agreement and of $4.4 million for reimbursement of certain severance-related costs pursuant to the Asset Purchase Agreement.

Property and equipment, net consists of the following:


	Useful Life (in Years)	March 31, 2021		December 31, 2020
		(in thousands)
Furniture and fixtures	5	$	2,519	$	2,524
Machinery and equipment	3-5	54,021		55,456
Masks and production equipment	2-5	21,601		19,205
Software	3	7,831		7,194
Leasehold improvements	1-5	16,628		16,871
Construction in progress	N/A	9,261		8,050
		111,861		109,300
Less: accumulated depreciation and amortization		(71,074)		(69,830)
		$	40,787	$	39,470

Depreciation expense for the three months ended March 31, 2021 and 2020 was $3.7 million and $1.6 million, respectively.


Table of Contents			MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

Included in other long-term assets, long-term investments were $5.0 million as of March 31, 2021 and consist of an investment in a privately held entity. The Company does not have the ability to exercise significant influence or control over such entity and has accounted for the investment as a financial instrument. Given that there is not a readily determinable fair value, the Company is electing to measure such investment at cost, less any impairment, and adjust the carrying value to fair value if any observable price changes for similar investments in the same entity are identified.

Accrued price protection liability consists of the following activity:


	Three Months Ended March 31,
	2021		2020
	(in thousands)
Beginning balance	$	47,766	$	12,557

Charged as a reduction of revenue	24,423		1,399

Payments	(17,160)		(5,932)
Ending balance	$	55,029	$	8,024

Accrued expenses and other current liabilities consist of the following:


	March 31, 2021		December 31, 2020
	(in thousands)
Deferred purchase price payments	$	14,794	$	34,484
Payables under transition services agreement	1,662		$	17,420
Accrued technology license payments	4,950		5,821
Accrued professional fees	5,075		2,620
Accrued engineering and production costs	2,019		3,448
Accrued restructuring	910		3,628

Accrued royalty	1,779		1,965
Short-term lease liabilities	9,456		8,144

Accrued customer credits	809