MaxLinear, Inc. Announces Second Quarter 2016 Financial Results

Company Delivers Second Quarter 2016 Revenue of $101.7 Million, 
Operating Cash Flow of $32.3 Million and GAAP Diluted Earnings per Share of $0.33

CARLSBAD, Calif., Aug. 08, 2016 (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, and for data center, metro, and long-haul fiber networks, and wireless infrastructure, today announced financial results for the second quarter ended June 30, 2016.

Management Commentary

“We are pleased to announce strong second quarter 2016 revenue of $101.7 million, consistent with prior guidance, representing a decrease of approximately 1 percent sequentially, and an increase of 44 percent year-over-year. The continued strength in revenues were accompanied by sequential expansion in both GAAP and non-GAAP gross margins to 61.9 percent and 63.8 percent, respectively. There was sequential expansion in both GAAP and non-GAAP operating margins to 22 percent and 34 percent, respectively. We had another strong quarter of operating cash flow, one in which we generated approximately $32.3 million. The strong financial results were achieved through a combination of continued tight operating expense management, sustained momentum in the ramp of our high-speed optical interconnect solutions and stronger than expected seasonal strength in our cable CPE markets. These positive revenue growth drivers were offset by anticipated softness in our legacy video SoC shipments and softness in satellite analog channel stacking outdoor units,” commented Kishore Seendripu, Ph.D., Chairman and CEO.

“With the completion of the acquisitions on April 28, 2016 and July 1, 2016 of Microsemi Corporation’s wireless infrastructure access line business and Broadcom’s wireless infrastructure backhaul business, we are excited by the increasing scale and diversification of our strategic wireless infrastructure footprint. We are not only aggressively increasing our analog and mixed-signal content in our broadband access and connectivity platforms addressing broadband service provider markets, but we are also accelerating our expansion into the large wired and wireless infrastructure markets,” continued Kishore Seendripu, Ph.D., Chairman and CEO.

Generally Accepted Accounting Principles (GAAP) Results

Net revenue for the second quarter 2016 was $101.7 million, a decrease of 1 percent compared to the first quarter 2016, and an increase of 44 percent compared to the second quarter 2015. Gross margin for the second quarter 2016 was 61.9 percent of revenue, compared to 59.6 percent for the first quarter 2016, and 38.0 percent for the second quarter 2015.

Operating expenses were $40.5 million, $39.5 million and $59.0 million for the second quarter 2016, first quarter 2016 and second quarter 2015, respectively.  Operating expenses increased 3 percent compared to the first quarter 2016, and decreased 31 percent compared to the second quarter 2015. Operating expenses as a percentage of revenue were 40 percent for the second quarter 2016, 38 percent for the first quarter 2016 and 83 percent for the second quarter 2015.  Operating margins were 22 percent, 21 percent and (45) percent for the second quarter 2016, first quarter 2016 and second quarter 2015, respectively.

Net income for the second quarter 2016 was $22.6 million, or $0.33 per share (diluted). These results compare to net income of $20.7 million, or $0.31 per share (diluted), for the first quarter 2016, and net loss of $30.6 million, or net loss of $0.58 per share (diluted), for the second quarter 2015.  

Gross margin, operating margin and net loss for the second quarter 2015 includes a non-recurring charge of $13.3 million for amortization of step-up of inventory to fair value related to our acquisition of Entropic in April 2015.

Cash flow provided by operations for the second quarter 2016 totaled $32.3 million, compared to cash provided by operations of $39.0 million for the first quarter 2016, and cash provided by operations of $4.6 million for the second quarter 2015.  The $6.6 million sequential quarterly decrease in cash flow provided by operations is primarily attributable to greater revenue linearity in the current quarter versus the prior quarter.

Cash, cash equivalents and investments totaled $176.5 million at June 30, 2016, compared to $166.8 million at March 31, 2016, and $82.1 million at June 30, 2015.  The $176.5 million at June 30, 2016 reflects $21.0 million of cash paid for our acquisition of wireless infrastructure access line business in April 2016.

Non-GAAP Results

Non-GAAP gross margin for the second quarter 2016 was 63.8 percent of revenue, compared to 61.3 percent for the first quarter 2016, and 58.4 percent for the second quarter 2015.

Non-GAAP operating expenses were $30.6 million, $29.4 million and $29.3 million for the second quarter 2016, first quarter 2016 and second quarter 2015, respectively. Non-GAAP operating expenses increased 4 percent when compared to the first quarter 2016, and increased 4 percent when compared to second quarter 2015. Non-GAAP operating expenses as a percentage of revenue were 30 percent, 29 percent and 41 percent for the second quarter 2016, first quarter 2016 and second quarter 2015, respectively. Non-GAAP operating margins were 34 percent, 33 percent and 17 percent for the second quarter 2016, first quarter 2016 and second quarter 2015, respectively.

Non-GAAP net income for the second quarter 2016 was $33.9 million, or $0.50 per share (diluted), compared to $32.7 million, or $0.49 per share (diluted), for the first quarter 2016, and $11.9 million, or $0.22 per share (diluted), for the second quarter 2015.

Third Quarter 2016 Revenue and Gross Margin Guidance

We expect revenue in the third quarter 2016 to be between $94 million and $98 million, GAAP gross margin to be approximately 58.5 percent to 60 percent of revenue, and non-GAAP gross margin to be 63 percent to 64 percent of revenue. Our estimates of forward-looking non-GAAP gross margins exclude estimates for stock-based compensation expense, bonus accruals, acquisition related expenses, and restructuring changes, 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 our control to predict.  Accordingly, we cannot provide a quantitative reconciliation of non-GAAP gross margin without unreasonable effort.  Material changes to any of these items could have a significant effect on our guidance and future GAAP results.

Conference Call Details

MaxLinear will host its second quarter financial results conference call today, August 8, 2016 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). To access this call, dial US toll free: 1-855-629-3857 / International: 1-661-378-9892 with conference ID: 50359443. 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 August 22, 2016. A replay of the conference call will also be available until August 22, 2016 by dialing toll free: 1-855-859-2056 and referencing passcode: 50359443.

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 third quarter 2016 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. The closing of recent acquisitions of wireless infrastructure assets from Microsemi and Broadcom present particular risks associated with our ability to integrate the acquired businesses, and maintain relationships with employees, customers, and vendors.  In addition, our current expectations with respect to the size of the available market and growth opportunities in future years are subject to substantial management assumptions that are themselves subject to material risks and uncertainties.   Additional risks and uncertainties that could affect our assumptions and expectations with respect to the completed acquisitions that also generally affect our business, operating results, financial condition, and stock price, 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, including pending litigation against us by a third party in the United States District Court in Delaware; 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, 2015 as amended by Amendment No. 1 filed with the SEC on April 28, 2016; our subsequent Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 and for the quarter ended June 30, 2016, which expect to file shortly; and our Current Reports on Form 8-K. In addition, when available, investors should review 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, 2015 and subsequent Quarterly Reports on Form 10-Q. All forward-looking statements are based on the estimates, projections and assumptions of management as of August 8, 2016, 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.

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