MaxLinear, Inc. Updates Financial Guidance Based on U.S. Department of Commerce Action

MaxLinear, Inc. (NYSE: MXL), a leading provider of radio frequency (RF),
analog and mixed-signal integrated circuits for the connected home,
wired and wireless infrastructure, and industrial and multimarket
applications, today announced a revision to its second quarter 2019
business outlook based on the action taken by the Bureau of Industry and
Security (BIS) of the United States Department of Commerce to add Huawei
Technologies Co., Ltd. and 68 of its affiliates (Huawei) to the “Entity
List” maintained by the Department.

Huawei constitutes a growing customer of multiple MaxLinear products
addressing several applications in the communications network
infrastructure markets. While total sales to Huawei have not been
material to MaxLinear in the past, as a large strategic customer of
MaxLinear’s newer network infrastructure products, Huawei represents a
source of strong revenue growth projections for the current year.
MaxLinear is continuing to review the impact of the BIS action on its
business, including its ability to apply for and obtain appropriate
licenses to allow it to ship products to Huawei in the future. Pending
further developments, MaxLinear has ceased all shipments to Huawei and
its affiliates and cannot predict as to when it will be able to resume
such shipments.

MaxLinear’s financial guidance provided on May 1, 2019 preceded the BIS
action and did not reflect the effect of discontinuation of sales to
Huawei or of the steps required to respond to the BIS action.
Accordingly, MaxLinear is providing revised GAAP and non-GAAP
expectations for revenue, operating expenses, and gross margin for the
second quarter of fiscal 2019, along with the prior guidance that the
company originally expected as of May 1, 2019, in the table 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. We refer you to the detailed description of our
non-GAAP financial presentation provided below as well as a summary of
factors that could affect future operating results.

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, revised
guidance for second quarter 2019 revenue, gross margins, and operating
expenses) and statements concerning management’s views with respect to
MaxLinear’s relationship with Huawei as impacted by governmental
policies and regulations, including recent actions by the United States
Department of Commerce. 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, the
current situation relating to trade with China and governmental and
regulatory concerns relating to specific Chinese companies remain fluid
and unpredictable. Our current and future operating results could
be materially and adversely affected by limitations on our ability to
sell to one or more Chinese customers and by tariffs and other trade
barriers that may be implemented by governmental authorities. In
addition to these geopolitical risks relating to China, risks and
uncertainties generally 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 most recent Annual Report
on Form 10-K for the year ended December 31, 2018 filed with the SEC on
February 5, 2019, our most recent Quarterly Report on Form 10-Q for the
quarter ended March 31, 2019 filed with the SEC on May 1, 2019, and our
Current Reports on Form 8-K, as well as the risk factors set forth
therein. All forward-looking statements are based on the estimates,
projections and assumptions of management as of June 4, 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, 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.

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.

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