0001288469December 312024Q1falseP2YP2YP1YP1YP1Y00012884692024-01-012024-03-3100012884692024-04-17xbrli:shares00012884692024-03-31iso4217:USD00012884692023-12-31iso4217:USDxbrli:shares00012884692023-01-012023-03-310001288469us-gaap:CommonStockMember2023-12-310001288469us-gaap:AdditionalPaidInCapitalMember2023-12-310001288469us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-12-310001288469us-gaap:RetainedEarningsMember2023-12-310001288469us-gaap:CommonStockMember2024-01-012024-03-310001288469us-gaap:AdditionalPaidInCapitalMember2024-01-012024-03-310001288469us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-01-012024-03-310001288469us-gaap:RetainedEarningsMember2024-01-012024-03-310001288469us-gaap:CommonStockMember2024-03-310001288469us-gaap:AdditionalPaidInCapitalMember2024-03-310001288469us-gaap:AccumulatedOtherComprehensiveIncomeMember2024-03-310001288469us-gaap:RetainedEarningsMember2024-03-310001288469us-gaap:CommonStockMember2022-12-310001288469us-gaap:AdditionalPaidInCapitalMember2022-12-310001288469us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-12-310001288469us-gaap:RetainedEarningsMember2022-12-3100012884692022-12-310001288469us-gaap:CommonStockMember2023-01-012023-03-310001288469us-gaap:AdditionalPaidInCapitalMember2023-01-012023-03-310001288469us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-01-012023-03-310001288469us-gaap:RetainedEarningsMember2023-01-012023-03-310001288469us-gaap:CommonStockMember2023-03-310001288469us-gaap:AdditionalPaidInCapitalMember2023-03-310001288469us-gaap:AccumulatedOtherComprehensiveIncomeMember2023-03-310001288469us-gaap:RetainedEarningsMember2023-03-3100012884692023-03-310001288469srt:MinimumMember2024-03-310001288469srt:MaximumMember2024-03-310001288469srt:MinimumMembermxl:ProductionMasksMember2024-03-310001288469mxl:ProductionMasksMembersrt:MaximumMember2024-03-310001288469srt:MinimumMember2024-01-012024-03-310001288469srt:MaximumMember2024-01-012024-03-31mxl:segmentmxl:business_activity0001288469mxl:TerminatedSiliconMotionMergerMember2023-08-310001288469mxl:CompanyYMember2023-01-172023-01-170001288469mxl:CompanyYMember2023-01-170001288469mxl:CompanyYMember2024-03-3100012884692023-01-012023-12-3100012884692023-01-012024-03-310001288469us-gaap:EmployeeSeveranceMember2024-01-012024-03-310001288469mxl:NonCashChargesRelatedToExitingFacilitiesAndWritingOffOfAssetsMember2024-01-012024-03-310001288469us-gaap:EmployeeSeveranceMember2023-01-012023-03-310001288469us-gaap:FacilityClosingMember2024-01-012024-03-310001288469us-gaap:FacilityClosingMember2023-01-012023-03-310001288469mxl:OtherRestructuringNettingMember2024-01-012024-03-310001288469mxl:OtherRestructuringNettingMember2023-01-012023-03-310001288469us-gaap:OneTimeTerminationBenefitsMember2023-12-310001288469mxl:FacilityClosingNettingMember2023-12-310001288469mxl:OtherRestructuringNettingMember2023-12-310001288469us-gaap:OneTimeTerminationBenefitsMember2024-01-012024-03-310001288469mxl:FacilityClosingNettingMember2024-01-012024-03-310001288469us-gaap:OneTimeTerminationBenefitsMember2024-03-310001288469mxl:FacilityClosingNettingMember2024-03-310001288469mxl:OtherRestructuringNettingMember2024-03-3100012884692023-10-312023-10-310001288469mxl:LicensedTechnologyMember2024-03-310001288469mxl:LicensedTechnologyMember2023-12-310001288469us-gaap:DevelopedTechnologyRightsMember2024-03-310001288469us-gaap:DevelopedTechnologyRightsMember2023-12-310001288469us-gaap:TrademarksAndTradeNamesMember2024-03-310001288469us-gaap:TrademarksAndTradeNamesMember2023-12-310001288469us-gaap:CustomerRelationshipsMember2024-03-310001288469us-gaap:CustomerRelationshipsMember2023-12-310001288469us-gaap:PatentsMember2024-03-310001288469us-gaap:PatentsMember2023-12-310001288469us-gaap:CostOfSalesMember2024-01-012024-03-310001288469us-gaap:CostOfSalesMember2023-01-012023-03-310001288469us-gaap:ResearchAndDevelopmentExpenseMember2024-01-012024-03-310001288469us-gaap:ResearchAndDevelopmentExpenseMember2023-01-012023-03-310001288469us-gaap:SellingGeneralAndAdministrativeExpensesMember2024-01-012024-03-310001288469us-gaap:SellingGeneralAndAdministrativeExpensesMember2023-01-012023-03-310001288469us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2023-12-310001288469us-gaap:FairValueMeasurementsRecurringMember2024-03-310001288469us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2024-03-310001288469us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2024-03-310001288469us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2024-03-310001288469us-gaap:FairValueMeasurementsRecurringMember2023-12-310001288469us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel1Member2023-12-310001288469us-gaap:FairValueMeasurementsRecurringMemberus-gaap:FairValueInputsLevel2Member2023-12-310001288469mxl:ContingentConsiderationLiabilityMember2023-12-310001288469mxl:ContingentConsiderationLiabilityMember2022-12-310001288469mxl:ContingentConsiderationLiabilityMember2024-01-012024-03-310001288469mxl:ContingentConsiderationLiabilityMember2023-01-012023-03-310001288469mxl:ContingentConsiderationLiabilityMember2024-03-310001288469mxl:ContingentConsiderationLiabilityMember2023-03-310001288469us-gaap:FurnitureAndFixturesMember2024-03-310001288469us-gaap:FurnitureAndFixturesMember2023-12-310001288469srt:MinimumMemberus-gaap:MachineryAndEquipmentMember2024-03-310001288469us-gaap:MachineryAndEquipmentMembersrt:MaximumMember2024-03-310001288469us-gaap:MachineryAndEquipmentMember2024-03-310001288469us-gaap:MachineryAndEquipmentMember2023-12-310001288469srt:MinimumMembermxl:MasksAndProductionEquipmentMember2024-03-310001288469mxl:MasksAndProductionEquipmentMembersrt:MaximumMember2024-03-310001288469mxl:MasksAndProductionEquipmentMember2024-03-310001288469mxl:MasksAndProductionEquipmentMember2023-12-310001288469us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2024-03-310001288469us-gaap:SoftwareAndSoftwareDevelopmentCostsMember2023-12-310001288469srt:MinimumMemberus-gaap:LeaseholdImprovementsMember2024-03-310001288469us-gaap:LeaseholdImprovementsMembersrt:MaximumMember2024-03-310001288469us-gaap:LeaseholdImprovementsMember2024-03-310001288469us-gaap:LeaseholdImprovementsMember2023-12-310001288469us-gaap:ConstructionInProgressMember2024-03-310001288469us-gaap:ConstructionInProgressMember2023-12-3100012884692022-03-012022-03-3100012884692023-09-012023-09-3000012884692023-08-312023-08-310001288469mxl:ReductionInTransactionPriceMember2024-03-310001288469mxl:ReductionInTransactionPriceMember2023-12-310001288469us-gaap:SalesReturnsAndAllowancesMember2024-03-310001288469us-gaap:SalesReturnsAndAllowancesMember2023-12-310001288469us-gaap:AccumulatedTranslationAdjustmentMember2023-12-310001288469us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2023-12-310001288469us-gaap:AccumulatedTranslationAdjustmentMember2024-01-012024-03-310001288469us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2024-01-012024-03-310001288469us-gaap:AccumulatedTranslationAdjustmentMember2024-03-310001288469us-gaap:AccumulatedDefinedBenefitPlansAdjustmentNetUnamortizedGainLossMember2024-03-310001288469mxl:InitialTermLoanTLBJune2021Member2024-03-310001288469mxl:InitialTermLoanTLBJune2021Member2023-12-310001288469us-gaap:MediumTermNotesMember2024-03-310001288469us-gaap:MediumTermNotesMember2023-12-31xbrli:pure0001288469mxl:WellsFargoBankNationalAssociationMembermxl:InitialTermLoanTLBJune2021Member2021-06-230001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembermxl:WellsFargoBankNationalAssociationMember2021-06-230001288469mxl:InitialTermLoanTLBJune2021Member2021-06-230001288469us-gaap:FederalFundsEffectiveSwapRateMembermxl:InitialTermLoanTLBJune2021Member2024-01-012024-03-310001288469mxl:SecuredOvernightFinancingRateSOFRMembermxl:InitialTermLoanTLBJune2021Member2024-01-012024-03-310001288469mxl:InitialTermLoanTLBJune2021Member2024-01-012024-03-310001288469mxl:SecuredOvernightFinancingRateSOFRSubjectToFloorMembermxl:InitialTermLoanTLBJune2021Member2024-01-012024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2024-01-012024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembermxl:SecuredOvernightFinancingRateSOFRMember2024-01-012024-03-310001288469srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMember2021-07-012024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMembersrt:MaximumMember2021-07-012024-03-310001288469srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembermxl:SecuredOvernightFinancingRateSOFRMember2021-07-012024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembermxl:SecuredOvernightFinancingRateSOFRMembersrt:MaximumMember2021-07-012024-03-310001288469srt:MinimumMemberus-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2021-07-012024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-07-012024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2024-03-310001288469us-gaap:LineOfCreditMemberus-gaap:RevolvingCreditFacilityMember2024-01-012024-03-310001288469mxl:EquityIncentivePlanMember2024-03-310001288469mxl:EmployeeStockPurchasePlanMember2024-03-3100012884692024-02-290001288469us-gaap:RestrictedStockUnitsRSUMember2024-03-310001288469us-gaap:RestrictedStockUnitsRSUMember2024-01-012024-03-310001288469us-gaap:PerformanceSharesMember2024-03-310001288469us-gaap:PerformanceSharesMember2024-01-012024-03-310001288469us-gaap:EmployeeStockOptionMember2024-03-310001288469us-gaap:EmployeeStockOptionMember2024-01-012024-03-310001288469us-gaap:RestrictedStockUnitsRSUMember2023-12-310001288469us-gaap:ShareBasedCompensationAwardTrancheThreeMember2024-01-012024-03-310001288469us-gaap:ShareBasedCompensationAwardTrancheOneMember2024-01-012024-03-310001288469us-gaap:ShareBasedCompensationAwardTrancheTwoMember2024-01-012024-03-310001288469us-gaap:PerformanceSharesMember2023-12-310001288469us-gaap:EmployeeStockMember2023-01-012023-03-310001288469us-gaap:EmployeeStockMember2024-01-012024-03-310001288469us-gaap:EmployeeStockMember2024-03-310001288469us-gaap:EmployeeStockMember2023-03-310001288469srt:MinimumMemberus-gaap:EmployeeStockOptionMember2024-03-310001288469srt:MaximumMemberus-gaap:EmployeeStockOptionMember2024-03-310001288469us-gaap:CustomerConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:CustomerAMember2024-01-012024-03-310001288469us-gaap:CustomerConcentrationRiskMembermxl:CustomerBMemberus-gaap:SalesRevenueNetMember2024-01-012024-03-310001288469us-gaap:CustomerConcentrationRiskMembermxl:CustomerBMemberus-gaap:SalesRevenueNetMember2023-01-012023-03-310001288469us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermxl:CustomerCMember2024-01-012024-03-310001288469us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermxl:CustomerCMember2023-01-012023-03-310001288469us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermxl:CustomerDMember2024-01-012024-03-310001288469us-gaap:CustomerConcentrationRiskMemberus-gaap:AccountsReceivableMembermxl:CustomerDMember2023-01-012023-03-310001288469mxl:VendorAMemberus-gaap:InventoriesMemberus-gaap:SupplierConcentrationRiskMember2023-01-012023-03-310001288469mxl:VendorBMemberus-gaap:InventoriesMemberus-gaap:SupplierConcentrationRiskMember2024-01-012024-03-310001288469mxl:VendorBMemberus-gaap:InventoriesMemberus-gaap:SupplierConcentrationRiskMember2023-01-012023-03-310001288469mxl:VendorCMemberus-gaap:InventoriesMemberus-gaap:SupplierConcentrationRiskMember2024-01-012024-03-310001288469mxl:VendorDMemberus-gaap:InventoriesMemberus-gaap:SupplierConcentrationRiskMember2023-01-012023-03-310001288469srt:AsiaMemberus-gaap:SalesRevenueNetMember2024-01-012024-03-310001288469srt:AsiaMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2024-01-012024-03-310001288469srt:AsiaMemberus-gaap:SalesRevenueNetMember2023-01-012023-03-310001288469srt:AsiaMemberus-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMembersrt:EuropeMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMembersrt:EuropeMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMembersrt:EuropeMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMembersrt:EuropeMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMembercountry:US2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMembercountry:US2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMembercountry:US2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMembercountry:US2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMembermxl:RestOfWorldMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMembermxl:RestOfWorldMemberus-gaap:GeographicConcentrationRiskMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMembermxl:RestOfWorldMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMembermxl:RestOfWorldMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMembercountry:HKus-gaap:GeographicConcentrationRiskMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMembercountry:HKus-gaap:GeographicConcentrationRiskMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMemberus-gaap:GeographicConcentrationRiskMembercountry:CN2023-01-012023-03-310001288469mxl:LongLivedAssetsMembercountry:US2024-01-012024-03-310001288469us-gaap:GeographicConcentrationRiskMembermxl:LongLivedAssetsMembercountry:US2024-01-012024-03-310001288469mxl:LongLivedAssetsMembercountry:US2023-01-012023-06-300001288469us-gaap:GeographicConcentrationRiskMembermxl:LongLivedAssetsMembercountry:US2023-01-012023-06-300001288469country:SGmxl:LongLivedAssetsMember2024-01-012024-03-310001288469country:SGus-gaap:GeographicConcentrationRiskMembermxl:LongLivedAssetsMember2024-01-012024-03-310001288469country:SGmxl:LongLivedAssetsMember2023-01-012023-06-300001288469country:SGus-gaap:GeographicConcentrationRiskMembermxl:LongLivedAssetsMember2023-01-012023-06-300001288469mxl:RestOfWorldMembermxl:LongLivedAssetsMember2024-01-012024-03-310001288469mxl:RestOfWorldMemberus-gaap:GeographicConcentrationRiskMembermxl:LongLivedAssetsMember2024-01-012024-03-310001288469mxl:RestOfWorldMembermxl:LongLivedAssetsMember2023-01-012023-06-300001288469mxl:RestOfWorldMemberus-gaap:GeographicConcentrationRiskMembermxl:LongLivedAssetsMember2023-01-012023-06-300001288469mxl:LongLivedAssetsMember2024-01-012024-03-310001288469mxl:LongLivedAssetsMemberus-gaap:GeographicConcentrationRiskMember2024-01-012024-03-310001288469mxl:LongLivedAssetsMember2023-01-012023-06-300001288469mxl:LongLivedAssetsMemberus-gaap:GeographicConcentrationRiskMember2023-01-012023-06-300001288469mxl:BroadbandMember2024-01-012024-03-310001288469mxl:BroadbandMember2023-01-012023-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:BroadbandMember2024-01-012024-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:BroadbandMember2023-01-012023-03-310001288469mxl:ConnectivityMember2024-01-012024-03-310001288469mxl:ConnectivityMember2023-01-012023-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:ConnectivityMember2024-01-012024-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:ConnectivityMember2023-01-012023-03-310001288469mxl:InfrastructureMember2024-01-012024-03-310001288469mxl:InfrastructureMember2023-01-012023-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:InfrastructureMember2024-01-012024-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:InfrastructureMember2023-01-012023-03-310001288469mxl:IndustrialAndMultiMarketMember2024-01-012024-03-310001288469mxl:IndustrialAndMultiMarketMember2023-01-012023-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:IndustrialAndMultiMarketMember2024-01-012024-03-310001288469us-gaap:ProductConcentrationRiskMemberus-gaap:SalesRevenueNetMembermxl:IndustrialAndMultiMarketMember2023-01-012023-03-310001288469us-gaap:SalesRevenueNetMembermxl:RevenueFromDistributorsMembermxl:DistributorsMember2024-01-012024-03-310001288469us-gaap:SalesRevenueNetMembermxl:RevenueFromDistributorsMembermxl:DistributorsMember2023-01-012023-03-310001288469us-gaap:AccountsReceivableMember2023-01-012023-12-310001288469us-gaap:AccountsReceivableMember2024-01-012024-03-310001288469us-gaap:InventoriesMember2024-03-310001288469mxl:OtherObligationsMember2024-03-310001288469mxl:WaterIslandEventDrivenFundVMaxLinearIncMember2023-08-31mxl:claim0001288469mxl:DishLitigationMember2023-09-212023-09-210001288469mxl:DishLitigationMember2024-01-312024-01-310001288469mxl:CoxLitigationMember2023-02-102023-02-100001288469mxl:CoxLitigationMember2023-10-062023-10-0600012884692021-02-2300012884692021-02-232024-03-31
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, 2024
OR | | | | | |
☐ | 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 | The Nasdaq Stock Market LLC |
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 17, 2024, the registrant had 83,128,037 shares of common stock, par value $0.0001, outstanding.
MAXLINEAR, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS
| | | | | | | | |
| | Page |
Part I | | |
Item 1. | | |
| | |
| | |
| | |
| | |
| | |
| | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Part II | | |
Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 3. | | |
Item 4. | | |
Item 5. | | |
Item 6. | | |
| | |
PART I — FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MAXLINEAR, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value amounts) | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 |
Assets | (unaudited) | | |
Current assets: | | | |
Cash and cash equivalents | $ | 191,882 | | | $ | 187,288 | |
Short-term restricted cash | 1,028 | | | 1,051 | |
| | | |
Accounts receivable, net | 126,230 | | | 170,619 | |
Inventory | 96,125 | | | 99,908 | |
Prepaid expenses and other current assets | 29,414 | | | 29,159 | |
Total current assets | 444,679 | | | 488,025 | |
Long-term restricted cash | 20 | | | 17 | |
| | | |
Property and equipment, net | 68,338 | | | 66,431 | |
Leased right-of-use assets | 27,468 | | | 31,264 | |
Intangible assets, net | 64,939 | | | 73,630 | |
Goodwill | 318,588 | | | 318,588 | |
Deferred tax assets | 72,176 | | | 69,493 | |
Other long-term assets | 34,417 | | | 32,809 | |
Total assets | $ | 1,030,625 | | | $ | 1,080,257 | |
Liabilities and stockholders’ equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 32,392 | | | $ | 21,551 | |
| | | |
Accrued price protection liability | 65,233 | | | 71,684 | |
Accrued expenses and other current liabilities | 98,132 | | | 98,468 | |
Accrued compensation | 28,097 | | | 30,426 | |
| | | |
| | | |
Total current liabilities | 223,854 | | | 222,129 | |
Long-term lease liabilities | 23,897 | | | 26,243 | |
Long-term debt | 122,529 | | | 122,375 | |
Other long-term liabilities | 22,362 | | | 23,245 | |
Total liabilities | 392,642 | | | 393,992 | |
| | | |
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; 83,067 shares issued and outstanding at March 31, 2024 and 81,818 shares issued and outstanding December 31, 2023 | 8 | | | 8 | |
| | | |
| | | |
Additional paid-in capital | 834,384 | | | 808,575 | |
Accumulated other comprehensive loss | (5,573) | | | (3,791) | |
Accumulated deficit | (190,836) | | | (118,527) | |
Total stockholders’ equity | 637,983 | | | 686,265 | |
Total liabilities and stockholders’ equity | $ | 1,030,625 | | | $ | 1,080,257 | |
See accompanying notes.
MAXLINEAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)
| | | | | | | | | | | | | | | |
| | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Net revenue | | | | | $ | 95,269 | | | $ | 248,442 | |
Cost of net revenue | | | | | 46,001 | | | 108,135 | |
Gross profit | | | | | 49,268 | | | 140,307 | |
Operating expenses: | | | | | | | |
Research and development | | | | | 64,766 | | | 67,291 | |
Selling, general and administrative | | | | | 36,488 | | | 38,653 | |
Impairment losses | | | | | — | | | 2,438 | |
Restructuring charges | | | | | 22,630 | | | 4,648 | |
Total operating expenses | | | | | 123,884 | | | 113,030 | |
Income (loss) from operations | | | | | (74,616) | | | 27,277 | |
Interest income | | | | | 1,822 | | | 633 | |
Interest expense | | | | | (2,711) | | | (2,487) | |
| | | | | | | |
Other income (expense), net | | | | | 1,434 | | | (324) | |
Total other income (expense), net | | | | | 545 | | | (2,178) | |
Income (loss) before income taxes | | | | | (74,071) | | | 25,099 | |
Income tax provision (benefit) | | | | | (1,762) | | | 15,566 | |
Net income (loss) | | | | | $ | (72,309) | | | $ | 9,533 | |
Net income (loss) per share: | | | | | | | |
Basic | | | | | $ | (0.88) | | | $ | 0.12 | |
Diluted | | | | | $ | (0.88) | | | $ | 0.12 | |
Shares used to compute net income (loss) per share: | | | | | | | |
Basic | | | | | 82,349 | | | 79,471 | |
Diluted | | | | | 82,349 | | | 81,338 | |
See accompanying notes.
MAXLINEAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited; in thousands)
| | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, | | | | |
| | | | | 2024 | | 2023 | | | | |
Net income (loss) | | | | | $ | (72,309) | | | $ | 9,533 | | | | | |
Other comprehensive loss, net of tax: | | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Foreign currency translation adjustments, net of tax benefit of $49 for the three months ended March 31, 2024, and net of tax benefit of $71 for the three months ended March 31, 2023 | | | | | (1,782) | | | (192) | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
Total comprehensive income (loss) | | | | | $ | (74,091) | | | $ | 9,341 | | | | | |
See accompanying notes.
MAXLINEAR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FISCAL QUARTER ENDED MARCH 31, 2024
(unaudited; in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| | Shares | | Amount | | | | |
Balance at December 31, 2023 | | 81,818 | | | $ | 8 | | | $ | 808,575 | | | $ | (3,791) | | | $ | (118,527) | | | $ | 686,265 | |
Common stock issued pursuant to equity awards, net | | 1,249 | | | — | | | 8,777 | | | — | | | — | | | 8,777 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
Stock-based compensation | | — | | | — | | | 17,032 | | | — | | | — | | | 17,032 | |
Other comprehensive loss | | — | | | — | | | — | | | (1,782) | | | — | | | (1,782) | |
Net loss | | — | | | — | | | — | | | — | | | (72,309) | | | (72,309) | |
Balance at March 31, 2024 | | 83,067 | | | $ | 8 | | | $ | 834,384 | | | $ | (5,573) | | | $ | (190,836) | | | $ | 637,983 | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
MAXLINEAR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FISCAL QUARTER ENDED MARCH 31, 2023
(unaudited; in thousands)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Common Stock | | | | | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ Equity |
| | | | | | Shares | | Amount | | | | | | | | | | | | |
Balance at December 31, 2022 | | | | | | 78,745 | | | $ | 8 | | | | | | | | | | | $ | 722,778 | | | $ | (1,021) | | | $ | (45,380) | | | $ | 676,385 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Common stock issued pursuant to equity awards, net | | | | | | 1,236 | | | — | | | | | | | | | | | 31,926 | | | — | | | — | | | 31,926 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Stock-based compensation | | | | | | — | | | — | | | | | | | | | | | 16,460 | | | — | | | — | | | 16,460 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
Other comprehensive loss | | | | | | — | | | — | | | | | | | | | | | — | | | (192) | | | — | | | (192) | |
Net income | | | | | | — | | | — | | | | | | | | | | | — | | | — | | | 9,533 | | | 9,533 | |
Balance at March 31, 2023 | | | | | | 79,981 | | | $ | 8 | | | | | | | | | | | $ | 771,164 | | | $ | (1,213) | | | $ | (35,847) | | | $ | 734,112 | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
See accompanying notes.
MAXLINEAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands) | | | | | | | | | | | |
| | | |
| Three Months Ended March 31, |
2024 | | 2023 |
Operating Activities | | | |
Net income (loss) | $ | (72,309) | | | $ | 9,533 | |
Adjustments to reconcile net income (loss) to cash provided by operating activities: | | | |
Amortization and depreciation | 16,684 | | | 19,202 | |
Impairment losses | — | | | 2,438 | |
| | | |
| | | |
| | | |
| | | |
Amortization of debt issuance costs and accretion of discounts | 688 | | | 548 | |
Stock-based compensation | 17,061 | | | 16,448 | |
Deferred income taxes | (2,685) | | | 8,128 | |
Loss on disposal of property and equipment | 390 | | | 40 | |
| | | |
Unrealized holding gain on investments | — | | | (152) | |
| | | |
Impairment of leased right-of-use assets | 2,038 | | | — | |
| | | |
Gain on extinguishment of lease liabilities | (569) | | | — | |
Loss on settlement of pension | — | | | 362 | |
Gain on foreign currency | (968) | | | — | |
| | | |
Excess tax (benefits) deficiencies on stock-based awards | 1,367 | | | (507) | |
Changes in operating assets and liabilities: | | | |
Accounts receivable | 44,389 | | | (16,931) | |
Inventory | 3,783 | | | 10,959 | |
Prepaid expenses and other assets | (2,044) | | | (4,338) | |
| | | |
Accounts payable, accrued expenses and other current liabilities | 9,275 | | | (886) | |
Accrued compensation | 8,707 | | | 7,210 | |
| | | |
Accrued price protection liability | (6,451) | | | (9,877) | |
Lease liabilities | (2,505) | | | (3,095) | |
Other long-term liabilities | (881) | | | 3,077 | |
Net cash provided by operating activities | 15,970 | | | 42,159 | |
| | | |
Investing Activities | | | |
Purchases of property and equipment | (8,342) | | | (5,216) | |
| | | |
Purchases of intangible assets | (368) | | | (630) | |
Cash used in acquisitions, net of cash acquired | — | | | (9,665) | |
| | | |
| | | |
| | | |
Net cash used in investing activities | (8,710) | | | (15,511) | |
| | | |
Financing Activities | | | |
| | | |
| | | |
| | | |
| | | |
Net proceeds from issuance of common stock | — | | | 3 | |
Minimum tax withholding paid on behalf of employees for restricted stock units | (2,103) | | | (6,173) | |
| | | |
| | | |
Net cash used in financing activities | (2,103) | | | (6,170) | |
Effect of exchange rate changes on cash and cash equivalents | (583) | | | 1 | |
Increase in cash, cash equivalents and restricted cash | 4,574 | | | 20,479 | |
Cash, cash equivalents and restricted cash at beginning of period | 188,356 | | | 188,357 | |
Cash, cash equivalents and restricted cash at end of period | $ | 192,930 | | | $ | 208,836 | |
| | | |
Supplemental disclosures of cash flow information: | | | |
Cash paid for interest | $ | 2,478 | | | $ | 2,163 | |
Cash paid for income taxes | $ | 1,364 | | | $ | 3,336 | |
| | | |
Supplemental disclosures of non-cash activities: | | | |
| | | |
Issuance of shares for payment of bonuses | $ | 10,880 | | | $ | 38,096 | |
| | | |
| | | |
See accompanying notes.
| | | | | | | | |
| 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 directly and indirectly wholly-owned subsidiaries, collectively referred to as MaxLinear, or the Company, is 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. MaxLinear is 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. MaxLinear’s customers primarily 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. Examples of such devices include broadband modems compliant with Data Over Cable Service Interface Specifications, or DOCSIS, Passive Optical Network, or PON, and DSL; Wi-Fi and wireline routers for home networking; radio transceivers and modems for 4G/5G base-station and backhaul infrastructure; optical transceivers targeting hyperscale data centers; 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 directly and indirectly 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, stockholders’ equity, and cash flows.
The consolidated balance sheet as of December 31, 2023 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, 2023 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 January 31, 2024, or the Annual Report. Interim results for the three months ended March 31, 2024 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2024.
The functional currency of certain foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these foreign subsidiaries are translated at the current exchange rate at the balance sheet date and historical rates for equity. Revenue and expense components are translated at weighted average exchange rates in effect during the period. Gains and losses resulting from foreign currency translation are included as a component of stockholders’ equity. Foreign currency transaction gains and losses are included in the results of operations, and to date, have not been material.
Use of Estimates and Significant Risks and Uncertainties
The preparation of consolidated 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 of the consolidated financial statements. Actual results could differ from those estimates.
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 24, 2024, the issuance date of this Quarterly Report on Form 10-Q. Actual results could differ from those estimates.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Summary of Significant Accounting Policies
Business Combinations
The Company applies the provisions of ASC 805, Business Combinations, in accounting for its acquisitions. It requires the Company to recognize separately from goodwill the assets acquired and the liabilities assumed, at the acquisition date fair values. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the acquisition date fair values of the net assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations.
Costs to exit or restructure certain activities of an acquired company or the Company’s internal operations are accounted for as termination and exit costs pursuant to ASC 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exit or disposal activity is recognized and measured at its fair value in the consolidated statements of operations in the period in which the liability is incurred.
For a given acquisition, the Company may identify certain pre-acquisition contingencies as of the acquisition date and may extend its review, evaluation, and adjustment of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether the Company includes these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts. A pre-acquisition contingency (non-income tax related) is only recognized as an asset or a liability if: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated. Subsequent to the measurement period, changes in estimates of such contingencies will affect earnings and could have a material effect on the Company's results of operations and financial position.
In addition, uncertain tax positions and tax-related valuation allowances assumed, if any, in connection with a business combination are initially estimated as of the acquisition date. The Company re-evaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments to the preliminary estimates being recorded to goodwill if identified within the measurement period. Subsequent to the end of the measurement period or final determination of the estimated value of the tax allowance or contingency, whichever comes first, changes to these uncertain tax positions and tax related valuation allowances will affect the income tax provision (benefit) in the consolidated statements of operations and could have a material impact on the results of operations and financial position.
Cash and Cash Equivalents
The Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents are recorded at cost, which approximates market value.
Accounts Receivable
The Company performs ongoing credit evaluations of its customers and assesses each customer’s credit worthiness. The Company monitors collections and payments from its customers and maintains an allowance for doubtful accounts, which is based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote.
Inventory
The Company assesses the recoverability of its inventory based on assumptions about demand and market conditions. Forecasted demand is determined based on historical sales and expected future sales. Inventory is stated at the lower of cost or
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
net realizable value. Cost is computed using standard cost, which approximates actual cost on a first-in, first-out basis and net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation. The Company reduces its inventory to the lower of its cost or net realizable value on a part-by-part basis to account for obsolescence or lack of marketability. Reductions are calculated as the difference between the cost of inventory and its net realizable value based upon assumptions about future demand, market conditions and costs. Once established, these adjustments are considered permanent and are not revised until the related inventory is sold or disposed of.
Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, restricted cash, accounts receivable, accounts payable and accrued expenses and compensation are considered to be representative of their respective fair values because of the short-term nature of these accounts.
Property and Equipment
Property and equipment is carried at cost and depreciated over the estimated useful lives of the assets, ranging from two to five years, using the straight-line method. Leasehold improvements are stated at cost and amortized over the shorter of the estimated useful lives of the assets or the lease term.
Production Masks
Production masks with alternative future uses or discernible future benefits are capitalized and amortized over their estimated useful lives of two to five years. To determine if a production mask has alternative future uses or benefits, the Company evaluates risks associated with developing new technologies and capabilities, and the related risks associated with entering new markets. Production masks that do not meet the criteria for capitalization are expensed as research and development costs.
Goodwill and Intangible Assets
Goodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under the acquisition method. Intangible assets represent purchased intangible assets including developed technology, in-process research and development, or IPR&D, technologies acquired or licensed from other companies, customer relationships, non-compete covenants, backlog, and trademarks and tradenames. Purchased finite-lived intangible assets are capitalized and amortized over their estimated useful lives. Technologies acquired or licensed from other companies, customer relationships, non-compete covenants, backlog, and trademarks and tradenames are capitalized and amortized over the lesser of the terms of the agreement, or estimated useful life. The Company capitalizes IPR&D projects acquired as part of a business combination. On completion of each project, IPR&D assets are reclassified to developed technology and amortized over their estimated useful lives.
Impairment of Goodwill and Long-Lived Assets
Goodwill is not amortized but is tested for impairment using either a qualitative assessment, and/or quantitative assessment, which is based on comparing the fair value of a reporting unit with its carrying amount. If the carrying amount of a reporting unit exceeds its fair value, a goodwill impairment loss is recorded. The Company tests by reporting unit, goodwill and other indefinite-lived intangible assets for impairment as of October 31 each year or more frequently if it believes indicators of impairment exist.
During development, IPR&D is not subject to amortization and is tested for impairment annually or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company reviews indefinite-lived intangible assets for impairment using a qualitative assessment, followed by a quantitative assessment, as needed, each year as of October 31, the date of its annual goodwill impairment review, or whenever events or changes in circumstances indicate the carrying value may not be recoverable. Recoverability of indefinite-lived intangible assets is measured by comparing the carrying amount of the asset to its fair value. In certain cases, the Company utilizes the relief-from-royalty method when appropriate, and a fair value will be obtained based on analysis over the costs saved by owning the right instead of leasing it.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Once an IPR&D project is complete, it becomes a finite-lived intangible asset and is evaluated for impairment both immediately prior to its change in classification and thereafter in accordance with the Company’s policy for long-lived assets.
The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the useful lives, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss would be 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 would be measured based on the excess of the carrying amount of the asset over the asset’s fair value.
Revenue Recognition
The Company’s revenue is generated from sales of the Company’s integrated circuits and intellectual property, typically under individual customer purchase orders, some of which have underlying master sales agreements that specify terms governing the product or intellectual property sales. The Company recognizes such revenue at the point in time when control of the products or intellectual property is transferred to the customer at the estimated net consideration for which collection is probable, taking into account the customer’s rights to price protection, other pricing credits, unit rebates, and rights to return unsold product. Transfer of control occurs either when products are shipped to or received by the distributor or direct customer, based on the terms of the specific agreement with the customer, if the Company has a present right to payment and transfer of legal title and the risks and rewards of ownership to the customer has occurred. For most of the Company’s product sales, transfer of control occurs upon shipment to the distributor or direct customer. Under certain intellectual property sale agreements, we are entitled to fixed upfront consideration upon sale and variable consideration in the form of a portion of revenue generated by the recipient from the intellectual property. Fixed consideration is recognized when control of the functional intellectual property transfers; variable consideration may be constrained but is continuously monitored and recognized as revenue when it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur and the uncertainty associated with the variable consideration is resolved. The Company recognized a material amount of variable consideration during the three months ended March 31, 2024 as uncertainties related to such consideration were resolved.
In assessing whether collection of consideration from a customer is probable, the Company considers the customer’s ability and intention to pay that amount of consideration when it is due. Payment of invoices is due as specified in the underlying customer agreement, typically 30 days from the invoice date, which occurs on the date of transfer of control of the products to the customer. Since payment terms are less than a year, the Company has elected the practical expedient and does not assess whether a customer contract has a significant financing component.
A five-step approach is applied in the recognition of revenue: (1) identify the contract with a customer, (2) identify the performance obligations in the contract, (3) determine the transaction price, (4) allocate the transaction price to the performance obligations in the contract, and (5) recognize revenue when the Company satisfies a performance obligation. Customer purchase orders plus the underlying master sales agreements are considered to be contracts with the customer for purposes of applying the five-step approach.
Pricing adjustments and estimates of returns under contractual stock rotation rights are treated as variable consideration for purposes of determining the transaction price, and are estimated at the time control transfers using the expected value method based on the Company’s analysis of actual price adjustment claims by distributors and historical product return rates, and then reassessed at the end of each reporting period. The Company also considers whether any variable consideration is constrained, since such amounts for which it is probable that a significant reversal will occur when the contingency is subsequently resolved are required to be excluded from revenues. Price adjustments are finalized at the time the products are sold through to the end customer and the distributor or end customer submits a claim to reduce the sale price to a pre-approved net price. Stock rotation allowances are capped at a fixed percentage of the Company’s sales to a distributor for a period of time, up to six months, as specified in the individual distributor contract. If the Company’s current estimates of such credits and rights are materially inaccurate, it may result in adjustments that affect future revenues and gross profits. Returns under the Company’s general assurance warranty of products for a period of one to three years have not been material and warranty-related services are not considered a separate performance obligation under the customer contracts. Most of the Company’s customers resell the Company’s product as part of their product and thus are tax-exempt; however, to the extent the Company collects and remits taxes on product sales from customers, it has elected to exclude from the measurement of transaction price such taxes.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Each distinct promise to transfer products is considered to be an identified performance obligation for which revenue is recognized upon transfer of control of the products to the customer. Although customers may place orders for products to be delivered on multiple dates that may be in different quarterly reporting periods, all of the orders are scheduled within one year from the order date. The Company has elected to record sales commissions when incurred, as the period over which the sales commission asset that would have been recognized is less than one year.
Customer contract liabilities consist primarily of obligations to deliver rebates to customers in the form of units of products which are included in accrued expenses and other current liabilities in the consolidated balance sheets. Other obligations to customers, which are included in accrued price protection liability in the consolidated balance sheets, consist of estimates of price protection rights offered to the Company’s end customer on products sold by the Company to the end customer’s contract manufacturer at a standard price that are later incorporated into the end customers’ product. The Company’s price adjustments included in accrued expenses and other current liabilities are discounts and rebates expected to be claimed by the Company’s distributors upon sell-through of the products to their customers, which are initially sold by the Company to the distributors at a standard price. Also included in accrued expenses and other current liabilities are amounts expected to be returned by distributors under stock rotation rights. The Company also records a right of return asset, consisting of amounts representing the products the Company expects to receive from customers in returns, which is included in inventory in the consolidated balance sheets, and is typically settled within six months of transfer of control to the customer, or the period over which stock rotation rights are based. Upon lapse of the time period for stock rotations, or the contractual end to price protection and rebate programs, which is approximately one to two years, and when the Company believes unclaimed amounts are no longer subject to payment and will not be paid, any remaining asset or liability is derecognized by an offsetting entry to cost of net revenue and net revenue. For additional disclosures regarding contract liabilities and other obligations to customers, see Note 12.
The Company assesses customer accounts receivable and contract assets for impairment in accordance with ASC 310-10-35.
Warranty
The Company generally provides a warranty on its products for a period of one to three years. The Company makes estimates of product return rates and expected costs to replace the products under warranty at the time revenue is recognized based on historical warranty experience and any known product warranty issues. If actual return rates and/or replacement costs differ significantly from these estimates, adjustments to recognize additional warranty expenses in cost of net revenue may be required in future periods.
Segment Information
The Company operates under one segment as it has developed, marketed and sold primarily only one class of similar products, radio-frequency, high-performance analog and mixed-signal communications system-on-chip solutions for the connected home, wired and wireless infrastructure markets and industrial and multi-market applications.
Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer reviews financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managers who are held accountable for operations, operating results and plans for products or components below the consolidated unit level. Accordingly, the Company reports under a single operating segment.
Stock-based Compensation
The Company measures the cost of employee services received in exchange for equity incentive awards, including restricted stock units, employee stock purchase rights and stock options based on the grant date fair value of the award. The Company calculates the fair value of restricted stock units and performance-based restricted stock units based on the fair market value of the Company’s common stock on the grant date. Stock-based compensation expense is then determined based on the number of restricted stock units that are expected to vest; for performance-based restricted stock units, this is the number of
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
units that are expected to vest during the performance period if it is probable that the Company will achieve the performance metrics specified in the underlying award agreement. The Company uses the Black-Scholes valuation model to calculate the fair value of stock options and employee stock purchase rights granted to employees. Stock-based compensation expense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vesting period. The Company recognizes compensation expense over the vesting period using the straight-line method and classifies these amounts in the consolidated statements of operations based on the department to which the related employee reports.
Research and Development
Costs incurred in connection with the development of the Company’s technology and future products are charged to research and development expense as incurred. From time to time, the Company enters into contracts for jointly funded research and development projects to develop technology that may be commercialized into a product in the future. The Company also obtains research and development funding grants from governments in certain jurisdictions in which it operates. Both of these types of income are reflected as a credit to research and development expense when such income has been earned and any contingencies associated with retaining such income have been resolved. During the three months ended March 31, 2024 and 2023, the Company recognized income from jointly funded research and development projects of $0.9 million and $8.9 million, respectively. While the Company retains ownership and rights to the underlying technology developed under the joint development projects, the Company may be required to repay all or a portion of the funds provided by the other parties under certain conditions, and defers such funds as liabilities until the repayment conditions have been resolved (Note 15).
Leases
The Company’s leases primarily consist of facility leases which are classified as operating leases. The Company assesses whether an arrangement contains a lease at inception. The Company recognizes a lease liability to make contractual payments under all leases with terms greater than twelve months and a corresponding right-of-use asset, representing its right to use the underlying asset for the lease term. The lease liability is initially measured at the present value of the lease payments over the lease term using the collateralized incremental borrowing rate when the implicit rate is unknown. Options to extend or terminate a lease are included in the lease term when it is reasonably certain that the Company will exercise such an option. The right-of-use asset is initially measured as the contractual lease liability plus any initial direct costs and prepaid lease payments made, less any lease incentives. Upon adoption of ASC 842 on January 1, 2019, the carrying value of lease-related restructuring liabilities for certain restructured leases existing at that date was offset against the related right-of-use assets. Lease expense is recognized on a straight-line basis over the lease term.
Upon adoption of ASC 842, the Company elected certain practical expedients and accordingly has (1) carried forward its prior assessments of (a) whether existing contracts on the January 1, 2019 adoption date contain leases, (b) classification of leases as operating or financing and (c) initial direct costs for existing leases and (2) considered hindsight in determining the lease term and assessing impairment of the right-of-use-asset. In addition, the Company used a portfolio approach for its facility leases when making judgments and estimates, such as the discount rate.
Leased right-of-use assets are subject to impairment testing as a long-lived asset at the asset-group level. The Company monitors its long-lived assets for indicators of impairment. As the Company’s leased right-of-use assets primarily relate to facility leases, early abandonment of all or part of a facility as part of a restructuring plan is typically an indicator of impairment. If impairment indicators are present, the Company tests whether the carrying amount of the leased right-of-use asset is recoverable including consideration of sublease income, and if not recoverable, measures impairment loss for the right-of-use asset or asset group.
Pension and Other Defined Benefit Retirement Obligations
The costs of pension and certain other defined benefit employee retirement benefits are required to be recognized based upon actuarial valuations. The related net retirement benefit obligation is recognized as the excess of the projected benefit obligation over the fair value of the plan assets. In measuring the retirement benefit obligation, the discount rate, expected long-term rate of return on plan assets, and long-term rate of salary increase are the most significant assumptions. Retirement benefit costs primarily represent the increase in the actuarial present value of the retirement benefit obligation.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Income Taxes
The Company provides for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes represent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are presented net as noncurrent. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted for changes in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when a judgment is made that is considered more likely than not that a tax benefit will not be realized. A decision to record a valuation allowance results in an increase in income tax expense or a decrease in income tax benefit. If the valuation allowance is released in a future period, income tax expense will be reduced accordingly.
The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The impact of an uncertain income tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be less than the ultimate assessment, a further charge to expense would result.
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company continually assesses the need for a valuation allowance on the deferred tax asset by evaluating both positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the consolidated statement of operations for the period that the adjustment is determined to be required.
On December 22, 2017, the Tax Cuts and Jobs Act, or the Tax Act, was enacted into U.S. tax law. In 2018, the Company made an accounting policy election to treat Global Intangible Low Taxed Income in accordance with the Tax Act as a period cost.
Comprehensive Income (Loss)
Comprehensive income (loss) is defined as the change in equity (net assets) of a business entity during a period from transactions and other events and circumstances from non-owner sources. Other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss), net of tax, such as foreign currency translation gains and losses and changes in fair value of projected benefit obligations for defined benefit plans.
Litigation and Settlement Costs
Legal costs are expensed as incurred. The Company is involved in disputes, litigation and other legal actions in the ordinary course of business. The Company continually evaluates uncertainties associated with litigation and records a charge equal to at least the minimum estimated liability for a loss contingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probable that an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the loss or range of loss can be reasonably estimated.
Recently Issued, Not Yet Adopted Accounting Pronouncements
In March 2024, the FASB issued ASU No. 2024-02, Codification Improvements - Amendments to Remove References to the Concepts Statements to remove various references to concepts statements from the FASB Accounting Standards Codification. This guidance is to clarify guidance, simplify wording or structure of guidance, and other minor improvements. These amendments are effective for the Company for annual periods in 2025, applied prospectively, with early adoption and retrospective application permitted. The Company intends to adopt the amendments in this update prospectively in 2025. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
In March 2024, the FASB issued ASU No. 2024-01, Compensation - Stock Compensation (Topic 718) - Scope Application of Profits Interest and Similar Awards, to clarify whether profits interest and similar awards should be accounted for in accordance with Topic 718, Compensation - Stock Compensation. The guidance applies to all business entities that issue profits interest awards as compensation to employees or nonemployees in exchange for goods or services. These amendments are effective for the Company for annual and interim periods in 2025, applied prospectively, with early adoption and retrospective application permitted. As the Company does not issue profit interest awards, the impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations.
In December 2023, the FASB issued ASU No. 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, to require enhanced income tax disclosures to provide information to assess how an entity’s operations and related tax risks, tax planning, and operational opportunities affect its tax rate and prospects for future cash flows. The amendments in this update provide that a business entity disclose (1) a tabular income tax rate reconciliation, using both percentages and amounts, (2) separate disclosure of any individual reconciling items that are equal to or greater than 5% of the amount computed by multiplying the income (loss) from continuing operations before income taxes by the applicable statutory income tax rate, and disaggregation of certain items that are significant and (3) amount of income taxes paid (net of refunds received) disaggregated by federal, state and foreign jurisdictions, including separate disclosure of any individual jurisdictions greater than 5% of total income taxes paid. These amendments are effective for the Company for annual periods in 2025, applied prospectively, with early adoption and retrospective application permitted. The Company intends to adopt the amendments in this update prospectively in 2025. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, since the amendments require only enhancement of existing income tax disclosures in the footnotes to the Company’s consolidated financial statements.
In November 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures, to require enhanced disclosures that include reportable segment expenses. The amendments in this update provide that a business entity disclose significant segment expenses, segment profit or loss (after significant segment expenses), and allows reporting of additional measures of a segments profit or loss if used in assessing segment performance. Such disclosures apply to entities with a single reportable segment. These amendments are effective for the Company for annual periods in 2024 and interim periods in 2025, retrospectively to all prior periods using the significant segment expense categories identified and disclosed in the period of adoption. The impact of the adoption of the amendments in this update is not expected to be material to the Company’s consolidated financial position and results of operations, since the requirements impact only segment reporting disclosures in the footnotes to the Company’s consolidated financial statements.
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, stock options and restricted stock units 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.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
The table below presents the computation of basic and diluted EPS: | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
| | | | (in thousands, except per share amounts) |
Numerator: | | | | | | | |
Net income (loss) | | | | | $ | (72,309) | | | $ | 9,533 | |
Denominator: | | | | | | | |
Weighted average common shares outstanding—basic | | | | | 82,349 | | | 79,471 | |
Dilutive common stock equivalents | | | | | — | | | 1,867 | |
Weighted average common shares outstanding—diluted | | | | | 82,349 | | | 81,338 | |
Net income (loss) per share: | | | | | | | |
Basic | | | | | $ | (0.88) | | | $ | 0.12 | |
Diluted | | | | | $ | (0.88) | | | $ | 0.12 | |
For the three months ended March 31, 2024 and 2023, the Company excluded common stock equivalents for outstanding stock-based awards, which represented potentially dilutive securities of 5.0 million and 2.2 million, respectively, from the calculation of diluted net income (loss) per share due to their anti-dilutive nature.
3. Business Combinations
Terminated Silicon Motion Merger
On May 5, 2022, MaxLinear 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 laws of the Cayman Islands, pursuant to which, among other things and subject to the terms and conditions thereof, MaxLinear agreed to acquire Silicon Motion pursuant to a statutory merger, under the laws of the Cayman Islands, 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, or SSDs, and other solid state storage devices.
On July 26, 2023, MaxLinear terminated the Merger Agreement and notified Silicon Motion that MaxLinear was relieved of its 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. For these same reasons, under the terms of the Merger Agreement, MaxLinear was not required to pay a break-up fee or other fee to Silicon Motion as a result of the termination of the Merger Agreement. Undefined capitalized terms in this paragraph have the same meaning as in the Merger Agreement. On August 16, 2023, Silicon Motion delivered to MaxLinear a notice, 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 MaxLinear arising from MaxLinear's alleged breaches of the Merger Agreement.
On October 5, 2023, Silicon Motion filed a Notice of Arbitration with the Singapore International Arbitration Centre alleging that MaxLinear breached the Merger Agreement. See Note 15 for more information on legal matters 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, in August 2023, the Company was required to pay to Wells Fargo Bank a ticking fee of $18.3 million.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Acquisition of Company Y
On January 17, 2023, the Company completed its acquisition of a business, or Company Y, pursuant to a Purchase and Sale Agreement, or the Purchase Agreement. The transaction consideration included $9.8 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.
Acquisition Consideration
The following table summarizes the fair value of purchase price consideration to acquire Company Y (in thousands):
| | | | | | | | |
Description | | Amount |
Fair value of purchase consideration: | | |
Cash | | $ | 9,824 | |
| | |
Contingent consideration(1) | | 2,600 | |
Total purchase price | | $ | 12,424 | |
_________________(1) The fair value of contingent consideration is based on applying the Monte Carlo simulation method to forecast achievement under various contingent consideration events which may result in up to $2.6 million in payments subject to the acquired business’s satisfying certain financial and personnel objectives by June 17, 2024 under the Purchase Agreement. Key inputs in the valuation include forecasted revenue, revenue volatility and discount rate. Underlying forecast mathematics were based on Geometric Brownian Motion in a risk-neutral framework and discounted back to the applicable period in which the accumulative thresholds were achieved at discount rates commensurate with the risk and expected payout term of the contingent consideration.
Purchase Price Allocation
The final allocation of purchase price as of the January 17, 2023 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 primarily includes $2.0 million in net operating liabilities, with $11.8 million in goodwill.
Assumptions in the Allocations of Purchase Price
Management prepared the purchase price allocations for Company Y 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 an acquired workforce and contingent consideration. Certain stockholders that are employees of Company Y were not required to remain employed in order to receive the contingent consideration; accordingly, the fair value of the contingent consideration was accounted for as a portion of the purchase consideration.
Estimates of fair value require management to make significant estimates and assumptions. The goodwill recognized is attributable primarily to the acquired workforce. 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.
Goodwill recorded in connection with Company Y was $11.7 million as of March 31, 2024. The Company does not expect to deduct any of the acquired goodwill for tax purposes.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
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 may include terminating employees, vacating certain leased facilities, and cancellation of contracts.
During the year ended December 31, 2023, the Company entered into restructuring plans to reduce its workforce. In the year ended December 31, 2023, we incurred $19.8 million in restructuring costs primarily related to severance costs and related expenses. In the three months ended March 31, 2024, the Company completed notification to remaining affected employees of the reduction in workforce, and incurred $22.6 million in restructuring costs, or a cumulative total of $42.4 million.
Restructuring costs in the three months ended March 31, 2024 included $19.9 million in severance costs and related expenses, substantially all of which pertained to statutory severance benefits in the jurisdictions in which the terminated employees were employed, and $2.7 million in non-cash charges related to exiting facilities and writing off of assets. Estimated restructuring costs remaining to be incurred for the restructuring plans pertain to write off of certain licenses and exiting of leased office space and are anticipated to occur in the remaining periods of 2024. The remaining restructuring costs are not expected to be material. 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 restructuring plans.
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, |
| | | | | 2024 | | 2023 |
| | | | (in thousands) |
Employee separation expenses | | | | | $ | 19,938 | | | $ | 4,589 | |
Lease related charges | | | | | 2,137 | | | 8 | |
Other | | | | | 555 | | | 51 | |
| | | | | $ | 22,630 | | | $ | 4,648 | |
The following table presents a roll-forward of the Company’s restructuring liability for the three months ended March 31, 2024. 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, 2023 | $ | 7,383 | | | $ | (2) | | | $ | 920 | | | $ | 8,301 | |
Restructuring charges | 19,938 | | | 2,137 | | | 555 | | | 22,630 | |
Cash payments | (6,781) | | | (18) | | | (178) | | | (6,977) | |
| | | | | | | |
Non-cash charges and adjustments | (7) | | | (1,816) | | | (528) | | | (2,351) | |
| | | | | | | |
Liability as of March 31, 2024 | 20,533 | | | 301 | | | 769 | | | 21,603 | |
Less: current portion as of March 31, 2024 | (20,533) | | | (301) | | | (769) | | | (21,603) | |
Long-term portion as of March 31, 2024 | $ | — | | | $ | — | | | $ | — | | | $ | — | |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
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).
The following table presents the changes in the carrying amount of goodwill for the periods indicated: | | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
| | (in thousands) |
Beginning balance | | $ | 318,588 | | | $ | 306,739 | |
Acquisitions (Note 3) | | — | | | 12,171 | |
| | | | |
| | | | |
Ending balance | | $ | 318,588 | | | $ | 318,910 | |
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. As a result of the Company’s impairment assessment, no goodwill impairment was recognized as of October 31, 2023.
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, 2024 and 2023, there were no indications of impairment of the Company’s goodwill balances.
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, 2024 | | December 31, 2023 |
| Weighted Average Useful Life (in Years) | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| | | (in thousands) |
Licensed technology | 6.9 | | $ | 20,188 | | | $ | (1,365) | | | $ | 18,823 | | | $ | 20,133 | | | $ | (1,431) | | | $ | 18,702 | |
Developed technology | 6.9 | | 311,261 | | | (271,856) | | | 39,405 | | | 311,261 | | | (263,635) | | | 47,626 | |
Trademarks and trade names | 6.2 | | 14,800 | | | (14,312) | | | 488 | | | 14,800 | | | (14,276) | | | 524 | |
Customer relationships | 5.0 | | 128,800 | | | (126,731) | | | 2,069 | | | 128,800 | | | (126,347) | | | 2,453 | |
| | | | | | | | | | | | | |
| | | | | | | | | | | | | |
Patents | 7.0 | | 4,780 | | | (626) | | | 4,154 | | | 4,780 | | | (455) | | | 4,325 | |
| 6.1 | | $ | 479,829 | | | $ | (414,890) | | | $ | 64,939 | | | $ | 479,774 | | | $ | (406,144) | | | $ | 73,630 | |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
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, |
| | | | | 2024 | | 2023 |
| | | (in thousands) |
Cost of net revenue | | | | | $ | 8,468 | | | $ | 9,458 | |
Research and development | | | | | — | | | 1 | |
Selling, general and administrative | | | | | 591 | | | 928 | |
| | | | | $ | 9,059 | | | $ | 10,387 | |
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, |
| | 2024 | | 2023 |
| | (in thousands) |
Beginning balance | | $ | 73,630 | | | $ | 109,316 | |
| | | | |
Additions | | 368 | | | 630 | |
Other disposals | | — | | | (769) | |
| | | | |
Amortization | | (9,059) | | | (10,387) | |
Impairment losses | | — | | | (2,438) | |
Ending balance | | $ | 64,939 | | | $ | 96,352 | |
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, 2024, no impairment losses related to finite-lived intangible assets were recognized. During the three months ended March 31, 2023, impairment losses related to finite-lived intangible assets of $2.4 million, were recognized. The impairment losses were attributable to certain purchased licensed technology.
The following table presents future amortization of the Company’s finite-lived intangible assets at March 31, 2024: | | | | | | | | |
| | Amount |
| | (in thousands) |
2024 (9 months) | | $ | 14,673 | |
2025 | | 14,774 | |
2026 | | 13,735 | |
2027 | | 9,957 | |
2028 | | 4,620 | |
Thereafter | | 7,180 | |
Total | | $ | 64,939 | |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
6. Financial Instruments
The composition of financial instruments is as follows: | | | | | | | | | | | | | | |
| | Fair Value |
| | March 31, 2024 | | December 31, 2023 |
| | (in thousands) |
Liabilities | | | | |
Contingent consideration (Note 3) | | $ | 2,535 | | | $ | 2,462 | |
The fair value of the Company’s financial instruments is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants and is recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The levels are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available.
The Company classifies its financial instruments that are categorized within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted market prices or alternate pricing sources and models utilizing market observable inputs, respectively.
The contingent consideration liability as of March 31, 2024 and December 31, 2023 is associated with the Company’s acquisition of Company Y in January 2023 (Note 3). The contingent consideration liability is classified as a Level 3 financial instrument. The contingent consideration as it relates to Company Y is subject to the acquired business’s satisfaction of certain personnel objectives by June 17, 2024. The fair value of contingent consideration is based on (1) applying the Monte Carlo simulation method, with underlying forecast mathematics based on Geometric Brownian motion in a risk-neutral framework, to forecast achievement of the acquired business’ financial objectives, if applicable, under various possible contingent consideration events and (2) a probability based methodology using management’s inputs and assumptions to forecast achievement of the acquired business’ personnel objectives which included an assumption of total payments up to $2.6 million to Company Y. Key inputs in the valuation include forecasted revenue, revenue volatility, discount rate and discount term as it relates to the financial objectives and probability of achievement, discount term and discount rate as it relates to the personnel objectives.
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | Fair Value Measurements at March 31, 2024 |
| Balance at March 31, 2024 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (in thousands) |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liabilities | | | | | | | |
Contingent consideration | $ | 2,535 | | | $ | — | | | $ | — | | | $ | 2,535 | |
| | | | | | | |
| | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | |
| | | Fair Value Measurements at December 31, 2023 |
| Balance at December 31, 2023 | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| (in thousands) |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
Liabilities | | | | | | | |
Contingent consideration | $ | 2,462 | | | $ | — | | | $ | — | | | $ | 2,462 | |
| | | | | | | |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
The following summarizes the activity in Level 3 financial instruments:
| | | | | | | | | | | | | | |
| | Three Months Ended March 31, |
| | 2024 | | 2023 |
Contingent consideration
| | | | |
Beginning balance
| | $ | 2,462 | | | $ | 2,941 | |
Acquisitions(1)(Note 3) | | — | | | 2,200 | |
| | | | |
Accretion of discount(1) | | 73 | | | 112 | |
Ending balance
| | $ | 2,535 | | | $ | 5,253 | |
_____________________
(1) These changes to the balance associated with the estimated fair value of contingent consideration for the three months ended March 31, 2024 and 2023 were due to the addition of contingent consideration associated with the acquisition of Company Y in January 2023 and accretion of discounts on contingent consideration.
There were no transfers between Level 1, Level 2, or Level 3 fair value hierarchy categories of financial instruments. for the three months ended March 31, 2024.
Financial Instruments Not Recorded 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 as described below. 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).
Included in other long-term assets are investments in privately held entities of $11.8 million as of March 31, 2024 and December 31, 2023. The Company does not have the ability to exercise significant influence or control over such entity and has accounted for the investments as financial instruments. Given that fair values for such investments are not readily determinable, the Company is electing to measure these investments 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.
7. Balance Sheet Details
Cash, cash equivalents and restricted cash consist of the following: | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | (in thousands) |
Cash and cash equivalents | | $ | 191,882 | | | $ | 187,288 | |
Short-term restricted cash | | 1,028 | | | 1,051 | |
Long-term restricted cash | | 20 | | | 17 | |
Total cash, cash equivalents and restricted cash | | $ | 192,930 | | | $ | 188,356 | |
| | | | |
| | | | |
| | | | |
As of March 31, 2024 and December 31, 2023, cash and cash equivalents included money market funds of approximately $110.9 million and $78.1 million, respectively. As of March 31, 2024 and December 31, 2023, the Company had restricted cash of approximately $1.0 million and $1.1 million, respectively. The cash is restricted in connection with guarantees for certain import duties and office leases.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Inventory consists of the following: | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | (in thousands) |
| | | | |
Work-in-process | | $ | 58,676 | | | $ | 60,368 | |
Finished goods | | 37,449 | | | 39,540 | |
| | | | |
| | | | |
| | $ | 96,125 | | | $ | 99,908 | |
Property and equipment, net consists of the following: | | | | | | | | | | | | | | | | | |
| Useful Life (in Years) | | March 31, 2024 | | December 31, 2023 |
| | | (in thousands) |
Furniture and fixtures | 5 | | $ | 3,958 | | | $ | 3,995 | |
Machinery and equipment | 3-5 | | 78,070 | | | 76,732 | |
Masks and production equipment | 2-5 | | 59,948 | | | 54,240 | |
Software | 3 | | 11,590 | | | 11,427 | |
Leasehold improvements | 1-5 | | 34,712 | | | 35,867 | |
Construction in progress | N/A | | 570 | | | 348 | |
| | | 188,848 | | | 182,609 | |
Less: accumulated depreciation and amortization | | | (120,510) | | | (116,178) | |
| | | $ | 68,338 | | | $ | 66,431 | |
Depreciation expense for the three months ended March 31, 2024 and 2023 was $5.5 million and $6.4 million, respectively.
In March 2022, the Company entered into a note receivable with a supplier for $10.0 million which is included in other long-term assets as of March 31, 2024 and December 31, 2023, respectively. In September 2023, the terms of this note receivable were renegotiated, and the first initial repayment of $1.5 million is now due by March 31, 2025, and annual repayments of $1.7 million per year are due annually thereafter by March 31, from 2026 through 2030, provided that certain production utilization targets for the prior year are met. Previously, repayments of $2.0 million per year were due annually by March 31, in years 2024 through 2027.
Accrued price protection liability consists of the following activity: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2024 | | 2023 |
| (in thousands) |
Beginning balance | $ | 71,684 | | | $ | 113,274 | |
| | | |
Charged as a reduction of revenue | 12,132 | | | 28,536 | |
| | | |
Payments | (18,583) | | | (38,013) | |
Ending balance | $ | 65,233 | | | $ | 103,797 | |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
The decrease in price protection liability from approximately $71.7 million as of December 31, 2023 to approximately $65.2 million as of March 31, 2024 was driven by increased sell-through activity by distributors to their end customers.
Accrued expenses and other current liabilities consist of the following: | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 | | |
| (in thousands) | | |
| | | | | |
| | | | | |
Accrued technology license payments | $ | 4,540 | | | $ | 3,843 | | | |
Accrued professional fees | 4,921 | | | 3,736 | | | |
Accrued engineering and production costs | 5,620 | | | 2,861 | | | |
Accrued restructuring | 21,603 | | | 8,301 | | | |
| | | | | |
Accrued royalty | 348 | | | 603 | | | |
Short-term lease liabilities | 9,167 | | | 9,132 | | | |
| | | | | |
Accrued customer credits | 5,564 | | | 3,984 | | | |
| | | | | |
Income tax liability | 379 | | | 521 | | | |
Customer contract liabilities | 1,597 | | | 1,597 | | | |
Accrued obligations to customers for price adjustments | 36,811 | | | 54,837 | | | |
Accrued obligations to customers for stock rotation rights | 401 | | | 349 | | | |
Contingent consideration - current portion | 2,535 | | | 2,462 | | | |
Other | 4,646 | | | 6,242 | | | |
| $ | 98,132 | | | $ | 98,468 | | | |
The following table summarizes the change in balances of accumulated other comprehensive income (loss) by component: | | | | | | | | | | | | | | | | | | | | | |
| | | Cumulative Translation Adjustments | | | | Pension and Other Defined Benefit Plan Obligation | | Total |
| | | (in thousands) |
Balance at December 31, 2023 | | | $ | (5,059) | | | | | $ | 1,268 | | | $ | (3,791) | |
Other comprehensive income (loss) before reclassifications, net of tax | | | (1,782) | | | | | — | | | (1,782) | |
| | | | | | | | | |
| | | | | | | | | |
Balance at March 31, 2024 | | | $ | (6,841) | | | | | $ | 1,268 | | | $ | (5,573) | |
8. Debt
Debt
The carrying amount of the Company’s long-term debt consists of the following: | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 | | |
| | (in thousands) |
Principal balance: | | | | | | |
Initial term loan under the June 23, 2021 credit agreement | | $ | 125,000 | | | $ | 125,000 | | | |
| | | | | | |
| | | | | | |
Total principal balance | | 125,000 | | | 125,000 | | | |
Less: | | | | | | |
Unamortized debt discount | | (540) | | | (571) | | | |
Unamortized debt issuance costs | | (1,931) | | | (2,054) | | | |
Net carrying amount of long-term debt | | 122,529 | | | 122,375 | | | |
Less: current portion of long-term debt | | — | | | — | | | |
Long-term debt, non-current portion | | $ | 122,529 | | | $ | 122,375 | | | |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
As of March 31, 2024 and December 31, 2023, the weighted average effective interest rate on aggregate debt was approximately 7.9% and 7.6%, respectively.
During the three months ended March 31, 2024 and 2023, the Company recognized total amortization of debt discount and debt issuance costs of $0.2 million and $0.2 million, respectively, to interest expense.
The approximate aggregate fair value of the term loans outstanding as of March 31, 2024 and December 31, 2023 was $134.8 million and $135.7 million, respectively, which was estimated on the basis of inputs that are observable in the market and which is considered a Level 2 measurement method in the fair value hierarchy (Note 6).
As of March 31, 2024, the outstanding principal balance of $125.0 million is due in full on June 23, 2028, upon maturity of the loan.Initial Term Loan and Revolving Facility under the June 23, 2021 Credit Agreement On June 23, 2021, the Company entered into a Credit Agreement, or the June 23, 2021 Credit Agreement, by and among the Company, the lenders from time to time party thereto, and Wells Fargo Bank, National Association, as administrative agent and collateral agent, that provides for a senior secured term B loan facility, or the “Initial Term Loan under the June 23, 2021 Credit Agreement,” in an aggregate principal amount of $350.0 million and a senior secured revolving credit facility, or the “Revolving Facility,” in an aggregate principal amount of up to $100.0 million. The proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement were used (i) to repay in full all outstanding indebtedness under that certain Credit Agreement dated May 12, 2017, by and among the Company, MUFG Bank Ltd., as administrative agent and MUFG Union Bank, N.A., as collateral agent and the lenders from time to time party thereto (as amended by Amendment No. 1, dated July 31, 2020) and (ii) to pay fees and expenses incurred in connection therewith. The remaining proceeds of the Initial Term Loan under the June 23, 2021 Credit Agreement are available for general corporate purposes and the proceeds of the Revolving Facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries. As of March 31, 2024, the Revolving Facility was undrawn. Under the terminated amended and restated commitment letter with Wells Fargo Bank and other lenders entered into in connection with the previously pending (now terminated) merger with Silicon Motion (Note 3), the Company had expected to repay the remaining outstanding term loans under this agreement upon closing of the merger.
The June 23, 2021 Credit Agreement permits the Company to request incremental loans in an aggregate principal amount not to exceed the sum of an amount equal to the greater of (x) $175.0 million and (y) 100% of consolidated EBITDA, plus the amount of certain voluntary prepayments, plus an unlimited amount that is subject to pro forma compliance with certain first lien net leverage ratio, secured net leverage ratio and total net leverage ratio tests. Incremental loans are subject to certain additional conditions, including obtaining additional commitments from the lenders then party to the June 23, 2021 Credit Agreement or new lenders.
Under the June 23, 2021 Credit Agreement, the Initial Term Loan 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 Term SOFR 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 Term SOFR 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 Term SOFR 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 Term SOFR 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 will amortize in equal quarterly installments equal to 0.25% of the original principal amount of the Initial Term Loan under the June 23, 2021 Credit Agreement, with the balance payable on the maturity date. The June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.
The Company is required to make mandatory prepayments of the outstanding principal amount of term loans under the June 23, 2021 Credit Agreement with the net cash proceeds from the disposition of certain assets and the receipt of insurance proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow beyond stated threshold amounts, and from the incurrence of certain indebtedness. The Company
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
has the right to prepay its term loans under the June 23, 2021 Credit Agreement, in whole or in part, at any time without premium or penalty, subject to certain limitations and a 1.0% soft call premium applicable during the first six months following the closing date of the June 23, 2021 Credit Agreement. The Initial Term Loan under the June 23, 2021 Credit Agreement will mature on June 23, 2028, at which time all outstanding principal and accrued and unpaid interest on the Initial Term Loan under the June 23, 2021 Credit Agreement must be repaid. The Revolving Facility will mature on June 23, 2026, at which time all outstanding principal and accrued and unpaid interest under the Revolving Facility must be repaid. The Company is also obligated to pay fees customary for a credit facility of this size and type.
The Company’s obligations under the June 23, 2021 Credit Agreement are required to be guaranteed by certain of its domestic subsidiaries meeting materiality thresholds set forth in the June 23, 2021 Credit Agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the subsidiary guarantors pursuant to a Security Agreement, dated as of June 23, 2021, by and among the Company, the subsidiary guarantors from time to time party thereto, and Wells Fargo Bank, National Association, as collateral agent.
The June 23, 2021 Credit Agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its restricted subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, and sell assets, in each case, subject to limitations and exceptions set forth in the June 23, 2021 Credit Agreement. The Revolving Facility also prohibits the Company from having a secured net leverage ratio in excess of 3.50:1.00 (subject to a temporary increase to 3.75:1.00 following the consummation of certain material permitted acquisitions) as of the last day of any fiscal quarter of the Company (commencing with the fiscal quarter ending September 30, 2021) if the aggregate borrowings under the Revolving Facility exceed 1% of the aggregate commitments thereunder (subject to certain exceptions set forth in the June 23, 2021 Credit Agreement) as of such date. As of March 31, 2024, the Company was in compliance with such covenants. The June 23, 2021 Credit Agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, covenant defaults, change in control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, the lenders may require immediate payment of all obligations under the June 23, 2021 Credit Agreement and may exercise certain other rights and remedies provided for under the June 23, 2021 Credit Agreement, the other loan documents and applicable law.
The debt is carried at its principal amount, net of unamortized debt discount and issuance costs, and is not adjusted to fair value each period. The issuance date fair value of the liability component of the debt in the amount of $350.2 million was determined using a discounted cash flow analysis, in which the projected interest and principal payments were discounted back to the issuance date of the term loan at a market interest rate for nonconvertible debt of 3.4%, which represents a Level 2 fair value measurement. The debt discount of $0.9 million and debt issuance costs of $2.9 million associated with the Initial Term Loan under the June 23, 2021 Credit Agreement are being amortized to interest expense using the effective interest method over its seven-year term. Debt issuance costs of $0.4 million associated with the Revolving Facility are being amortized to interest expense over its five-year term.
9. Stock-Based Compensation
Employee Stock-Based Compensation Plans
At March 31, 2024, the Company had stock-based compensation awards outstanding under the following plans: the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP. Refer to the Company’s Annual Report for a summary of its stock-based compensation and equity plans as of December 31, 2023. There have been no material changes to the terms of the Company’s equity incentive plans during the three months ended March 31, 2024.
As of March 31, 2024, the number of shares of common stock available for future issuance under the 2010 Plan was 16,548,604 shares. As of March 31, 2024, the number of shares of common stock available for future issuance under the ESPP was 6,627,302 shares.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Employee Incentive Bonus
The Company’s Executive Incentive Bonus Plan permits the settlement of awards under the plan in any combination of cash or shares of its common stock. The Company settles a majority of bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company’s common stock as determined in trading on the applicable stock exchange, on a date approved by the Board of Directors. In connection with the Company’s bonus programs, in February 2024, the Company issued 0.4 million freely-tradable (subject to certain restrictions for affiliates) shares of the Company’s common stock in settlement of bonus awards to employees, including executives, for the 2023 performance period. At March 31, 2024, the Company has an accrual of $7.6 million for bonus awards for employees for year-to-date achievement in the 2024 performance period, which the Company intends to settle primarily in shares of its common stock, unless otherwise required to be settled in cash due to local laws or agreements. The Company’s compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
Stock-Based Compensation
The Company recognizes stock-based compensation in the consolidated statements of operations, based on the department to which the related employee reports, as follows: | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
| | | (in thousands) |
Cost of net revenue | | | | | $ | 181 | | | $ | 210 | |
Research and development | | | | | 10,441 | | | 11,455 | |
Selling, general and administrative | | | | | 6,439 | | | 4,783 | |
| | | | | | | |
| | | | | $ | 17,061 | | | $ | 16,448 | |
The total unrecognized compensation cost related to unvested restricted stock units as of March 31, 2024 was $146.6 million, and the weighted average period over which these equity awards are expected to vest is 2.37 years.
The total unrecognized compensation cost related to unvested performance-based restricted stock units as of March 31, 2024 was $9.1 million as a result of revised estimates of performance achievement levels as of that date, and the weighted average period over which these equity awards are expected to vest is 1.86 years. Actual levels of future performance for the unvested periods may differ from current estimates.
The total unrecognized compensation cost related to unvested stock options as of March 31, 2024 was $29.5 million, and the weighted average period over which these equity awards are expected to vest is 3.89 years.
Restricted Stock Units
A summary of the Company’s restricted stock unit activity is as follows: | | | | | | | | | | | |
| Number of Shares (in thousands) | | Weighted-Average Grant-Date Fair Value per Share |
Outstanding at December 31, 2023 | 5,632 | | | $ | 36.72 | |
Granted | 2,299 | | | 18.78 | |
| | | |
Vested | (1,313) | | | 31.07 | |
Canceled | (387) | | | 38.48 | |
Outstanding at March 31, 2024 | 6,231 | | | $ | 31.18 | |
Performance-Based Restricted Stock Units
Performance-based restricted stock units are eligible to vest at the end of each year-long performance period, as defined in the underlying agreement, in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over baseline results relative to the growth rates for a peer group of companies for the same metrics and periods.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
For the performance-based restricted stock units granted to date, 60% of each performance-based award is subject to the net sales metric for the performance period and 40% is subject to the non-GAAP diluted earnings per share metric for the performance period. The maximum percentage for a particular metric is 250% of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30% and 100%, respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period.
As of March 31, 2024, achievement to date under the performance metrics specified in the respective award agreements are based on its expected revenue and non-GAAP diluted EPS results over the performance periods and calculated growth rates relative to its peers’ expected results based on data available, as defined in the respective award agreements. To the extent any prior achievement levels are no longer probable, any compensation expense recorded is adjusted to the revised achievement levels.
A summary of the Company’s performance-based restricted stock unit activity is as follows: | | | | | | | | | | | |
| Number of Shares (in thousands) | | Weighted-Average Grant-Date Fair Value per Share |
Outstanding at December 31, 2023 | 2,653 | | | $ | 34.38 | |
Granted(1) | 1,460 | | | 17.77 | |
| | | |
Vested | (6) | | | 58.31 | |
Canceled | (598) | | | 41.90 | |
Outstanding at March 31, 2024 | 3,509 | | | $ | 26.15 | |
________________ (1) Number of shares granted is based on the maximum percentage achievable in the performance-based restricted stock unit award.
Employee Stock Purchase Rights and Stock Options
Employee Stock Purchase Rights
During the three months ended March 31, 2024 and 2023, there were no shares of common stock purchased under the ESPP.
The fair values of employee stock purchase rights were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions: | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Weighted-average grant date fair value per share | | | | | $ | 6.35 | | | $ | 11.97 | |
Risk-free interest rate | | | | | 5.41 | % | | 4.54 | % |
Dividend yield | | | | | — | % | | — | % |
Expected life (in years) | | | | | 0.50 | | 0.50 |
Volatility | | | | | 70.46 | % | | 59.78 | % |
The risk-free interest rate assumption was based on rates for United States (U.S.) Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term is the duration of the offering period for each grant date. In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company’s daily closing stock prices.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Stock Options
A summary of the Company’s stock options activity is as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Options (in thousands) | | Weighted-Average Exercise Price | | Weighted-Average Contractual Term (in years) | | Aggregate Intrinsic Value (in thousands) |
Outstanding at December 31, 2023 | 375 | | | $ | 17.29 | | | | | |
Granted | 2,688 | | | 19.45 | | | | | |
| | | | | | | |
Exercised | (39) | | | 7.68 | | | | | |
Canceled | (1) | | | 23.75 | | | | | |
Outstanding at March 31, 2024 | 3,023 | | | $ | 19.33 | | | 8.95 | | $ | 4,493 | |
Vested and expected to vest at March 31, 2024 | 3,023 | | | $ | 19.33 | | | 8.95 | | $ | 4,493 | |
Exercisable at March 31, 2024 | 335 | | | $ | 18.40 | | | 1.36 | | $ | 811 | |
The fair values of stock options were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions: | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023(1) |
Weighted-average grant date fair value per share | | | | | $10.84 - $11.24 | | N/A |
Risk-free interest rate | | | | | 4.33 | % | | N/A |
Dividend yield | | | | | — | % | | N/A |
Expected life (in years) | | | | | 6.50 | | N/A |
Volatility | | | | | 57.50 | % | | N/A |
__________________ (1) No options were granted during the three months ended March 31, 2023.
The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term of the options was calculated using the simplified method as prescribed by guidance provided by the SEC. This decision was based on the lack of historical data due to the Company’s limited number of stock option exercises under the 2010 Equity Incentive Plan. Estimated volatility incorporates historical volatility of the Company over the expected term based on the Company's daily closing stock prices.
The intrinsic value of stock options exercised was $0.5 million and $0.1 million in the three months ended March 31, 2024 and 2023, respectively.
Cash received from exercise of stock options was negligible during each of the three months ended March 31, 2024 and 2023.
The tax benefit from stock options exercised was $0.8 million and $0.1 million during the three months ended March 31, 2024 and 2023, respectively.
10. Income Taxes
The provision for income taxes primarily relates to projected federal, state, and foreign income taxes. To determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. In addition, the tax effects of certain significant or unusual items are recognized discretely in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.
The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the temporary differences reverse. The Company records a valuation
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
allowance to reduce its deferred taxes to the amount it believes is more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence quarterly, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. Based upon the Company’s review of all positive and negative evidence, the Company continues to have a valuation allowance on its state deferred tax assets, certain of its federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where the Company has cumulative losses or otherwise is not expected to utilize certain tax attributes. The Company does not incur expense or benefit in certain tax-free jurisdictions in which it operates.
The Company recorded an income tax benefit of $1.8 million in the three months ended March 31, 2024 and an income tax provision of $15.6 million in the three months ended March 31, 2023.
The difference between the Company’s effective tax rate and the 21.0% United States federal statutory rate for the three months ended March 31, 2024 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including tax credits, stock based compensation, and tax shortfalls related to stock-based compensation.
The difference between the Company’s effective tax rate and the 21.0% U.S. federal statutory rate for the three months ended March 31, 2023 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, research and development credits, stock based compensation, excess tax benefits related to stock-based compensation, and the release of certain reserves for uncertain tax positions under ASC 740-10. The permanent tax item related to global intangible low-taxed income in this period also reflected the then recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.
Income tax positions must meet a more-likely-than-not threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are de-recognized in the first financial reporting period in which that threshold is no longer met. The Company records potential penalties and interest accrued related to unrecognized tax benefits within the consolidated statements of operations as income tax expense.
During the three months ended March 31, 2024, the Company’s unrecognized tax benefits increased by $0.5 million. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. Accrued interest and penalties associated with uncertain tax positions as of March 31, 2024 were approximately $0.3 million and $0.01 million, respectively.
The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At March 31, 2024, the statutes of limitations for the assessment of federal, state, and foreign income taxes are closed for the years before 2020, 2019, and 2017, respectively.
The Company’s subsidiary in Singapore operates under certain tax incentives in Singapore, which are generally effective through March 2027, and are conditional upon meeting certain employment and investment thresholds in Singapore. Under the incentives, qualifying income derived from certain sales of the Company’s integrated circuits is taxed at a concessionary rate over the incentive period, and there are reduced Singapore withholding taxes on certain intercompany royalties during the incentive period. The Company recorded a tax provision in the three months ended March 31, 2024 and 2023 at the incentive rate.
11. Concentration of Credit Risk, Significant Customers and Geographic Information
Concentration of Credit Risk
Financial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. Collateral is generally not required for customer receivables. The Company limits its exposure to credit loss by placing its cash with high credit quality financial institutions. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on its deposits of cash and cash equivalents.
Significant Customers
The Company markets its products and services to manufacturers of a wide range of electronic devices (Note 1). The Company sells its products both directly to end-customers and through third-party distributors, both of which are referred to as
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
the Company’s customers (Note 12). Revenue is also generated from sales of intellectual property, and the recipients of such intellectual property are also referred to as the Company’s customers. The Company makes periodic evaluations of the credit worthiness of its customers.
Customers comprising 10% or greater of net revenues for each of the periods presented are as follows: | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Percentage of total net revenue | | | | | | | |
Customer A | | | | | 23 | % | | * |
Customer B | | | | | 13 | % | | 15 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
____________________________
* Represents less than 10% of the net revenue for the period presented.
The following table presents balances that are 10% or greater of accounts receivable, based on the Company’s billings to its customers. | | | | | | | | | | | | | | | | | |
| March 31, 2024 | | December 31, 2023 | | | | | | |
Percentage of gross accounts receivable | | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Customer C | 32 | % | | 33 | % | | | | | | |
Customer D | 38 | % | | 24 | % | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | | | | | |
Significant Suppliers
Suppliers comprising greater than 10% or greater of total inventory purchases are as follows: | | | | | | | | | | | | | | | | | | |
| | | | Three Months Ended March 31, |
| | | | | | 2024 | | 2023 |
Vendor A | | | | | | * | | 23 | % |
Vendor B | | | | | | 45 | % | | 25 | % |
Vendor C | | | | | | 11 | % | | * |
Vendor D | | | | | | * | | 11 | % |
| | | | | | | | |
____________________________ * Represents less than 10% of total inventory purchases for the period presented.
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
Geographic Information
The Company’s consolidated net revenues by geographic area based on ship-to location are as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
| | | | | | | | | Amount | | % of total net revenue | | Amount | | % of total net revenue |
Asia | | | | | | | | | $ | 55,832 | | | 59 | % | | $ | 192,502 | | | 77 | % |
Europe | | | | | | | | | 7,448 | | | 8 | % | | 40,216 | | | 16 | % |
United States | | | | | | | | | 30,474 | | | 32 | % | | 12,184 | | | 5 | % |
Rest of world | | | | | | | | | 1,515 | | | 2 | % | | 3,539 | | | 1 | % |
Total | | | | | | | | | $ | 95,269 | | | 100 | % | | $ | 248,441 | | | 100 | % |
The products shipped to individual countries or territories representing greater than 10% of net revenue for each of the periods presented are as follows: | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
Percentage of total net revenue | | | | | | | |
Hong Kong | | | | | 28 | % | | 31 | % |
China | | | | | * | | 16 | % |
| | | | | | | |
| | | | | | | |
| | | | | | | |
____________________________ * Represents less than 10% of total net revenue for the respective period.
The determination of which country a particular sale is allocated to is based on the destination of the product shipment. No other individual country accounted for more than 10% of net revenue during these periods. Although a large percentage of the Company’s products is shipped to Asia, and in particular, Hong Kong and mainland China, the Company believes that a significant number of the systems designed by customers and incorporating the Company’s semiconductor products are subsequently sold outside Asia to Europe, Middle East, and Africa markets and North American markets.
Long-lived assets, which consists of property and equipment, net, leased right-of-use assets, intangible assets, net, and goodwill by geographic area are as follows (in thousands): | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | March 31, 2024 | | December 31, 2023 |
| | | | |
| | Amount | | % of total | | Amount | | % of total |
United States | | $ | 331,552 | | | 69 | % | | $ | 337,696 | | | 69 | % |
Singapore | | 114,115 | | | 24 | % | | 113,248 | | | 23 | % |
Rest of world | | 33,666 | | | 7 | % | | 38,969 | | | 8 | % |
Total | | $ | 479,333 | | | 100 | % | | $ | 489,913 | | | 100 | % |
| | | | | | | | |
| MAXLINEAR, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited) | |
12. Revenue from Contracts with Customers
Revenue by Market
The table below presents disaggregated net revenues by market (in thousands): | | | | | | | | | | | | | | | | | |
| | | Three Months Ended March 31, |
| | | | | 2024 | | 2023 |
| | | | | |
Broadband | | | | | $ | 33,055 | | | $ | 81,681 | |
% of net revenue | | | | | 35 | % | | 33 | % |
Connectivity | | | | | 9,711 | | | 66,268 | |
% of net revenue | | | | | 10 | % | | 27 | % |
Infrastructure | | | | | 32,605 | | | 46,302 | |
% of net revenue | | | | | 34 | % | | 19 | % |
Industrial and multi-market | | | | | 19,898 | | | 54,191 | |
% of net revenue | | | | | 21 | % | | 22 | % |
Total net revenue | | | | | $ | 95,269 | | | $ | 248,442 | |
Revenues from sales through the Company’s distributors accounted for 36% and 43% of net revenue for the three months ended March 31, 2024 and 2023, respectively. Revenue related to the sales of intellectual property recognized during the three months ended March 31, 2024 has been allocated by market based upon the usage of such intellectual property.
Contract Liabilities
As of March 31, 2024 and December 31, 2023, customer contract liabilities were approximately $1.6 million and $1.6 million, respectively, and consisted primarily of advanced payments received for which performance obligations have not been completed. Revenue recognized in each of the three months ended March 31, 2024 and 2023 that was included in the contract liability balance as of the beginning of each of those respective periods was immaterial.
There were no material changes in the contract liabilities balance during the three months ended March 31, 2024 and 2023.
Obligations to Customers for Price Adjustments and Returns and Assets for Right-of-Returns
As of March 31, 2024 and December 31, 2023, obligations to customers consisting of estimates of price protection rights offered to the Company’s end customers totaled $65.2 million and $71.7 million, respectively, and are included in accrued price protection liability in the consolidated balance sheets. For activity in this account, including amounts included in net revenue, refer to Note 7.
Other obligations to customers representing estimates of price adjustments to be claimed by distributors upon sell-through of their inventory to their end customer and estimates of stock rotation returns to be claimed by distributors on products sold as of March 31, 2024 were $36.8 million and $0.4 million, respectively, and as of December 31, 2023 were $54.8 million and $0.3 million, respectively, and are included in accrued expenses and other current liabilities in the consolidated balance sheets (Note 7). The reason for the significant decrease in accrued obligations to customers for price adjustments from approximately $54.8 million as of December 31, 2023 to approximately $