MAXLINEAR INC

Previous wording

In the six months ended June 30, 2024, net revenue was $187.3 million, which was derived in part from sales of RF receivers and RF receiver SOC and connectivity solutions and intellectual property into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications. Our ability to achieve revenue growth in the future will depend, among other factors, on our ability to improve revenue in key markets such as the broadband market which has experienced slower than expected recovery; our ability to further penetrate existing markets; our ability to expand our target addressable markets by developing new and innovative products such as researching, developing and designing capabilities for new solutions in advanced semiconductor process nodes such as 16nm and 5nm and beyond, and addressing challenges of capturing and processing high quality broadband communications and high-speed optical interconnect signals; changes in government trade policies; changes in export control regulations; our ability to carry on licensed activities with entities on the Entity List, which have been paused, delayed or halted by the U.S. Department of Commerce Bureau of Industry and Security, or BIS at certain times; and our ability to obtain design wins with device manufacturers, in particular manufacturers of data modems, and gateways for the broadband service provider, storage networking market, cable infrastructure market, industrial and automotive markets, and optical module and telecommunications infrastructure markets.

Current wording

In the nine months ended September 30, 2024, net revenue was $268.4 million, which was derived in part from sales of RF receivers and RF receiver SOC and connectivity solutions and intellectual property into broadband operator voice and data modems and gateways and connectivity adapters, global analog and digital RF receiver products, radio and modem solutions into wireless carrier access and backhaul infrastructure platforms, high-speed optical interconnect solutions sold into optical modules for data-center, metro and long-haul networks, and high-performance interface and power management solutions into a broad range of communications, industrial, automotive and multi-market applications. We have experienced slower than expected recovery in sales and our ability to achieve revenue growth in the future will depend, among other factors, on our ability to improve revenue in key markets such as the broadband market which has experienced slower than expected recovery; our ability to further penetrate existing markets; our ability to expand our target addressable markets by developing new and innovative products such as researching, developing and designing capabilities for new solutions in advanced semiconductor process nodes such as 16nm and 5nm and beyond, and addressing challenges of capturing and processing high quality broadband communications and high-speed optical interconnect signals; changes in government trade policies; changes in export control regulations; our ability to carry on licensed activities with entities on the Entity List, which have been paused, delayed or halted by the U.S. Department of Commerce Bureau of Industry and Security, or BIS at certain times; and our ability to obtain design wins with device manufacturers, in particular manufacturers of data modems, and gateways for the broadband service provider, storage networking market, cable infrastructure market, industrial and automotive markets, and optical module and telecommunications infrastructure markets.

Previous wording

Products shipped to Asia accounted for 68% and 74% of net revenue during the six months ended June 30, 2024 and 2023, respectively, including 31% from products shipped to Hong Kong during the six months ended June 30, 2024 and 31% from products shipped to Hong Kong and 14% from products shipped to mainland China during three months ended June 30, 2023. Although a large percentage of our products is shipped to Asia, we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside Asia. For example, revenue generated from sales of our products during the six months ended June 30, 2024 and 2023 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and North American markets. To date, all of our sales have been denominated in United States dollars.

Current wording

Products shipped to Asia accounted for 72% and 74% of net revenue during the nine months ended September 30, 2024 and 2023, respectively, including 37% from products shipped to Hong Kong during the nine months ended September 30, 2024 and 34% from products shipped to Hong Kong and 12% from products shipped to mainland China during nine months ended September 30, 2023. Although a large percentage of our products is shipped to Asia, we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then sold outside Asia. For example, revenue generated from sales of our products during the nine months ended September 30, 2024 and 2023 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and North American markets. To date, all of our sales have been denominated in United States dollars.

Previous wording

A significant portion of our net revenue has historically been generated by a limited number of customers through sales of our products, as well as consideration under intellectual property sale agreements. Sales of products to customers comprise both direct sales to customers and indirect sales through distributors. In the three months ended June 30, 2024, one customer accounted for 15% of our net revenue, and our ten largest customers collectively accounted for 62% of our net revenue, of which distributor customers accounted for 19% of our net revenue. In the six months ended June 30, 2024, two customers accounted for 22% of our net revenue, and our ten largest customers collectively accounted for 65% of our net revenue, of which distributor customers accounted for 21% of our net revenue. For certain customers, we sell multiple products into disparate end user applications such as PON outdoor units, or PON ODUs, Wi-Fi routers, broadband gateways, and cable modems.

Current wording

A significant portion of our net revenue has historically been generated by a limited number of customers through sales of our products, as well as consideration under intellectual property sale agreements. Sales of products to customers comprise both direct sales to customers and indirect sales through distributors. In the three months ended September 30, 2024, one customer accounted for 25% of our net revenue, and our ten largest customers collectively accounted for 71% of our net revenue, of which distributor customers accounted for 8% of our net revenue. In the nine months ended September 30, 2024, one customer accounted for 13% of our net revenue, and our ten largest customers collectively accounted for 64% of our net revenue, of which distributor customers accounted for 15% of our net revenue. For certain customers, we sell multiple products into disparate end user applications such as PON outdoor units, or PON ODUs, Wi-Fi routers, broadband gateways, and cable modems.

Previous wording

During the year ended December 31, 2023, we entered into two plans of restructuring to reduce our workforce, or the 2023 Workforce Reductions. We are initiating a reduction in our workforce in July 2024, or the 2024 Workforce Reduction, which together with the 2023 Workforce Reductions are referred to collectively as the Workforce Reductions. The Workforce Reductions are intended to align our operational needs with the changes in macroeconomic conditions and the demand environment while continuing to support the long-term business strategy by reducing our operating expenses. As a result of the 2023 Workforce Reductions, in the year ended December 31, 2023, we incurred $19.8 million in restructuring costs primarily related to severance costs and related expenses. During the six months ended June 30, 2024, we completed notification to the remaining affected employees of the 2023 Workforce Reductions, and incurred $23.5 million in restructuring costs, or a cumulative total of $43.3 million.

Current wording

We initiated a reduction in our workforce in July 2024, or the 2024 Workforce Reduction, following slower than expected recovery in our sales as a result of macroeconomic conditions and the demand environment. Previously, during the year ended December 31, 2023, we entered into two plans of restructuring to reduce our workforce, or the 2023 Workforce Reductions, which together with the 2024 Workforce Reduction, are referred to collectively as the Workforce Reductions. The Workforce Reductions are intended to align our operational needs with the changes in macroeconomic conditions and the demand environment while continuing to support the long-term business strategy by reducing our operating expenses.

Previous wording

Restructuring costs in the six months ended June 30, 2024 included $19.8 million in severance costs and related expenses, substantially all of which pertained to statutory severance benefits in the jurisdictions in which the terminated employees were employed, and $3.7 million in non-cash charges related to exiting facilities and writing off of assets. As of June 30, 2024, we do not expect to incur a material amount of additional restructuring costs pertaining to the 2023 Workforce Reductions, and we estimate we will incur approximately $15 million to $20 million in cash severance and related costs pertaining to the 2024 Workforce Reduction. We expect to complete notifications to employees regarding the 2024 Workforce Reduction by the end of 2024. The estimate of costs that we expect to incur, and the timing thereof, are subject to a number of assumptions and actual results may differ. We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Workforce Reductions.

Current wording

The estimate of costs that we expect to incur, and the timing thereof, are subject to a number of assumptions and actual results may differ. We may also incur other charges or cash expenditures not currently contemplated due to events that may occur as a result of, or associated with, the Workforce Reductions.

Previous wording

For a summary of our critical accounting policies and estimates, refer to Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2023, which we filed with the Securities and Exchange

Current wording

For a summary of our critical accounting policies and estimates, refer to Management’s Discussion and Analysis section of our Annual Report on Form 10-K for the year ended December 31, 2023, which we filed with the Securities and Exchange Commission, or SEC, on January 31, 2024, or our Annual Report. There have been no material changes to our critical accounting policies and estimates during the nine months ended September 30, 2024.

Previous wording

Interest and Other Income (Expense), Net. Interest and other income (expense), net includes interest income, interest expense and other income (expense). Interest income consists of interest earned on our cash, cash equivalents and restricted cash balances. Interest expense consists of interest accrued on debt and amortization of discounts on debt and other liabilities. Other income (expense) generally consists of income (expense) generated from non-operating transactions, net gains (losses) on sales of investments and/or income from investments, if any, and unrealized holding gains (losses) from certain investments required to be marked to market value, if any.

Current wording

Interest and Other Income (Expense), Net. Interest and other income (expense), net includes interest income, interest expense and other income (expense). Interest income consists of interest earned on our cash, cash equivalents and restricted cash balances. Interest expense consists of interest accrued on debt and amortization of discounts on debt and other liabilities. Other income (expense) consists of income (expense) generated from non-operating transactions, including a ticking fee paid to lenders following the termination of the Silicon Motion merger, net gains (losses) from sales or impairment of investments and/or income or losses from investments, if any, including unrealized holding gains (losses) from certain investments required to be marked to market value, if any, and a gain from partial curtailment of employee defined benefit obligations.

Previous wording

Net revenue decreased $91.9 million to $92.0 million for the three months ended June 30, 2024, as compared to $183.9 million for the three months ended June 30, 2023, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in 2022. The decrease in broadband net revenue of $31.7 million was driven by decreases in the volume of broadband SOC shipments in this category. The decrease in connectivity net revenue of $24.7 million was driven by decreased volume of shipments of certain products associated with residential broadband market decline. The decrease in net infrastructure revenues of $17.5 million was driven by a decrease in the volume of wireless backhaul product shipments. The decrease in industrial and multi-market net revenue of $18.1 million was driven by decreased volume of shipments of component and high-performance analog products. Price changes did not have a material impact to revenues period over period.

Current wording

Net revenue decreased $54.4 million to $81.1 million for the three months ended September 30, 2024, as compared to $135.5 million for the three months ended September 30, 2023, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in 2022. The decrease in broadband net revenue of $2.1 million was driven by decreases in the volume of broadband SOC, satellite ODU, and tuner shipments in this category, partially offset by increases from reversals of unclaimed rebates due to expiration of rebate pricing and improvements in shipments of cable data shipments. The decrease in connectivity net revenue of $2.3 million was driven by decreased volume of shipments of certain products associated with residential broadband market decline, while ethernet product shipments improved. The decrease in net infrastructure revenues of $26.9 million was driven by a decrease in the volume of wireless backhaul and high performance analog product shipments. The decrease in industrial and multi-market net revenue of $23.0 million was driven by decreased volume of shipments of component and high-performance analog products, while high speed interconnect product shipments improved. Price changes did not have a material impact to revenues period over period.

Previous wording

Net revenue decreased $245.1 million to $187.3 million for the six months ended June 30, 2024, as compared to $432.4 million for the six months ended June 30, 2023, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in 2022. The decrease in broadband net revenue of $80.3 million was driven by decreases in the volume of broadband SOC shipments in this category, partially offset by revenue from certain intellectual property sale agreements. The decrease in connectivity net revenue of $81.2 million was driven by decreased volume of shipments of certain products associated with residential broadband market decline, partially offset by revenue from certain intellectual property sale agreements. The decrease in net infrastructure revenues of $31.2 million was driven by a decrease in the volume of wireless backhaul product shipments, partially offset by revenue from certain intellectual property sale agreements. The decrease in industrial and multi-market net revenue of $52.4 million was driven by decreased volume of shipments of component and high-performance analog products. Price changes did not have a material impact to revenues period over period.

Current wording

Net revenue decreased $299.5 million to $268.4 million for the nine months ended September 30, 2024, as compared to $567.9 million for the nine months ended September 30, 2023, primarily as a result of macroeconomic conditions impacting customer demand, including excess inventory in the channel built up following the supply shortages in 2022. The decrease in broadband net revenue of $82.5 million was driven by decreases in the volume of broadband SOC shipments in this category, partially offset by revenue from certain intellectual property sale agreements and increases from reversals of unclaimed rebates due to expiration of rebate pricing. The decrease in connectivity net revenue of $83.5 million was driven by decreased volume of shipments of certain products associated with residential broadband market decline, partially offset by revenue from certain intellectual property sale agreements. The decrease in net infrastructure revenues of $58.1 million was driven by decreases in the volume of wireless backhaul products, and to a lesser extent, high performance analog shipments, partially offset by improvement in shipments of from high speed interconnect products, and revenues from certain intellectual property sale agreements. The decrease in industrial and multi-market net revenue of $75.4 million was driven by decreased volume of shipments of component and high-performance analog products. Price changes did not have a material impact to revenues period over period.

Previous wording

Cost of net revenue decreased $39.3 million to $41.8 million for the three months ended June 30, 2024, as compared to $81.1 million for the three months ended June 30, 2023. The decrease was driven by a decreased volume of shipments as a result of macroeconomic conditions impacting customer demand for our products as described above under “Net Revenue.” Gross profit percentage declined for the three months ended June 30, 2024, as compared to the three months ended June 30, 2023, due to reduced absorption of intangible amortization and fixed costs.

Current wording

Cost of net revenue decreased $24.6 million to $37.0 million for the three months ended September 30, 2024, as compared to $61.6 million for the three months ended September 30, 2023. The decrease was driven by a decreased volume of shipments as a result of macroeconomic conditions impacting customer demand for our products as described above under “Net Revenue.” Gross profit percentage declined for the three months ended September 30, 2024, as compared to the three months ended September 30, 2023, due to reduced absorption of intangible amortization and fixed costs.

Previous wording

Cost of net revenue decreased $101.4 million to $87.8 million for the six months ended June 30, 2024, as compared to $189.2 million for the six months ended June 30, 2023. The decrease was driven by a decreased volume of shipments as a result of macroeconomic conditions impacting customer demand for our products as described above under “Net Revenue.” Gross profit percentage declined for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, due to reduced absorption of intangible amortization and fixed costs.

Current wording

Cost of net revenue decreased $126.0 million to $124.8 million for the nine months ended September 30, 2024, as compared to $250.8 million for the nine months ended September 30, 2023. The decrease was driven by a decreased volume of shipments as a result of macroeconomic conditions impacting customer demand for our products as described above under “Net Revenue.” Gross profit percentage declined for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, due to reduced absorption of intangible amortization and fixed costs.

Previous wording

Research and development expense decreased $14.1 million to $56.5 million for the three months ended June 30, 2024, as compared to $70.7 million for the three months ended June 30, 2023. The decrease was driven by decreases in payroll and benefits expense of $4.1 million, CAD design tools expense of $2.2 million, stock based compensation of $2.1 million, prototype expense of $2.0 million, bonuses of $1.5 million, consulting expense of $0.8 million and depreciation expense of $0.7 million. The decrease was partially offset by an increase in income from governmental R&D grants of $0.5 million offsetting our R&D expense. The decrease in payroll and benefits, bonuses, outside services, and stock-based compensation are attributable to the 2023 Workforce Reductions, and cost reduction measures. The decrease in CAD design tool, prototype, and consulting expenses are due to timing of project completion. The decrease in depreciation expense is from acquired assets becoming fully amortized as they reached the end of their useful lives. The increase in governmental R&D grants income was related to new grants received this year.

Current wording

Research and development expense decreased $13.7 million to $52.6 million for the three months ended September 30, 2024, as compared to $66.3 million for the three months ended September 30, 2023. The decrease was driven by decreases in payroll and benefits expense of $5.6 million, bonuses of $3.1 million, stock based compensation of $2.0 million, CAD design tools expense of $1.7 million, consulting expense of $0.9 million and prototype expense of $0.7 million. These decreases were partially offset by the impact of a decrease to income from joint R&D projects and government grants of $0.7 million offset against R&D expense. The decrease in payroll and benefits, bonuses, and stock-based compensation are attributable to the 2023 Workforce Reductions. The decrease in CAD design tool, consulting and prototype expenses are due to timing of project completion. The decrease in research and development funded by others is due to timing of governmental R&D grants and termination of certain programs during the third quarter of 2024 as a result of the 2024 Workforce Reduction. The amount of income from research and development funded by others also varies from period to period depending on availability of such funding, including governmental grants.

Previous wording

Research and development expense decreased $16.6 million to $121.3 million for the six months ended June 30, 2024, as compared to $137.9 million for the six months ended June 30, 2023. The decrease was driven by decreases in payroll and benefits expense of $10.1 million, CAD design tools expense of $4.2 million, stock based compensation of $3.2 million, consulting expense of $2.1 million, prototype expense of $1.6 million, and depreciation expense of $1.5 million. These decreases were partially offset by the impact of lower governmental R&D grant income of $7.4 million offset against R&D expense. The decrease in payroll and benefits expense and stock-based compensation are attributable to the 2023 Workforce Reductions and cost reduction measures. The decrease in CAD design tool, consulting and prototype expenses are due to timing of project completion. The decrease in depreciation expense is from acquired assets becoming fully amortized as they reached the end of their useful lives. The decrease in R&D grant income is due to timing of governmental R&D grants and termination of certain programs during the first quarter of 2024 as a result of the 2023 Workforce Reductions. The amount of income from governmental R&D grants also varies from period to period depending on availability of governmental R&D programs.

Current wording

Research and development expense decreased $30.3 million to $173.9 million for the nine months ended September 30, 2024, as compared to $204.3 million for the nine months ended September 30, 2023. The decrease was driven by decreases in payroll and benefits expense of $15.8 million, CAD design tools expense of $5.9 million, stock based compensation of $5.2 million, bonuses of $3.3 million, consulting expense of $3.0 million, prototype expense of $2.3 million, depreciation expense of $1.7 million and occupancy expenses of $0.6 million. These decreases were partially offset by a decrease in income from joint R&D and governmental grants of $8.1 million offset against R&D expense. The decrease in payroll and benefits expense, stock-based compensation, and bonuses are attributable to the 2023 Workforce Reductions and cost reduction measures. The decrease in CAD design tool, consulting and prototype expenses are due to timing of project completion. The decrease in depreciation expense is from acquired assets becoming fully amortized as they reached the end of their useful lives. The decrease in income from joint R&D projects and governmental grants is due to timing of governmental R&D grants and termination of certain programs during the first and third quarters of 2024 as a result of the 2023 Workforce Reductions and 2024 Workforce Reduction. The amount of income from research and development funded by others also varies from period to period depending on availability of such funding, including governmental grants.

Previous wording

We are closely managing our research and development expenses to meet evolving demand; however, we expect our research and development expenses to increase in future years as we develop products to drive future growth.

Current wording

We are reducing our research and development spending, including via our Workforce Reductions, to meet evolving demand; however, we expect our research and development expenses to increase in future years as we develop products to drive future growth.

Previous wording

Selling, general and administrative expense decreased $0.1 million to $33.6 million for the three months ended June 30, 2024, as compared to $33.7 million for the three months ended June 30, 2023. The decrease was a result of decreases in professional fees of $1.0 million, payroll and other benefits expense of $0.6 million, bonuses of $0.5 million, and commissions expense of $0.5 million. These decreases were partially offset by an increase in stock based compensation of $2.4 million. The decrease in professional fees is mainly due to a decrease in merger and acquisition related fees following the termination of our merger with Silicon Motion. The decreases in payroll and other benefits and bonuses are attributable to the 2023 Workforce Reductions and other cost reduction measures. The decrease in commissions expense is due to decreased revenues. The increase in stock based compensation expense is a result of incremental grants made to executives for retention purposes in the first quarter of 2024.

Current wording

Selling, general and administrative expense increased $4.8 million to $30.2 million for the three months ended September 30, 2024, as compared to $25.4 million for the three months ended September 30, 2023. The increase was a result of increase in stock based compensation of $9.8 million, partially offset by decreases in payroll and other benefits expense of $1.8 million, professional fees of $1.8 million, and bonuses of $1.4 million. The increase in stock-based compensation expense is a result of incremental grants made to executives for retention purposes in the first quarter of 2024. The decrease in professional fees is mainly due to a decrease in merger and acquisition related fees following the termination of our merger with Silicon Motion. The decreases in payroll and other benefits and bonuses are attributable to the 2023 Workforce Reductions and other cost reduction measures.

Previous wording

Selling, general and administrative expense decreased $2.3 million to $70.1 million for the six months ended June 30, 2024, as compared to $72.4 million for the six months ended June 30, 2023. The decrease was a result of decreases in payroll and other benefits expense of $2.5 million, professional fees of $2.3 million, depreciation and amortization of $1.0 million, and commissions of $0.7 million. These decreases were partially offset by an increase in stock based compensation of $4.0 million. The decreases in payroll and other benefits are attributable to the 2023 Workforce Reductions and other cost reduction measures. The decrease in professional fees is mainly due to decrease in merger and acquisition related fees following the termination of our merger with Silicon Motion. The decrease in depreciation and amortization is from assets becoming fully amortized as they reached the end of their useful lives. The decrease in commissions expense is due to decreased revenues. The increase in stock-based compensation expense is a result of incremental grants made to executives for retention purposes in the first quarter of 2024.

Current wording

Selling, general and administrative expense increased $2.5 million to $100.2 million for the nine months ended September 30, 2024, as compared to $97.8 million for the nine months ended September 30, 2023. The increase was a result of increase in stock based compensation of $13.8 million, partially offset by decreases in professional fees of $4.1 million, payroll and other benefits expense of $3.9 million, bonuses of $1.6 million, commissions of $1.0 million, and depreciation and amortization of $1.0 million. The increase in stock-based compensation expense is a result of incremental grants made to executives for retention purposes in the first quarter of 2024. The decrease in professional fees is mainly due to a decrease in merger and acquisition related fees following the termination of our merger with Silicon Motion. The decreases in payroll and other benefits and bonuses are attributable to the 2023 Workforce Reductions and other cost reduction measures. The decrease in commissions expense is due to decreased revenues. The decrease in depreciation and amortization is from assets becoming fully amortized as they reached the end of their useful lives.

Previous wording

We are closely managing our selling, general and administrative expenses; however, we expect selling, general and administrative expenses to increase in future years when we return to growing our sales and marketing organization to expand into existing and new markets.

Current wording

We are reducing our selling, general and administrative expenses, including via our Workforce Reductions; however, we expect selling, general and administrative expenses to increase in future years when we return to growing our sales and marketing organization to expand into existing and new markets.

Previous wording

Impairment losses in the six months ended June 30, 2023 related to abandonment of certain intellectual property licenses.

Current wording

Impairment losses in the three and nine months ended September 30, 2024 and the nine months ended September 30, 2023 related to abandonment of certain intellectual property licenses.

Previous wording

Restructuring charges decreased $3.6 million to $0.9 million for the three months ended June 30, 2024, compared to $4.4 million for the three months ended June 30, 2023. Restructuring charges for the three months ended June 30, 2024 included $0.8 million in charges related to reduction of space leased for office facilities. Restructuring charges for the three months ended June 30, 2023 included $4.3 million in employee severance and related charges related to the 2023 Workforce Reductions.

Current wording

Restructuring charges increased $26.8 million to $26.8 million for the three months ended September 30, 2024, compared to $0.1 million for the three months ended September 30, 2023. Restructuring charges for the three months ended September 30, 2024 included $17.0 million charges under contracts associated with cancelled projects and related impairment of assets, $9.1 million in severance and related charges related to the 2024 Workforce Reduction, and $0.7 million in charges related to the reduction of space leased for office facilities. A significant portion of the employee severance-related changes from the 2024 Workforce Reduction are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed.

Previous wording

Restructuring charges increased $14.4 million to $23.5 million for the six months ended June 30, 2024, compared to $9.1 million for the six months ended June 30, 2023. Restructuring charges for the six months ended June 30, 2024 included $19.8 million in employee severance and related charges related to the 2023 Workforce Reductions and $3.0 million in charges related to reduction of space leased for office facilities. Substantially all of the employee severance-related charges in this period are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed. Restructuring charges for the six months ended June 30, 2023 included $8.9 million in employee severance and related charges related to the 2023 Workforce Reductions.

Current wording

Restructuring charges increased $41.2 million to $50.3 million for the nine months ended September 30, 2024, compared to $9.1 million for the nine months ended September 30, 2023. Restructuring charges for the nine months ended September 30, 2024 included $28.9 million in employee severance and related charges, $19.8 million of which related to the 2023 Workforce Reductions and $9.1 million which related to the 2024 Workforce Reduction, $17.8 million in charges under contracts associated with cancelled projects and related impairment of assets, and $3.6 million in charges related to reduction of space leased for office facilities. Substantially all of the employee severance-related charges from the 2023 Workforce Reductions and a significant portion of the employee severance-related charges from the 2024 Workforce Reduction are estimated statutory severance benefits payable in the jurisdictions in which the terminated employees were employed.

Previous wording

The income tax benefit for the three months ended June 30, 2024 was $2.1 million compared to an income tax benefit of $0.4 million for the three months ended June 30, 2023.

Current wording

The income tax benefit for the three months ended September 30, 2024 was $6.7 million compared to an income tax benefit of $1.7 million for the three months ended September 30, 2023.

Previous wording

The income tax benefit for the six months ended June 30, 2024 was $3.8 million compared to an income tax provision of $15.2 million for the six months ended June 30, 2023.

Current wording

The income tax benefit for the nine months ended September 30, 2024 was $10.5 million compared to an income tax provision of $13.5 million for the nine months ended September 30, 2023.

Previous wording

The difference between our effective tax rate and the 21.0% U.S. federal statutory rate for the six months ended June 30, 2024 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items, and stock based compensation, tax shortfalls related to stock-based compensation, and release of uncertain tax positions under ASC 740-10.

Current wording

The difference between our effective tax rate and the 21.0% U.S. federal statutory rate for the nine months ended September 30, 2024 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items, and stock based compensation.

Previous wording

The difference between our effective tax rate and the 21.0% U.S. federal statutory rate for the six months ended June 30, 2023 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, and the release of uncertain tax positions under ASC 740-10. The permanent tax item related to global intangible low-taxed income also reflected the then recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

Current wording

The difference between our effective tax rate and the 21.0% U.S. federal statutory rate for the nine months ended September 30, 2023 primarily related to the mix of pre-tax income among jurisdictions, permanent tax items including a tax on global intangible low-taxed income, stock based compensation, excess tax benefits related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10. The permanent tax item related to global intangible low-taxed income also reflected the then recent legislative changes requiring the capitalization of research and experimentation costs, as well as limitations on the creditability of certain foreign income taxes.

Previous wording

Our subsidiary in Singapore operates under certain tax incentives in Singapore, which are effective through March 2027. Under these incentives, qualifying income derived from certain sales of our integrated circuits is taxed at a concessionary rate over the incentive period. We also receive a reduced withholding tax rate on certain intercompany royalty payments made by our Singapore subsidiary during the incentive period. We recorded income taxes in the six months ended June 30, 2024 and 2023 at the incentive rate. The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period. We currently believe that we will be able to satisfy these conditions without material risk.

Current wording

Our subsidiary in Singapore operates under certain tax incentives in Singapore, which are effective through March 2027. Under these incentives, qualifying income derived from certain sales of our integrated circuits is taxed at a concessionary rate over the incentive period. We also receive a reduced withholding tax rate on certain intercompany royalty payments made by our Singapore subsidiary during the incentive period. We recorded income taxes in the nine months ended September 30, 2024 and 2023 at the incentive rate. The incentives are conditional upon our meeting certain minimum employment and investment thresholds within Singapore over time, and we may be required to return certain tax benefits in the event we do not achieve compliance related to that incentive period. We currently believe that we will be able to satisfy these conditions without material risk.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $185.1 million, restricted cash of $1.0 million and net accounts receivable of $84.9 million. Additionally, as of June 30, 2024, our working capital, which we define as current assets less current liabilities, was $207.3 million. Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. Collateral is generally not required for customer receivables. We limit our exposure to credit loss by placing our cash with high credit quality financial institutions. At times, such deposits may be in excess of insured limits. We have not experienced any losses on our deposits of cash and cash equivalents.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $148.5 million, restricted cash of $1.0 million and net accounts receivable of $47.9 million. Additionally, as of September 30, 2024, our working capital, which we define as current assets less current liabilities, was $159.7 million. Financial instruments, which potentially subject us to concentrations of credit risk, consist primarily of cash and cash equivalents and accounts receivable. Collateral is generally not required for customer receivables. We limit our exposure to credit loss by placing our cash with high credit quality financial institutions. At times, such deposits may be in excess of insured limits. We have not experienced any losses on our deposits of cash and cash equivalents.

Previous wording

We may also use cash to pay down outstanding debt and from time to time, make investments. As of June 30, 2024, $125.0 million of principal was outstanding under a senior secured term B loan facility or the “Initial Term Loan under the June 23, 2021 Credit Agreement.” The Company also has available a senior secured revolving credit facility, in an aggregate principal amount of up to $100.0 million which remained undrawn as of June 30, 2024. The proceeds of the revolving facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries.

Current wording

From time to time, we may also use cash to pay down outstanding debt and/or make investments. As of September 30, 2024, $125.0 million of principal was outstanding under a senior secured term B loan facility or the “Initial Term Loan under the June 23, 2021 Credit Agreement.” The Company also has available, subject to the terms and conditions of the agreement, a senior secured revolving credit facility, in an aggregate principal amount of up to $100.0 million which remained undrawn as of September 30, 2024. The proceeds of the revolving facility may be used to finance the working capital needs and other general corporate purposes of the Company and its subsidiaries.

Previous wording

Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement has amortized in equal quarterly installments equal to 0.25% of the original principal amount of the Initial Term Loan under the June 23, 2021 Credit Agreement, with the balance payable on June 23, 2028. We could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate or an adjusted base rate. While we had been mitigating the impact of rising interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it could have a material adverse effect on our operating results and could affect our ability to service the indebtedness. Please refer to the Risk Factor entitled “As of June 30, 2024, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by rising interest rates in the future. Such indebtedness adversely affects our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations and contains financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interest of stockholders, including obtaining additional indebtedness to finance such transactions. In addition, rising interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service their interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors' business” for a discussion of how our indebtedness could have a material adverse effect on our liquidity and capital resources.

Current wording

Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement has amortized in equal quarterly installments equal to 0.25% of the original principal amount of the Initial Term Loan under the June 23, 2021 Credit Agreement, with the balance payable on June 23, 2028. We could be subject to substantial variable interest rate risk because our interest rate under term loans typically vary based on a fixed margin over an indexed rate or an adjusted base rate. While we had been mitigating the impact of high interest rates with large amounts of prepayments on our outstanding debt, if interest rates were to further increase substantially, it could have a material adverse effect on our operating results and could affect our ability to service the indebtedness. Please refer to the Risk Factor entitled “As of September 30, 2024, our aggregate indebtedness was $125.0 million, and we are subject to a variable amount of interest on the principal balance of our credit agreements and could continue to be adversely impacted by high interest rates in the future. Such indebtedness adversely affects our operating results and cash-flows as we satisfy our underlying interest and principal payment obligations and contains financial and operational covenants that could adversely affect our operational freedom or ability to pursue strategic transactions that we would otherwise consider to be in the best interest of stockholders, including obtaining additional indebtedness to finance such transactions. In addition, high interest rates may make it more difficult for us, our customers, and our distributors to obtain financing and service their interest and debt obligations, which in turn has an impact on customer demand for our products and our distributors' business” for a discussion of how our indebtedness could have a material adverse effect on our liquidity and capital resources.

Previous wording

Our future capital requirements will depend on many factors, including changes in revenue, the expansion of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products, any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement and any other potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to us or at all. If we are unable to raise additional funds when needed, we may not be able to sustain our operations or execute our strategic plans.

Current wording

Our future capital requirements will depend on many factors, including changes in revenue, the expansion or contraction of our engineering, sales and marketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of our products, any damages from legal proceedings related to the termination of the Merger Agreement with Silicon Motion or any alleged breaches of the Merger Agreement that we are required to pay, or any amounts we agree to pay in any settlement and any other potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to us or at all. If we are unable to raise additional funds when needed, we may not be able to sustain our operations or execute our strategic plans.

Previous wording

Our cash and cash equivalents are impacted by the timing of when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses. Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as, but not limited to, amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of intangible assets, impairment of leased right-of-use assets and gain on extinguishment of lease liabilities. Cash used to fund capital purchases and acquisitions of businesses and investments are included in investing activities in our consolidated statements of cash flows. Cash paid to satisfy minimum tax withholdings on behalf of employees for restricted stock units are included in financing activities in our consolidated statements of cash flows.

Current wording

Our cash and cash equivalents are impacted by the timing of when we pay expenses as reflected in the change in our outstanding accounts payable and accrued expenses. Cash used to fund operating expenses in our consolidated statements of cash flows excludes the impact of non-cash items such as, but not limited to, amortization and depreciation of acquired intangible assets and leased right-of-use assets and property and equipment, stock-based compensation, impairment of assets, and gain on extinguishment of lease liabilities. Cash used to fund capital purchases and acquisitions of businesses and investments are included in investing activities in our consolidated statements of cash flows. Cash paid to satisfy minimum tax withholdings on behalf of employees for restricted stock units are included in financing activities in our consolidated statements of cash flows.

Previous wording

$15.0 million received from other parties for jointly funded research and development projects which will be recognized into income when the contingencies associated with the repayment conditions have been resolved. The future payments related to uncertain tax positions recorded as other long-term liabilities have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.

Current wording

Our planned capital expenditures as of September 30, 2024 were not material. Our consolidated balance sheet at September 30, 2024 included $4.4 million in other long-term liabilities for uncertain tax positions, some of which may result in cash payment and $15.0 million received from other parties for jointly funded research and development projects which will be recognized into income when the contingencies associated with the repayment conditions have been resolved. The future payments related to uncertain tax positions recorded as other long-term liabilities have not been presented in the table above due to the uncertainty of the amounts and timing of cash settlement with the taxing authorities.

Previous wording

We believe that our $185.1 million of cash and cash equivalents at June 30, 2024 will be sufficient to fund our projected operating requirements for at least the next twelve months. As of June 30, 2024, our indebtedness totaled $125.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement. The June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of June 30, 2024. The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted SOFR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25% or (ii) an adjusted SOFR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%. Loans under the Revolving Facility initially bear interest, at a per annum rate equal to either (i) a base rate (as calculated above) plus an applicable margin of 0.00%, or (ii) an adjusted SOFR rate (as calculated above) plus an applicable margin of 1.00%. Following delivery of financial statements for the Company’s fiscal quarter ending June 30, 2021, the applicable margin for loans under the Revolving Facility will range from 0.00% to 0.75% in the case of base rate loans and 1.00% to 1.75% in the case of SOFR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter. The Company is required to pay commitment fees ranging from 0.175% to 0.25% per annum on the daily undrawn commitments under the Revolving Facility, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter. Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement amortizes in equal quarterly installments equal to 0.25% of the original principal amount, with the balance payable at maturity on June 23, 2028. The June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.

Current wording

We believe that our $148.5 million of cash and cash equivalents at September 30, 2024 will be sufficient to fund our projected operating requirements for at least the next twelve months. As of September 30, 2024, our indebtedness totaled $125.0 million, which consists of outstanding principal under the Initial Term Loan under the June 23, 2021 Credit Agreement. The June 23, 2021 Credit Agreement also provides the Company with the Revolving Facility in an aggregate principal amount of up to $100.0 million, which remained undrawn as of September 30, 2024. The Initial Term Loan under the June 23, 2021 Credit Agreement has a seven-year term expiring in June 2028 and bears interest, at the Company’s option, at a per annum rate equal to either (i) a base rate equal to the highest of (x) the federal funds rate, plus 0.50%, (y) the prime rate then in effect and (z) an adjusted SOFR rate determined on the basis of a one-month interest period plus 1.00%, in each case, plus an applicable margin of 1.25% or (ii) an adjusted SOFR rate, subject to a floor of 0.50%, plus an applicable margin of 2.25%. Loans under the Revolving Facility initially bear interest, at a per annum rate equal to either (i) a base rate (as calculated above) plus an applicable margin of 0.00%, or (ii) an adjusted SOFR rate (as calculated above) plus an applicable margin of 1.00%. Following delivery of financial statements for the Company’s fiscal quarter ending June 30, 2021, the applicable margin for loans under the Revolving Facility will range from 0.00% to 0.75% in the case of base rate loans and 1.00% to 1.75% in the case of SOFR rate loans, in each case, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter. The Company is required to pay commitment fees ranging from 0.175% to 0.25% per annum on the daily undrawn commitments under the Revolving Facility, depending on the Company’s secured net leverage ratio as of the most recently ended fiscal quarter. Commencing on September 30, 2021, the Initial Term Loan under the June 23, 2021 Credit Agreement amortizes in equal quarterly installments equal to 0.25% of the original principal amount, with the balance payable at maturity on June 23, 2028. The June 23, 2021 Credit Agreement was amended on June 29, 2023 to implement a benchmark replacement.

Previous wording

Net cash provided by operating activities was $13.3 million for the six months ended June 30, 2024, compared to net cash provided by operating activities of $72.7 million six months ended June 30, 2023. The decline in operating cash flows was driven by a decline in revenue from decreased volume of shipments of our products as a result of macroeconomic conditions impacting customer demand for our products (as discussed under the heading, “Results of Operations,” above). Operating cash flows were also impacted by changes in our working capital, which increased $79.2 million, in particular, in the first half of 2024, we collected accounts receivable of $164.2 million, which was partially offset by payments against our price protection liability of $33.3 million and severance payments from the 2023 Workforce Reductions of $17.7 million.

Current wording

Net cash used in operating activities was $17.5 million for the nine months ended September 30, 2024, compared to net cash provided by operating activities of $59.9 million nine months ended September 30, 2023. The decline in operating cash flows was driven by a decline in revenue from decreased volume of shipments of our products as a result of macroeconomic conditions impacting customer demand for our products (as discussed under the heading, “Results of Operations,” above). Operating cash flows were also impacted by changes in our working capital, which increased $88.7 million, in particular, in the first nine months of 2024, we collected accounts receivable of $177.6 million, which was partially offset by payments against our price protection liability of $54.0 million and severance and other payments from the Workforce Reductions of $31.5 million.

Previous wording

Our use of cash in investing activities declined by $13.7 million as we reduced our capital spending and acquisition investments. Our capital purchases of property and equipment and intangible assets decreased $1.3 million for the six months ended June 30, 2024, and we did not make any acquisition-related payments in the first half of 2024.

Current wording

Our use of cash in investing activities declined by $10.3 million driven by a reduction our acquisition investments, offset by increased capital purchases. In the nine months ended September 30, 2023, we used $12.4 million in acquiring a small business. We did not make any acquisition-related payments in the 2024 period. Our capital purchases of property and equipment and intangible assets increased $2.1 million for the nine months ended September 30, 2024 due to the timing of purchases of production masks and other property and equipment.

Previous wording

Net cash used in investing activities was $14.5 million for the six months ended June 30, 2024 and consisted of purchases of property and equipment of $11.4 million, and purchases of intangible assets of $3.1 million.

Current wording

Net cash used in investing activities was $20.4 million for the nine months ended September 30, 2024 and consisted of purchases of property and equipment of $15.5 million, and purchases of intangible assets of $5.0 million.

Previous wording

Net cash used in investing activities was $28.2 million for the six months ended June 30, 2023 and consisted of cash used in acquisitions of Company X and Y of $12.4 million (including $2.7 million contingent consideration paid to shareholders of Company X), purchases of property and equipment of $10.3 million, and purchases of intangible assets of $5.5 million.

Current wording

Net cash used in investing activities was $30.8 million for the nine months ended September 30, 2023 and consisted of cash used in acquisitions of Company X and Y of $12.4 million (including $2.7 million contingent consideration paid to shareholders of Company X), purchases of property and equipment of $12.2 million, and purchases of intangible assets of $6.2 million.

Previous wording

Our use of cash in financing activities, which was comprised of minimum tax withholding paid on behalf of employees for restricted stock units for both periods, partially offset by net proceeds from issuance of common stock for stock-related awards to employees which declined due to a smaller amount of restricted stock units released for bonuses and a decline in value of other stock-related awards released during the periods.

Current wording

Our use of cash in financing activities for the 2023 period included payment of debt commitment, or ticking fees, of $18.3 million in connection with the termination of the merger with Silicon Motion. Both the 2024 and 2023 periods included minimum tax withholding paid on behalf of employees for restricted stock, partially offset by net proceeds from issuance of common stock for stock-related awards to employee. The employee stock-related amounts declined due to a smaller amount of restricted stock units released for bonuses and a decline in value of other stock-related awards released during the periods.