Company Delivers First Quarter 2017 Revenue of $88.8 Million,
Operating Cash Flow of $22.7 Million, GAAP Diluted Earnings per Share of $0.12,
and Non-GAAP Diluted Earnings per Share of $0.33
CARLSBAD, Calif., May 09, 2017 (GLOBE NEWSWIRE) -- MaxLinear, Inc. (NYSE:MXL), a leading provider of radio frequency (RF) and mixed-signal integrated circuits for cable and satellite broadband communications, the connected home, data center, metro, long-haul fiber networks, and wireless infrastructure, today announced financial results for the first quarter ended March 31, 2017.
“We are pleased to announce first quarter 2017 revenue of $88.8 million, which marks MaxLinear’s return to sequential top-line revenue growth. In Q1 2017, our revenue growth was driven by cable and terrestrial broadband operator applications, which more than offset sequential declines in wireless backhaul and optical interconnect revenues. GAAP gross margin improved to 59.6 percent and Non-GAAP gross margin was 62.7 percent as supply-chain related cost savings more than offset the anticipated adverse impact of increased revenue contribution from lower-margin terrestrial receiver shipments into South America. Our sequential GAAP and Non-GAAP operating expenses were almost flat owing to our disciplined expense management, which resulted in another strong quarter of operating cash flows of $22.7 million,” commented Kishore Seendripu, Ph.D., Chairman and CEO.
“Q1 2017 was a remarkably busy quarter on the corporate development front. We are excited about the prospects for our recently closed acquisition of Marvell's G.hn business, as well as our pending acquisition of Exar Corporation. Exar’s high performance analog technology portfolio and extensive indirect sales channel are highly complementary to MaxLinear's mixed-signal technology platform leadership and direct customer sales channel. As a combined company, we will be uniquely positioned to address the most challenging analog and mixed-signal needs of an increasingly diverse customer base addressing consumer, broadband, industrial, and network infrastructure markets,” Dr. Seendripu continued.
Generally Accepted Accounting Principles (GAAP) Results
Net revenue for the first quarter 2017 was $88.8 million, an increase of 2 percent compared to the fourth quarter 2016, and a decrease of 13 percent compared to the first quarter 2016. Gross margin for the first quarter 2017 was 59.6 percent of revenue, compared to 57.8 percent for the fourth quarter 2016, and 59.6 percent for the first quarter 2016.
Operating expenses were $42.5 million, $42.1 million and $39.5 million for the first quarter 2017, fourth quarter 2016 and first quarter 2016, respectively. Operating expenses increased 1 percent compared to the fourth quarter 2016, and increased 8 percent compared to the first quarter 2016. The year-over-year increase in operating expenses was primarily due to increased costs associated with our merger and acquisitions activity and amortization of intangible assets from our acquisitions of the wireless infrastructure businesses in the second and third quarters of 2016, partially offset by a decrease in restructuring charges. Operating expenses as a percentage of revenue were 48 percent for the first quarter 2017, 48 percent for the fourth quarter 2016 and 38 percent for the first quarter 2016. Operating margins were 12 percent, 10 percent and 21 percent for the first quarter 2017, fourth quarter 2016 and first quarter 2016, respectively.
Net income for the first quarter 2017 was $8.5 million, or $0.12 per share (diluted). These results compare to net income of $8.3 million, or $0.12 per share (diluted) for the fourth quarter 2016, and net income of $20.7 million, or $0.31 per share (diluted), for the first quarter 2016. The provision for income taxes was $2.0 million, $0.2 million and $1.0 million for the first quarter 2017, fourth quarter 2016, and first quarter 2016, respectively. The sequential increase of $1.8 million in the provision for income taxes relative to a sequential increase of $1.9 million in income before income taxes was primarily due to the impact of exhaustion of certain organic net operating losses in the fourth quarter 2016 and limitations on the use of certain acquired net operating losses in both periods, which previously did not have a recorded tax benefit due to the Company’s valuation allowance. The year-over-year increase of $1.0 million in the provision for income taxes relative to a year-over-year decrease of $11.2 million in income before income taxes was primarily due to the impact of exhaustion of certain organic net operating losses in the fourth quarter 2016 and limitations on the use of certain acquired net operating losses in the first quarter 2017, which previously did not have a recorded tax benefit due to the Company’s valuation allowance.
Cash flow provided by operations for the first quarter 2017 totaled $22.7 million, compared to $27.6 million for the fourth quarter 2016, and $39.0 million for the first quarter 2016.
Cash, cash equivalents, restricted cash and investments totaled $154.9 million at March 31, 2017, compared to $136.8 million at December 31, 2016, and $166.8 million at March 31, 2016.
Non-GAAP gross margin for the first quarter 2017 was 62.7 percent of revenue, compared to 63.9 percent for the fourth quarter 2016, and 61.3 percent for the first quarter 2016.
Non-GAAP operating expenses were $30.1 million, $30.1 million and $29.4 million for the first quarter 2017, fourth quarter 2016 and first quarter 2016, respectively. Non-GAAP operating expenses remained flat when compared to the fourth quarter 2016, and increased 2 percent when compared to first quarter 2016. Non-GAAP operating expenses as a percentage of revenue were 34 percent, 35 percent and 29 percent for the first quarter 2017, fourth quarter 2016 and first quarter 2016, respectively. Non-GAAP operating margins were 29 percent, 29 percent and 33 percent for the first quarter 2017, fourth quarter 2016 and first quarter 2016, respectively.
Non-GAAP net income for the first quarter 2017 was $23.2 million, or $0.33 per share (diluted), compared to $25.7 million, or $0.38 per share (diluted), for the fourth quarter 2016, and $32.7 million, or $0.49 per share (diluted), for the first quarter 2016.
Second Quarter 2017 Revenue and Gross Margin Guidance
Excluding any potential contributions from our pending acquisition of Exar Corporation that is currently expected to close during the second quarter of 2017, MaxLinear expects revenue in the second quarter 2017 to be between $90 million and $94 million, GAAP gross margin to be approximately 58 percent of revenue, and non-GAAP gross margin to be approximately 62.5 to 63 percent of revenue. MaxLinear's estimates of forward-looking non-GAAP gross margins exclude estimates for amortization of inventory step-up, stock-based compensation expense, stock-based bonus accruals, acquisition related expenses, and restructuring charges, as applicable, each of which is described in more detail below under the caption “Use of Non-GAAP Financial Measures.” The timing and amounts of these material amounts needed to estimate non-GAAP financial measures are inherently unpredictable or outside the Company's control or ability to predict. Accordingly, MaxLinear cannot provide a quantitative reconciliation of forward-looking non-GAAP gross margin without unreasonable effort. Material changes to any of these items could have a significant effect on MaxLinear's guidance and future GAAP results.
Conference Call Details
MaxLinear will host its first quarter financial results conference call today, May 9, 2017 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). To access this call, dial US toll free: 1-877-407-3109 / International: 1-201-493-6798. A live webcast of the conference call will be accessible from the investor relations section of the MaxLinear website at http://investors.maxlinear.com, and will be archived and available after the call at http://investors.maxlinear.com until May 23, 2017. A replay of the conference call will also be available until May 23, 2017 by dialing US toll free: 1-877-660-6853 / International: 1-201-612-7415 and Conference ID#: 13653123.
Cautionary Note Concerning Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among others, statements concerning our future financial performance (including our current guidance for second quarter 2017 revenue and gross margin). These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause actual results to be materially different from any future results expressed or implied by the forward-looking statements. Forward-looking statements are based on management’s current, preliminary expectations and are subject to various risks and uncertainties. In particular, our future operating results are substantially dependent on our assumptions about market trends and conditions, our expectations with respect to recently completed acquisitions, and our expectations with respect to the impact of our pending acquisition of Exar Corporation. With respect to recently completed acquisitions and our pending acquisition of Exar, we face particular risks associated with our ability to integrate the acquired businesses and maintain relationships with employees, customers, and vendors. Exar’s target markets and business operations differ substantially from those of MaxLinear, and we may be unable to realize anticipated strategic, financial, and operating synergies to the same relative extent as we were able to achieve in other recent acquisitions. In addition, our decisions with respect to all our acquisitions were based on management’s current expectations with respect to the size of the available markets and growth opportunities presented by these acquisitions, all of which are subject to material risks and uncertainties. In addition, in connection with the pending acquisition of Exar, we anticipate incurring substantial acquisition-related indebtedness, which will substantially change our financial profile and presents specific risks relating to our ability to service interest and principal payments and limitations on our operating flexibility based on operating covenants in the applicable term loan agreements, including (without limitation) debt covenant restrictions that may limit our ability to obtain additional financing, issue guarantees, create liens, make certain restricted payments or repay certain obligations or to pursue future acquisitions. Additional risks and uncertainties arising from our operations generally and our recently completed and anticipated acquisitions include intense competition in our industry; our dependence on a limited number of customers for a substantial portion of our revenues; uncertainties concerning how end user markets for our products will develop; potential uncertainties arising from continued consolidation among cable television and satellite operators in our target markets and continued consolidation among competitors within the semiconductor industry generally; our ability to develop and introduce new and enhanced products on a timely basis and achieve market acceptance of those products, particularly as we seek to expand outside of our historic markets; potential decreases in average selling prices for our products; risks relating to intellectual property protection and the prevalence of intellectual property litigation in our industry; risks relating to our ability to close and complete the pending tender offer with respect to Exar, including the requirement to meet the minimum tender conditions; indemnification obligations of Exar arising from a recent divestiture; the impact on our financial condition of the anticipated acquisition indebtedness and cash usage arising from the Exar transaction; our reliance on a limited number of third party manufacturers; and our lack of long-term supply contracts and dependence on limited sources of supply. In addition to these risks and uncertainties, investors should review the risks and uncertainties contained in our filings with the Securities and Exchange Commission (SEC), including our most recent Annual Report on Form 10-K for the year ended December 31, 2016 filed with the SEC on February 9, 2017 and our Current Reports on Form 8-K, as well as the information to be set forth under the caption “Risk Factors” in MaxLinear’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, which we expect to file shortly. All forward-looking statements are based on the estimates, projections and assumptions of management as of May 9, 2017, and MaxLinear is under no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.