MaxLinear, Inc. Announces Fourth Quarter 2018 Financial Results

Fourth Quarter 2018 Net Revenue of $87.6 million

CARLSBAD, Calif.–(BUSINESS WIRE)–MaxLinear, Inc. (NYSE: MXL), a leading provider of RF, analog and
mixed-signal integrated circuits for the connected home, and industrial
and multi-market applications, today announced financial results for the
fourth quarter ended December 31, 2018.

Fourth Quarter Financial Highlights

GAAP basis:

  • Net revenue was $87.6 million, up 3% sequentially, and down 23%
    year-on-year.
  • GAAP gross margin was 52.4%, compared to 51.6% in the prior quarter,
    and 45.8% in the year-ago quarter.
  • GAAP operating expenses were $56.6 million in the fourth quarter 2018,
    or 65% of net revenue, compared to $56.4 million in the prior quarter,
    or 66% of net revenue, and $57.8 million in the year-ago quarter, or
    51% of net revenue.
  • GAAP loss from operations was 12% of revenue, compared to loss from
    operations of 15% in the prior quarter, and loss from operations of 5%
    in the year-ago quarter.
  • Net cash flow provided by operating activities of $24.2 million,
    compared to cash flow provided by operations of $30.7 million in the
    prior quarter and cash flow provided by operating activities of $21.7
    million in the year-ago quarter.
  • GAAP income tax benefit was $14.0 million, which included a $11.3
    million discrete tax benefit for a reduction in the valuation
    allowance on certain loss carryforwards as provisional estimates for
    the effects of the 2017 Tax Act were finalized, compared to an income
    tax benefit of $2.1 million in the prior quarter, and income tax
    provision of $9.0 million in the year-ago quarter.
  • GAAP net income was $0.3 million, compared to net loss of $13.9
    million in the prior quarter, and net loss of $19.4 million in the
    year-ago quarter.
  • GAAP diluted earnings per share was $0.00, compared to diluted loss
    per share of $0.20 in the prior quarter, and diluted loss per share of
    $0.29 in the year-ago quarter.

Non-GAAP basis:

  • Non-GAAP gross margin was 62.7%. This compares to 62.5% in the prior
    quarter, and 62.0% in the year-ago quarter.
  • Non-GAAP operating expenses were $36.7 million, or 42% of revenue,
    compared to $35.6 million or 42% of revenue in the prior quarter, and
    $38.3 million or 34% of revenue in the year-ago quarter.
  • Non-GAAP income from operations was 21% of revenue, compared to 21% in
    the prior quarter, and 28% in the year-ago quarter.
  • Non-GAAP effective tax rate was 7% of non-GAAP pre-tax income,
    compared to 7% in the prior quarter, and 4% in the year-ago quarter.
  • Non-GAAP net income was $14.2 million, compared to $13.2 million in
    the prior quarter, and $26.3 million in the year-ago quarter.
  • Non-GAAP diluted earnings per share was $0.20, compared to diluted
    earnings per share of $0.19 in the prior quarter, and diluted earnings
    per share of $0.38 in the year-ago quarter.

Recent Business Highlights

  • Successfully validated the functionality of the Telluride products in
    400Gbps mode through interoperability testing of Telluride PAM4 DSPs
    with Innovium’s 12.8 Tbps TERALYNX Switch ASIC.
  • Announced the integration of AirPHY multi-gigabit modem technology
    into Zinwell’s 3rd generation ZRA-003 device, which can transfer power
    and gigabit data through glass windows and walls up to 20cm thick.
  • G.hn home networking solutions with Comtrend selected by Chunghwa
    Telecom to deliver gigabit-class service to their subscribers in
    Taiwan.
  • Announced collaboration with Intel and cable industry leaders to
    enable 10 Gigabit ready gateway platforms.
  • G.hn Wave-2 technology selected by Zinwell for new family of home
    networking products.

Management Commentary

“In the fourth quarter, our business performed well overall, highlighted
by strong sequential revenue growth from our Infrastructure category.
More specifically, in 2018, our wireless backhaul infrastructure
business recorded nearly 50% growth. Our Connected Home business also
delivered on the beginning of an anticipated recovery, which is now in
its early stages. The Industrial and Multi-market business, as expected,
was soft, which we believe reflects an overall industry slowdown. These
results yielded GAAP net revenue of $87.6 million and net cash flows
from operating activities of $24.2 million. These strong operating cash
flows enabled us to pre-pay $15.0 million towards our outstanding
term-loan debt, which further reduced our net leverage ratio to
approximately 1.75 at the end of the fourth quarter,” commented Kishore
Seendripu, Ph.D., Chairman and CEO.

“As we begin 2019, we are very excited about the positive early customer
feedback regarding the new products launching this year which address
the large communications Infrastructure market. Specifically, we have
launched our 400G PAM4 DSP plus integrated driver and TIA system
solution targeting high speed interconnect data center deployments in
the second half of 2019 and our new wireless radio-transceiver targeting
the 5G massive MIMO wireless opportunity, slated for sampling in the
first half of 2019. These key infrastructure product launches combined
with the aforementioned strength in our wireless backhaul business and
the beginning of the recovery of our broadband business provide us
confidence in our ability to realize our strong mid-term and long-term
growth aspirations. Our technology leadership, along with our continued
operating expense discipline, strongly position us to be able to
navigate a turbulent market environment while supporting our long-term
growth initiatives,” continued Dr. Seendripu.

First Quarter 2019 Business Outlook

The company expects revenue in the first quarter 2019 to be
approximately $82 million to $87 million, and also estimates the
following:

  • GAAP gross margin of approximately 52.5% to 53.5%;
  • Non-GAAP gross margin of approximately 63.0% to 64.0%;
  • GAAP operating expenses of approximately $56.0 million to $56.5
    million; and
  • Non-GAAP operating expenses of approximately $36.0 million to $36.5
    million.

Webcast and Conference Call

MaxLinear will host its fourth quarter financial results conference call
today, February 5, 2019 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 February 19, 2019. A replay of the conference call will also be
available until February 19, 2019 by dialing US toll free:
1-877-660-6853 / International: 1-201-612-7415 and Conference ID#:
13686233.

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
first quarter 2019 revenue, gross margins, and operating expense and
statements concerning expectations of potential developments in our
target markets, including management’s views with respect to trends in
our DOCSIS and Connected Home markets. 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. Risks and uncertainties affecting our business and future
operating results include, without limitation, 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, including in particular new
markets we are entering but also existing markets such as cable;
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; the impact on our
financial condition of the indebtedness 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 Quarterly Report on Form
10-Q for the quarter ended September 30, 2018, 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 Annual Report on Form 10-K for the
year ended December 31, 2018, which we expect to file shortly. All
forward-looking statements are based on the estimates, projections and
assumptions of management as of February 5, 2019, 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.

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, pre-tax margins, 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 2018, which we currently intend
to settle in shares of our common stock; (iii) accruals related to our
performance based bonus plan for 2017, which we settled in shares of
common stock in 2018; (iv) amortization of purchased intangible assets
and inventory step up; (v) depreciation of fixed assets step-up; (vi)
acquisition and integration costs related to 2017 acquisitions; (vii)
professional fees and settlement costs related to our previously
disclosed IP and commercial litigation matters; (viii) impairment losses
on acquired intangible assets; (ix) severance and other restructuring
charges; and (x) non-cash income tax benefits and expenses and effects
of the Tax Act. 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 2017 performance periods were settled through the
issuance of shares of common stock under our equity incentive plans in
February 2018. We currently expect that bonus awards under our fiscal
2018 program will be settled in common stock in the first quarter of
fiscal 2019. 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 step-up of inventory to fair value,
depreciation of step-up of property and equipment to fair value,
acquisition and integration costs primarily consisting of professional
and consulting fees.

Restructuring charges incurred are related to our restructuring plans
which address issues primarily relating to the integration of the
Company and acquired businesses or internal operations 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.

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 first 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
December 31, 2018   September 30, 2018   December 31, 2017
Net revenue $ 87,627 $ 85,010 $ 113,721
Cost of net revenue 41,727   41,134   61,628  
Gross profit 45,900 43,876 52,093
Operating expenses:
Research and development 29,667 29,047 30,116
Selling, general and administrative 25,208 24,963 26,843
Impairment losses 2,198
Restructuring charges 1,737   236   800  
Total operating expenses 56,612   56,444   57,759  
Loss from operations (10,712 ) (12,568 ) (5,666 )
Interest income 24 17 14
Interest expense (3,194 ) (3,473 ) (4,044 )
Other income (expense), net 229   39   (793 )
Total interest and other expense, net (2,941 ) (3,417 ) (4,823 )
Loss before income taxes (13,653 ) (15,985 ) (10,489 )
Income tax provision (benefit) (13,964 ) (2,050 ) 8,959  
Net income (loss) $ 311   $ (13,935 ) $ (19,448 )
Net income (loss) per share:
Basic $   $ (0.20 ) $ (0.29 )
Diluted $   $ (0.20 ) $ (0.29 )
Shares used to compute net income (loss) per share:
Basic 69,186   68,742   67,147  
Diluted 71,267   68,742   67,147  
 
 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
 
Years Ended
December 31, 2018   December 31, 2017
Net revenue $ 384,997 $ 420,318
Cost of net revenue 176,223   212,355  
Gross profit 208,774 207,963
Operating expenses:
Research and development 120,046 112,279
Selling, general and administrative 101,789 105,831
Impairment losses 2,198 2,000
Restructuring charges 3,838   9,524  
Total operating expenses 227,871   229,634  
Loss from operations (19,097 ) (21,671 )
Interest income 78 274
Interest expense (14,255 ) (10,378 )
Other income (expense), net 422   (2,223 )
Total interest and other expense, net (13,755 ) (12,327 )
Loss before income taxes (32,852 ) (33,998 )
Income tax benefit (6,653 ) (24,811 )
Net loss $ (26,199 ) $ (9,187 )
Net loss per share:
Basic $ (0.38 ) $ (0.14 )
Diluted $ (0.38 ) $ (0.14 )
Shares used to compute net loss per share:
Basic 68,490   66,252  
Diluted 68,490   66,252  
 
 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Three Months Ended
December 31, 2018   September 30, 2018   December 31, 2017
Operating Activities
Net income (loss) $ 311 $ (13,935 ) $ (19,448 )
Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Amortization and depreciation 19,125 19,767 20,236
Impairment losses 2,198
Amortization of inventory step-up 9,715
Amortization of debt issuance costs and discount 287 287 287
Stock-based compensation 7,999 7,940 7,770
Deferred income taxes (8,827 ) 304 16,650
(Gain) loss on disposal of property and equipment 430 (33 )
(Gain) loss on foreign currency (268 ) (184 ) 738
Excess tax benefits on stock-based awards (820 ) (93 ) (1,961 )
Impairment of leasehold improvements 35
Changes in operating assets and liabilities:
Accounts receivable (867 ) 25,016 9,492
Inventory 19 2,581 543
Prepaid expenses and other assets 1,905 712 (424 )
Accounts payable, accrued expenses and other current liabilities 648 (10,606 ) (2,494 )
Accrued compensation 2,387 2,671 1,351
Deferred revenue and deferred profit (12,862 )
Accrued price protection liability 2,036 (5,662 ) (6,658 )
Other long-term liabilities (227 ) (275 ) (1,159 )
Net cash provided by operating activities 24,173 30,721 21,743
Investing Activities
Purchases of property and equipment (1,412 ) (1,609 ) (3,070 )
Proceeds from sale of property and equipment     30  
Net cash used in investing activities (1,412 ) (1,609 ) (3,040 )
Financing Activities
Repayment of debt (15,000 ) (35,000 ) (20,000 )
Net proceeds from issuance of common stock 2,732 91 2,960
Minimum tax withholding paid on behalf of employees for restricted
stock units
(2,606 ) (1,178 ) (1,718 )
Net cash used in financing activities (14,874 ) (36,087 ) (18,758 )
Effect of exchange rate changes on cash, cash equivalents and
restricted cash
(1,939 ) 103   371  
Increase (decrease) in cash, cash equivalents and restricted cash 5,948 (6,872 ) 316
Cash, cash equivalents and restricted cash at beginning of period 68,243   75,115   74,096  
Cash, cash equivalents and restricted cash at end of period $ 74,191   $ 68,243   $ 74,412  
 
 
MAXLINEAR, INC.
UNAUDITED GAAP CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Years Ended
December 31, 2018   December 31, 2017
Operating Activities
Net loss $ (26,199 ) $ (9,187 )
Adjustments to reconcile net loss to cash provided by operating
activities:
Amortization and depreciation 79,027 66,738
Impairment losses 2,198 2,000
Provision for losses on accounts receivable 133
Accretion of investment discounts, net (60 )
Amortization of inventory step-up 25,557
Amortization of debt issuance costs and discount 1,148 763
Stock-based compensation 31,721 32,668
Deferred income taxes (12,144 ) (31,767 )
Loss on disposal of property and equipment 430 168
Loss on sale of available-for-sale securities 38
(Gain) loss on foreign currency (809 ) 2,153
Excess tax benefits on stock-based awards (2,028 ) (8,559 )
Impairment of leasehold improvements 735
Changes in operating assets and liabilities:
Accounts receivable 6,595 (4,377 )
Inventory 11,696 (1,788 )
Prepaid expenses and other assets 5,833 1,272
Accounts payable, accrued expenses and other current liabilities 1,161 (1,918 )
Accrued compensation 8,961 1,567
Deferred revenue and deferred profit (138 ) (1,629 )
Accrued price protection liability (5,117 ) 6,395
Other long-term liabilities (381 ) (5,103 )
Net cash provided by operating activities 102,689 75,064
Investing Activities
Purchases of property and equipment (7,825 ) (7,468 )
Proceeds from sale of property and equipment 30
Purchases of intangible assets (5,378 )
Cash used in acquisition, net of cash acquired (473,304 )
Purchases of available-for-sale securities (30,577 )
Maturities of available-for-sale securities   84,546  
Net cash used in investing activities (7,825 ) (432,151 )
Financing Activities
Proceeds from issuance of debt 416,846
Repayment of debt (93,000 ) (70,000 )
Repurchases of common stock (334 )
Net proceeds from issuance of common stock 6,839 12,052
Minimum tax withholding paid on behalf of employees for restricted
stock units
(7,623 ) (11,543 )
Net cash provided by (used in) financing activities (93,784 ) 347,021
Effect of exchange rate changes on cash and cash equivalents (1,301 ) 1,582  
Decrease in cash, cash equivalents and restricted cash (221 ) (8,484 )
Cash, cash equivalents and restricted cash at beginning of period 74,412   82,896  
Cash, cash equivalents and restricted cash at end of period $ 74,191   $ 74,412  
 
 
MAXLINEAR, INC.
UNAUDITED GAAP CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
     
December 31, 2018 September 30, 2018 December 31, 2017
Assets
Current assets:
Cash and cash equivalents $ 73,142 $ 67,185 $ 71,872
Short-term restricted cash 645 349 1,476
Accounts receivable, net 59,491 58,633 66,099
Inventory 41,738 41,757 53,434
Prepaid expenses and other current assets 5,595   6,329   8,423
Total current assets 180,611 174,253 201,304
Long-term restricted cash 404 709 1,064
Property and equipment, net 18,404 19,413 22,658
Intangible assets, net 244,900 261,813 315,045
Goodwill 238,330 238,330 237,992
Deferred tax assets 51,518 42,691 39,878
Other long-term assets 4,664   4,935   6,921
Total assets $ 738,831   $ 742,144   $ 824,862
 
Liabilities and stockholders’ equity
Current liabilities $ 70,567 $ 66,464 $ 76,386
Long-term debt 255,757 270,470 347,609
Other long-term liabilities 12,571 12,816 13,443
Total stockholders’ equity 399,936   392,394   387,424
Total liabilities and stockholders’ equity $ 738,831   $ 742,144   $ 824,862
 
 
MAXLINEAR, INC.
UNAUDITED RECONCILIATION OF NON-GAAP ADJUSTMENTS
(in thousands, except per share data)
 
Three Months Ended
December 31, 2018   September 30, 2018   December 31, 2017
GAAP gross profit $ 45,900 $ 43,876 $ 52,093
Stock-based compensation 132 131 101
Performance based equity 56 53 35
Amortization of inventory step-up 9,715
Amortization of purchased intangible assets 8,875 8,969 8,465
Depreciation of fixed asset step-up   95   112  
Non-GAAP gross profit 54,963 53,124 70,521
 
GAAP R&D expenses 29,667 29,047 30,116
Stock-based compensation (4,399 ) (4,726 ) (4,349 )
Performance based equity (1,254 ) (1,517 ) (1,031 )
Amortization of purchased intangible assets (97 )
Depreciation of fixed asset step-up (76 ) (321 ) (297 )
Non-GAAP R&D expenses 23,938 22,483 24,342
 
GAAP SG&A expenses 25,208 24,963 26,843
Stock-based compensation (3,481 ) (3,070 ) (3,105 )
Performance based equity (948 ) (785 ) (937 )
Amortization of purchased intangible assets (7,994 ) (7,994 ) (8,760 )
Depreciation of fixed asset step-up (2 ) (12 ) (20 )
Acquisition and integration costs (54 )
IP litigation costs, net (3 ) (19 ) (38 )
Non-GAAP SG&A expenses 12,780 13,083 13,929
 
GAAP Impairment losses 2,198
Impairment losses   (2,198 )  
Non-GAAP Impairment losses
 
GAAP restructuring expenses 1,737 236 800
Restructuring charges (1,737 ) (236 ) (800 )
Non-GAAP restructuring expenses
 
GAAP loss from operations (10,712 ) (12,568 ) (5,666 )
Total non-GAAP adjustments 28,957   30,126   37,916  
Non-GAAP income from operations 18,245 17,558 32,250
 
GAAP and non-GAAP interest and other income (expense), net (2,941 ) (3,417 ) (4,823 )
 
GAAP loss before income taxes (13,653 ) (15,985 ) (10,489 )
Total non-GAAP adjustments 28,957   30,126   37,916  
Non-GAAP income before income taxes 15,304 14,141 27,427
 
GAAP income tax provision (benefit) (13,964 ) (2,050 ) 8,959
Adjustment for non-cash tax benefits/expenses and effects of the Tax
Act
15,035   3,040   (7,853 )
Non-GAAP income tax provision 1,071 990 1,106
 
GAAP net income (loss) 311 (13,935 ) (19,448 )
Total non-GAAP adjustments before income taxes 28,957 30,126 37,916
Less: total tax adjustments 15,035   3,040   (7,853 )
Non-GAAP net income $ 14,233   $ 13,151   $ 26,321  
 
Shares used in computing non-GAAP basic net income per share 69,186   68,742   67,147  
Shares used in computing non-GAAP diluted net income per share 71,267   70,634   70,175  
Non-GAAP basic net income per share $ 0.21   $ 0.19   $ 0.39  
Non-GAAP diluted net income per share $ 0.20   $ 0.19   $ 0.38  
 
 

Contacts

MaxLinear, Inc. Investor Relations Contact:
Steven Litchfield
Tel:
949-333-0080
[email protected]

Read full story here

error: Content is protected !!