MaxLinear, Inc. Announces Third Quarter 2015 Financial Results

CARLSBAD, Calif., Nov. 03, 2015 (GLOBE NEWSWIRE) -- MaxLinear, Inc. (NYSE:MXL), a provider of integrated, radio-frequency (RF) and mixed-signal integrated circuits for broadband communications, pay-TV and the connected home, and data center, metro, and long-haul transport network applications, today announced financial results for the third quarter ended September 30, 2015.

Management Commentary

“We are pleased to announce third quarter 2015 revenue of $95.2 million, our first quarter reflecting a full-quarter of contribution from the acquisition of Entropic Communications. The third quarter revenue represents an increase of 34 percent sequentially, which was slightly above the midpoint of our upwardly revised prior guidance,” commented Kishore Seendripu, Ph.D., Chairman and CEO. “This quarter’s revenue strength was broad-based, with increases across all of our end-market focus areas: operator, infrastructure and other, and legacy video SoC. Within this broad-based strength, areas representing the most significant sequential increases included satellite outdoor units, MoCA® solutions across both cable and satellite operators, Physpeed optical interconnects, and legacy video SoCs. We are also pleased to report a correspondingly strong quarter of operating cash flow, one in which we generated a record $22.0 million, reflecting our continued focus on tight operating expense management and related progress made towards the integration of Entropic.  As we look to finish 2015 strongly, we are encouraged by the progress we are making in exploiting new and exciting opportunities for our leading analog and mixed-signal technology platform.”

Generally Accepted Accounting Principles (GAAP) Results

Net revenue for the third quarter 2015 was $95.2 million, an increase of 34.4 percent compared to the second quarter 2015, and an increase of 193 percent compared to the third quarter 2014. Gross profit for the third quarter 2015 was 53.6 percent of revenue, compared to 38.0 percent for the second quarter 2015, and 61.2 percent for the third quarter 2014. The gross profit for the third quarter 2015 was impacted by $1.6 million in amortization of intangible assets and $0.9 million in amortization of inventory step-up related to the Entropic acquisition.

Operating expenses for the third quarter 2015 were $49.4 million, a decrease of 16 percent compared to the second quarter 2015, and an increase of 114 percent compared to the third quarter 2014. Operating expenses as a percentage of revenue represented 52 percent for the third quarter 2015, 83 percent for the second quarter 2015 and 71 percent for the third quarter 2014.

Net income for the third quarter 2015 was $1.6 million, or $0.03 per share (diluted), which included $13.6 million and $0.1 million in amortization of intangible assets related to the Entropic and Physpeed acquisitions, respectively, and restructuring charges of $0.4 million. These results compare to a net loss of $30.6 million, or $0.58 per share (diluted), for the second quarter 2015, and net loss of $3.2 million, or $0.09 per share (diluted), for the third quarter 2014.

Cash flow provided by operations for the third quarter 2015 totaled $22.0 million, compared to cash provided by operations of $4.6 million for the second quarter 2015, and cash provided by operations of $6.4 million for the third quarter 2014.

Cash, cash equivalents and investments totaled $104.8 million at September 30, 2015, compared to $82.1 million at June 30 2015, and $93.9 million at September 30, 2014.

Non-GAAP Results

Non-GAAP gross profit percentage for the third quarter 2015 was 56.7 percent of revenue, compared to 58.4 percent for the second quarter 2015, and 61.3 percent for the third quarter 2014.

Non-GAAP operating expenses were $29.1 million, $29.3 million and $18.2 million for the third quarter 2015, second quarter 2015 and third quarter 2014, respectively. Non-GAAP operating expenses decreased 1 percent when compared to the second quarter 2015, and increased 60 percent when compared to third quarter 2014. Non-GAAP operating expenses as a percentage of revenue represented 31 percent, 41 percent and 56 percent for the third quarter 2015, second quarter 2015 and third quarter 2014, respectively.

Non-GAAP net income for the third quarter 2015 was $25.1 million, or $0.40 per share (diluted), compared to $11.5 million, or $0.21 per share (diluted), for the second quarter 2015, and $1.7 million, or $0.04 per share (diluted), for the third quarter 2014.

Fourth Quarter 2015 Revenue and Gross Margin Guidance

We expect revenue in the fourth quarter of 2015 to be between $95 million and $100 million, and GAAP and non-GAAP gross profit percentages to be 53 percent and 57.5 percent of revenue, respectively.

Conference Call Details

MaxLinear will host its third quarter 2015 financial results conference call today, November 3, 2015 at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). To access this call, dial US toll free: 1-888-481-2844 / International: 1-719-325-2393 with conference ID: 893588. 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 investors.maxlinear.com until November 17, 2015. A replay of the conference call will also be available until November 17, 2015 by dialing US toll free: 1-888-203-1112 / International: 1-719-457-0820 and referencing passcode: 893588.

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 fourth quarter 2015 revenue and gross profit percentage); and trends and growth opportunities in our product 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, operating results, financial condition, and stock price, include, among others, integration risks arising from our acquisition of Entropic; 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; 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; limited trading volumes; 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 with the United States International Trade Commission and in 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, as amended by Amendment No. 1 filed with the SEC on March 12, 2015 and our subsequent Forms 10-Q. Additional risks, uncertainties, and other information will be contained in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2015, which MaxLinear expects to file with the SEC in November 2015.

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 net income, gross profit percentage, operating expenses and earnings per share. These supplemental measures exclude the effects of (i) stock-based compensation expense and its related tax effect, if any; (ii) an accrual related to our performance based bonus plan for 2015, which if achieved we intend to settle in shares of our class A common stock in 2016; (iii) an accrual related to our performance based bonus plan for 2014, which we settled in stock in May 2015; (iv) amortization of purchased intangible assets; (v) amortization of inventory step-up; (vi) acquisition and integration costs related to our recently completed acquisitions of Physpeed and Entropic; (vii) restricted merger proceeds; (viii) change in fair value of contingent consideration; (ix) severance charges; (x) restructuring charges related to our acquisition of Entropic; (xi) impairment of production masks; (xii) professional fees and settlement costs related to our previously disclosed IP litigation matters; and (xiii) release of valuation allowance due to net deferred tax liability acquired. 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.

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