MaxLinear, Inc. Announces First Quarter 2019 Financial Results

Use of Non-GAAP Financial Measures

To supplement our unaudited consolidated financial statements presented on a basis consistent with GAAP, we disclose certain non-GAAP financial measures, including non-GAAP gross margin, operating expenses, operating expenses as a percentage of revenue, income from operations as percentage of revenue, effective tax rate, net income and diluted earnings per share. These supplemental measures exclude the effects of (i) stock-based compensation expense; (ii) accruals related to our performance based bonus plan for 2019, which we currently intend to settle in shares of our common stock; (iii) accruals related to our performance based bonus plan for 2018 which we settled in shares of common stock in 2019; (iv) amortization of purchased intangible assets; (v) depreciation of fixed assets step-up; (vi) professional fees and settlement costs related to our previously disclosed IP and commercial litigation matters; (vii) severance and other restructuring charges; and (viii) non-cash income tax benefits and expenses and effects of the 2017 Tax Cuts and Jobs Act, or Tax Act, as applicable. These non-GAAP measures are not in accordance with and do not serve as an alternative for GAAP. We believe that these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with our GAAP results of operations. These non-GAAP measures should only be viewed in conjunction with corresponding GAAP measures. We compensate for the limitations of non-GAAP financial measures by relying upon GAAP results to gain a complete picture of our performance.

We believe that non-GAAP financial measures can provide useful information to both management and investors by excluding certain non-cash and other one-time expenses that are not indicative of our core operating results. Among other uses, our management uses non-GAAP measures to compare our performance relative to forecasts and strategic plans and to benchmark our performance externally against competitors. In addition, management’s incentive compensation will be determined in part using these non-GAAP measures because we believe non-GAAP measures better reflect our core operating performance.

The following are explanations of each type of adjustment that we incorporate into non-GAAP financial measures:

Stock-based compensation expense relates to equity incentive awards granted to our employees, directors, and consultants. Our equity incentive plans are important components of our employee incentive compensation arrangements and are reflected as expenses in our GAAP results. Stock-based compensation expense has been and will continue to be a significant recurring expense for MaxLinear.

Bonuses under our executive and non-executive bonus programs have been excluded from our non-GAAP net income for all periods reported. Bonus payments for the 2018 performance periods were settled through the issuance of shares of common stock under our equity incentive plans in February 2019. We currently expect that bonus awards under our fiscal 2019 program will be settled in common stock in the first quarter of fiscal 2020. While we include the dilutive impact of equity awards in weighted average shares outstanding, the expense associated with stock-based awards reflects a non-cash charge that we exclude from non-GAAP net income.

Expenses incurred in relation to acquisitions include amortization of purchased intangible assets and depreciation of step-up of property and equipment to fair value.

Restructuring charges incurred are related to our restructuring plans which eliminate redundancies and primarily include severance and restructuring costs related to exiting certain facilities.

Expenses incurred in relation to our intellectual property and commercial litigation include professional fees incurred.

Income tax benefits and expense adjustments are those that do not affect cash income taxes payable. Effects of the Tax Act were excluded from Non-GAAP effective tax rate, as applicable.

Reconciliations of non-GAAP measures for the historic periods disclosed in this press release appear below. Because of the inherent uncertainty associated with our ability to project future charges, particularly related to stock-based compensation and its related tax effects as well as potential impairments, we have not provided a reconciliation for non-GAAP guidance provided for the second quarter 2019.

About MaxLinear, Inc.

MaxLinear, Inc. (NYSE: MXL) is a leading provider of radio frequency (RF), analog and mixed-signal integrated circuits for the connected home, wired and wireless infrastructure, and industrial and multi-market applications. MaxLinear is headquartered in Carlsbad, California. For more information, please visit www.maxlinear.com.

MXL is MaxLinear’s registered trademark. Other trademarks appearing herein are the property of their respective owners.

 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
  Three Months Ended
March 31,   December 31,   March 31,
2019 2018 2018
Net revenue $ 84,635 $ 87,627 $ 110,827
Cost of net revenue 39,558   41,727   48,159  
Gross profit 45,077 45,900 62,668
Operating expenses:
Research and development 27,399 29,667 31,121
Selling, general and administrative 23,591 25,208 27,117
Restructuring charges 1,917   1,737    
Total operating expenses 52,907   56,612   58,238  
Income (loss) from operations (7,830 ) (10,712 ) 4,430
Interest income 147 24 18
Interest expense (2,975 ) (3,194 ) (3,894 )
Other income (expense), net (655 ) 229   (571 )
Total interest and other expense, net (3,483 ) (2,941 ) (4,447 )
Loss before income taxes (11,313 ) (13,653 ) (17 )
Income tax benefit (6,462 ) (13,964 ) (1,864 )
Net income (loss) $ (4,851 ) $ 311   $ 1,847  
Net income (loss) per share:
Basic $ (0.07 ) $   $ 0.03  
Diluted $ (0.07 ) $   $ 0.03  
Shares used to compute net income (loss) per share:
Basic 69,968   69,186   67,674  
Diluted 69,968   71,267   70,440  
 
 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
  Three Months Ended
March 31,   December 31,   March 31,
2019 2018 2018
Operating Activities
Net income (loss) $ (4,851 ) $ 311 $ 1,847
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization and depreciation 16,863 19,125 20,084
Amortization of debt issuance costs and accretion of discount on debt and leases 402 287 287
Stock-based compensation 7,747 7,999 8,473
Deferred income taxes (6,476 ) (8,827 ) (2,332 )
Loss on disposal of property and equipment 35 430
Impairment of leasehold improvements 1,442 35
Impairment of long-lived assets 2,182
Gain on extinguishment of lease liabilities (2,880 )
(Gain) loss on foreign currency 567 (268 ) 471
Excess tax benefits on stock-based awards (1,737 ) (820 ) (797 )
Changes in operating assets and liabilities:
Accounts receivable (142 ) (867 ) (24,533 )
Inventory (1,015 ) 19 7,676
Prepaid expenses and other assets 604 1,905 1,003
Leased right-of-use assets 645
Accounts payable, accrued expenses and other current liabilities 1,921 648 (421 )
Accrued compensation 893 2,387 2,502
Deferred revenue and deferred profit (138 )
Accrued price protection liability 2,489 2,036 (1,359 )
Lease liabilities (2,125 )
Other long-term liabilities (519 ) (227 ) (792 )
Net cash provided by operating activities 16,045 24,173 11,971
Investing Activities
Purchases of property and equipment (2,155 ) (1,412 ) (2,381 )
Net cash used in investing activities (2,155 ) (1,412 ) (2,381 )
Financing Activities
Repayment of debt (15,000 ) (15,000 ) (25,000 )
Net proceeds from issuance of common stock 2,628 2,732 980
Minimum tax withholding paid on behalf of employees for restricted stock units (4,419 ) (2,606 ) (2,391 )
Net cash used in financing activities (16,791 ) (14,874 ) (26,411 )
Effect of exchange rate changes on cash, cash equivalents and restricted cash 577   (1,939 ) (258 )
Increase (decrease) in cash, cash equivalents and restricted cash (2,324 ) 5,948 (17,079 )
Cash, cash equivalents and restricted cash at beginning of period 74,191   68,243   74,412  
Cash, cash equivalents and restricted cash at end of period $ 71,867   $ 74,191   $ 57,333  
 
 
MAXLINEAR, INC.
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  March 31,   December 31,   March 31,
2019

2018 (1)

2018 (1)

Assets
Current assets:
Cash and cash equivalents $ 71,102 $ 73,142 $ 55,645
Short-term restricted cash 347 645 617
Accounts receivable, net 59,639 59,491 90,632
Inventory 42,753 41,738 45,758
Prepaid expenses and other current assets 5,479   5,595   8,413  
Total current assets 179,320 180,611 201,065
Long-term restricted cash 418 404 1,071
Property and equipment, net 16,987 18,404 21,993
Leased right-of-use assets 21,543
Intangible assets, net 230,634 244,900 298,031
Goodwill 238,330 238,330 237,810
Deferred tax assets 58,067 51,518 41,426
Other long-term assets 3,583   4,664   7,318  
Total assets $ 748,882   $ 738,831   $ 808,714  
 
Liabilities and stockholders’ equity
Current liabilities $ 73,483 $ 70,567 $ 67,061
Long-term lease liabilities 18,132 4,097 4,718
Long-term debt 241,044 255,757 322,896
Other long-term liabilities 8,019 8,474 7,591
Stockholders’ equity 408,204   399,936   406,448  
Total liabilities and stockholders’ equity $ 748,882   $ 738,831   $ 808,714  

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