Last10K.com

Maxlinear Inc (MXL) SEC Filing 10-Q Quarterly report for the period ending Tuesday, March 31, 2020

SEC Filings

MXL Quarterly Reports

Maxlinear Inc

CIK: 1288469 Ticker: MXL

Exhibit 99.1
mxla01a01a421.jpg
FOR IMMEDIATE RELEASE

MaxLinear, Inc. Announces First Quarter 2020 Financial Results
Carlsbad, Calif. – April 29, 2020
– MaxLinear, Inc. (NYSE: MXL), a leading provider of RF, analog and mixed-signal integrated circuits for the connected home, and industrial and multi-market applications, today announced financial results for the first quarter ended March 31, 2020.

First Quarter Financial Highlights
GAAP basis:
Net revenue was $62.0 million, down 11% sequentially, and down 27% year-on-year.
GAAP gross margin was 49.6%, compared to 52.3% in the prior quarter, and 53.3% in the year-ago quarter.
GAAP operating expenses were $50.9 million in the first quarter 2020, or 82% of net revenue, compared to $44.6 million in the prior quarter, or 64% of net revenue, and $52.9 million in the year-ago quarter, or 63% of net revenue.
GAAP loss from operations was 33% of revenue, compared to loss from operations of 11% in the prior quarter, and loss from operations of 9% in the year-ago quarter.
Net cash flow provided by operating activities was $6.6 million, compared to $28.1 million in the prior quarter, and $16.0 million in the year-ago quarter.
GAAP diluted loss per share was $0.21, compared to diluted loss per share of $0.11 in the prior quarter, and diluted loss per share of $0.07 in the year-ago quarter.
Non-GAAP basis:
Non-GAAP gross margin was 63.8%. This compares to 64.6% in the prior quarter, and 63.5% in the year-ago quarter.
Non-GAAP operating expenses were $31.7 million, or 51% of revenue, compared to $30.0 million or 43% of revenue in the prior quarter, and $35.7 million or 42% of revenue in the year-ago quarter.
Non-GAAP income from operations was 13% of revenue, compared to 22% in the prior quarter, and 21% in the year-ago quarter.
Non-GAAP diluted earnings per share was $0.07, compared to diluted earnings per share of $0.16 in the prior quarter, and diluted earnings per share of $0.19 in the year-ago quarter.

Recent Business Highlights

Announced that MxL93616 100G PAM4 DSP with EA-EML Integrated Driver was recognized as among the best in the industry by the 2020 Lightwave Innovations Review.
Announced that Optoway Technology and Centera Photonics have each selected MaxLinear’s second generation PAM4 DSP to deliver sub-3.5W 100G optical modules for hyperscale data centers.
Announced that Technetix Group’s Virtual SegmentationTM driven by MaxLinear’s high-speed MxL85110 broadband modem is in production for wireless backhaul deployment over cable.
Announced that uSenlight Corporation has selected MaxLinear’s MxL93542 PAM4 DSP to develop next-generation 400G optical modules for hyperscale data centers.
Announced that GiaX GmBH is in production with its HelEOSTM Solution powered by MxL85110 gigabit modem SoC in field trials for 5G mobile backhaul over the cable network.
Announced that Aviat Networks has selected MxL1105 CMOS transceiver along with the MxL8552 and MxL85110 modems for its new line of WTM 480 Multi-Band radios.
Announced that Siklu EtherHaulTM product family has deployed MxL85110 baseband SoC to fuel backhaul connectivity.
1

The following information was filed by Maxlinear Inc (MXL) on Wednesday, April 29, 2020 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From              to
Commission file number: 001-34666
MaxLinear Inc.
(Exact name of Registrant as specified in its charter)

Delaware14-1896129
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
5966 La Place Court, Suite 100,CarlsbadCalifornia92008
(Address of principal executive offices)(Zip Code)
(760) 692-0711
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockMXLNew York Stock Exchange
Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes     No  
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filerEmerging growth company
Non-accelerated filerSmaller reporting company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No   
As of April 22, 2020, the registrant had 72,356,711 shares of common stock, par value $0.0001, outstanding.


MAXLINEAR, INC.
QUARTERLY REPORT ON FORM 10-Q
TABLE OF CONTENTS

Page
Part I
Item 1.
Item 2.
Item 3.
Item 4.
Part II
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.


2

PART I — FINANCIAL INFORMATION

3

ITEM 1. FINANCIAL STATEMENTS

MAXLINEAR, INC.
CONSOLIDATED BALANCE SHEETS
(unaudited; in thousands, except par value amounts)
March 31,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents$98,373  $92,708  
Short-term restricted cash10  349  
Accounts receivable, net44,796  50,411  
Inventory31,088  31,510  
Prepaid expenses and other current assets6,342  6,792  
Total current assets180,609  181,770  
Long-term restricted cash57  60  
Property and equipment, net15,751  16,613  
Leased right-of-use assets9,864  10,978  
Intangible assets, net173,570  187,971  
Goodwill238,330  238,330  
Deferred tax assets73,492  67,284  
Other long-term assets1,752  2,785  
Total assets$693,425  $705,791  
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$13,597  $13,442  
Accrued price protection liability8,024  12,557  
Accrued expenses and other current liabilities30,661  31,171  
Accrued compensation10,146  9,392  
Total current liabilities62,428  66,562  
Long-term lease liabilities8,029  9,335  
Long-term debt207,197  206,909  
Other long-term liabilities7,614  8,065  
Total liabilities285,268  290,871  
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.0001 par value; 25,000 shares authorized, no shares issued or outstanding—  —  
Common stock, $0.0001 par value; 550,000 shares authorized; 72,345 shares issued and outstanding at March 31, 2020 and 71,931 shares issued and outstanding December 31, 2019  
Additional paid-in capital
539,035  529,596  
Accumulated other comprehensive loss(1,620) (887) 
Accumulated deficit
(129,265) (113,796) 
Total stockholders’ equity408,157  414,920  
Total liabilities and stockholders’ equity$693,425  $705,791  

See accompanying notes.
4

MAXLINEAR, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited; in thousands, except per share data)

Three Months Ended March 31,
20202019
Net revenue$62,027  $84,635  
Cost of net revenue31,265  39,558  
Gross profit30,762  45,077  
Operating expenses:
Research and development25,689  27,399  
Selling, general and administrative24,632  23,591  
Impairment losses86  —  
Restructuring charges489  1,917  
Total operating expenses50,896  52,907  
Loss from operations(20,134) (7,830) 
Interest income225  147  
Interest expense(2,476) (2,975) 
Other income (expense), net180  (655) 
Total interest and other income (expense), net(2,071) (3,483) 
Loss before income taxes  (22,205) (11,313) 
Income tax benefit  (6,736) (6,462) 
Net loss$(15,469) $(4,851) 
Net loss per share:
Basic$(0.21) $(0.07) 
Diluted$(0.21) $(0.07) 
Shares used to compute net loss per share:
Basic72,039  69,968  
Diluted72,039  69,968  

See accompanying notes.
5

MAXLINEAR, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(unaudited; in thousands)


Three Months Ended March 31,
20202019
Net loss$(15,469) $(4,851) 
Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments, net of tax benefit of $9 and $1 for the three months ended March 31, 2020 and 2019, respectively(580) 513  
Unrealized loss on interest rate swap, net of tax benefit of $41 and $130 for the three months ended March 31, 2020 and 2019, respectively(153) (488) 
Other comprehensive income (loss)(733) 25  
Total comprehensive loss$(16,202) $(4,826) 


See accompanying notes.
6

MAXLINEAR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2020
(unaudited; in thousands)
        
Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Loss
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 201971,931  $ $529,596  $(887) $(113,796) $414,920  
Common stock issued pursuant to equity awards, net414  —  2,612  —  —  2,612  
Stock-based compensation—  —  6,827  —  —  6,827  
Other comprehensive loss—  —  —  (733) —  (733) 
Net loss—  —  —  —  (15,469) (15,469) 
Balance at March 31, 202072,345  $ $539,035  $(1,620) $(129,265) $408,157  
See accompanying notes.

7

MAXLINEAR, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
THREE MONTHS ENDED MARCH 31, 2019
(unaudited; in thousands)

Common StockAdditional
Paid-In
Capital
Accumulated
Other
Comprehensive
Income
Accumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 201869,551  $ $493,287  $272  $(93,630) $399,936  
Common stock issued pursuant to equity awards, net981  —  5,615  —  —  5,615  
Stock-based compensation—  —  7,747  —  —  7,747  
Cumulative effect of adoption of new accounting principle—  —  —  —  (268) (268) 
Other comprehensive income—  —  —  25  —  25  
Net loss—  —  —  —  (4,851) (4,851) 
Balance at March 31, 201970,532  $ $506,649  $297  $(98,749) $408,204  
See accompanying notes.

8

MAXLINEAR, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited; in thousands)
Three Months Ended March 31,
20202019
Operating Activities
Net loss$(15,469) $(4,851) 
Adjustments to reconcile net loss to cash provided by operating activities:
Amortization and depreciation16,733  16,863  
Impairment losses86  —  
Amortization of debt issuance costs and accretion of discount on debt and leases410  402  
Stock-based compensation6,827  7,747  
Deferred income taxes(6,208) (6,476) 
Loss on disposal of property and equipment—  35  
Impairment of leasehold improvements163  1,442  
Impairment of leased right-of-use assets44  2,182  
Gain on extinguishment of lease liabilities—  (2,880) 
(Gain) loss on foreign currency(246) 567  
Excess tax deficiencies (benefits) on stock-based awards94  (1,737) 
Changes in operating assets and liabilities:
Accounts receivable5,615  (142) 
Inventory353  (1,015) 
Prepaid expenses and other assets1,443  604  
Leased right-of-use assets640  645  
Accounts payable, accrued expenses and other current liabilities(785) 1,921  
Accrued compensation3,361  893  
Accrued price protection liability(4,537) 2,489  
Lease liabilities(1,430) (2,125) 
Other long-term liabilities(446) (519) 
Net cash provided by operating activities6,648  16,045  
Investing Activities
Purchases of property and equipment(1,035) (2,155) 
Net cash used in investing activities(1,035) (2,155) 
Financing Activities
Repayment of debt—  (15,000) 
Net proceeds from issuance of common stock488  2,628  
Minimum tax withholding paid on behalf of employees for restricted stock units(475) (4,419) 
Net cash provided by (used in) financing activities13  (16,791) 
Effect of exchange rate changes on cash and cash equivalents (303) 577  
Increase (decrease) in cash, cash equivalents and restricted cash5,323  (2,324) 
Cash, cash equivalents and restricted cash at beginning of period93,117  74,191  
Cash, cash equivalents and restricted cash at end of period$98,440  $71,867  
Supplemental disclosures of cash flow information:
Cash paid for interest$2,246  $3,099  
Cash paid for income taxes$557  $872  
Supplemental disclosures of non-cash activities:
Issuance of shares for payment of bonuses$2,599  $7,406  
See accompanying notes.
9

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

1. Organization and Summary of Significant Accounting Policies
Description of Business
MaxLinear, Inc. was incorporated in Delaware in September 2003. MaxLinear, Inc., together with its wholly owned subsidiaries, collectively referred to as MaxLinear, or the Company, is a provider of radio-frequency, or RF, high-performance analog, and mixed-signal communications system-on-chip solutions for the connected home, wired and wireless infrastructure, and industrial and multi-market applications. MaxLinear’s customers include electronics distributors, module makers, original equipment manufacturers, or OEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in a wide range of electronic devices, including cable DOCSIS broadband modems and gateways, wireline connectivity devices for in-home networking applications, RF transceivers and modems for wireless carrier access and backhaul infrastructure, fiber-optic modules for data center, metro, and long-haul transport networks, video set-top boxes and gateways, hybrid analog and digital televisions, direct broadcast satellite outdoor and indoor units, and power management and interface products used in these and a range of other markets. The Company is a fabless integrated circuit design company whose products integrate all or a substantial portion of a broadband communication system.
Basis of Presentation and Principles of Consolidation
The accompanying unaudited consolidated financial statements include the accounts of MaxLinear, Inc. and its wholly owned subsidiaries and have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP, for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and disclosures required by GAAP for complete financial statements. All intercompany transactions and investments have been eliminated in consolidation.
In the opinion of management, the Company’s unaudited consolidated interim financial statements contain adjustments, including normal recurring accruals necessary to present fairly the Company’s consolidated financial position, results of operations, comprehensive income (loss), stockholders’ equity, and cash flows.

The consolidated balance sheet as of December 31, 2019 was derived from the Company’s audited consolidated financial statements at that date. The accompanying unaudited consolidated interim financial statements should be read in conjunction with the audited consolidated financial statements and related notes thereto for the year ended December 31, 2019 included in the Company’s Annual Report on Form 10-K filed by the Company with the Securities and Exchange Commission, or the SEC, on February 5, 2020, or the Annual Report. Interim results for the three months ended March 31, 2020 are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2020.
Use of Estimates and Significant Risks and Uncertainties
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited consolidated financial statements and accompanying notes to unaudited consolidated financial statements.

In the quarter ended March 31, 2020, the Company’s revenues declined relative to its prior expectations in part due to the impact of the novel coronavirus disease, or COVID-19, pandemic. In particular, the Company experienced customer requests to delay shipments and supply constraints attributable to the COVID-19 pandemic. Heightened volatility and uncertainty in customer demand and the worldwide economy in general has continued since March 31, 2020, and the Company may experience decreased sales and revenues in the near future. The Company’s management believes such impact may in particular affect the Company’s sales of high performance analog products in its industrial and multi-market business and may impact the rest of its business to some degree. However, the magnitude of such impact on the Company’s business and its duration is uncertain and cannot be reasonably estimated at this time.

The Company also believes that its $98.4 million of cash and cash equivalents at March 31, 2020 will be sufficient to fund its projected operating requirements for at least the next twelve months. A material adverse impact from COVID-19 could result in a need to raise additional capital or incur additional indebtedness to fund strategic initiatives or operating activities, particularly if the Company pursues additional acquisitions. The Company’s future capital requirements will depend on many factors, including the potential impact of the WiFi and Broadband assets business (Note 14) and the Company’s efforts to integrate that business, changes in revenue, the expansion of engineering, sales and marketing activities, the timing and extent
10

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
of expansion into new territories, the timing of introductions of new products and enhancements to existing products, the continuing market acceptance of the Company’s products and potential material investments in, or acquisitions of, complementary businesses, services or technologies. Additional funds may not be available on terms favorable to the Company or at all. If the Company is unable to raise additional funds when needed, it may not be able to sustain its operations or execute its strategic plans.

The Company is not aware of any specific event or circumstance that would require an update to its estimates or adjustments to the carrying value of its assets and liabilities as of April 29, 2020, the issuance date of this Quarterly Report on Form 10-Q. Actual results could differ from those estimates, particularly if the Company experiences material impacts from COVID-19.
Summary of Significant Accounting Policies
Refer to the Company’s Annual Report for a summary of significant accounting policies. On January 1, 2020, the Company adopted ASC Topic 326, Measurement of Credit Losses on Financial Instruments, or ASC 326, and accordingly, modified its policy on accounting for allowance for doubtful accounts on trade accounts receivable as stated below. As described under “Recently Adopted Accounting Pronouncements,” section below, the impact of adopting ASC 326 for the Company was not material.
There have been no other significant changes to the Company’s significant accounting policies during the three months ended March 31, 2020.
Accounts Receivable
The Company performs ongoing credit evaluations of its customers and assesses each customer’s credit worthiness. The Company monitors collections and payments from its customers and maintains an allowance for doubtful accounts based upon applying an expected credit loss rate to receivables based on the historical loss rate from similar high risk customers adjusted for current conditions, including any specific customer collection issues identified, and forecasts of economic conditions. Delinquent account balances are written off after management has determined that the likelihood of collection is remote. The allowance for credit losses as of March 31, 2020 and the activity in this account, including the current-period provision for expected credit losses for the three months ended March 31, 2020, were not material.
Recently Adopted Accounting Pronouncements
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, to replace the incurred loss methodology with an expected credit loss model that requires consideration of a broader range of information to estimate credit losses over the lifetime of the asset, including current conditions and reasonable and supportable forecasts in addition to historical loss information, to determine expected credit losses. Pooling of assets with similar risk characteristics and the use of a loss model are also required. Also, in April 2019, the FASB issued ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments—Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments, to clarify the inclusion of recoveries of trade receivables previously written off when estimating an allowance for credit losses. The amendments in this update are effective for the Company beginning with fiscal year 2020, including interim periods. The adoption of the amendments in this update as of January 1, 2020 did not have a material impact on the Company’s accounts receivable, net and accumulated deficit, as well as its results of operations for the three months ended March 31, 2020. The adoption is also not expected to have a material impact on the Company’s consolidated financial position and results of operations as of and for the year ending December 31, 2020.
In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, to simplify the subsequent measurement of goodwill by eliminating Step 2 from the goodwill impairment test. An entity no longer will determine goodwill impairment by calculating the implied fair value of goodwill by assigning the fair value of a reporting unit to all of its assets and liabilities as if the reporting unit had been acquired in a business combination. Instead, under the amendments in this update, an entity should perform its annual, or interim, goodwill impairment test by comparing the fair value of a reporting unit with its carrying amount. The Board also eliminated the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. The amendments in this update are effective for the Company beginning with fiscal year 2020, including interim periods. The Company performs its annual goodwill testing as of October 31, or more frequently if there are indicators of impairment. The application of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations as of and for the
11

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
year ending December 31, 2020.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework— Changes to the Disclosure Requirements for Fair Value Measurement, to improve the fair value measurement reporting of financial instruments. The amendments in this update require, among other things, added disclosure of the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. The amendments in this update eliminate, among other things, disclosure of the reasons for and amounts of transfers between Level 1 and Level 2 for assets and liabilities that are measured at fair value on a recurring basis and an entity's valuation processes for Level 3 fair value measurements. The amendments in this update are effective for the Company beginning with fiscal year 2020. Retrospective application is required for all amendments in this update except the added disclosures, which should be applied prospectively. The adoption of the amendments in this update in the quarter ended March 31, 2020 did not have a material impact on the Company’s consolidated financial position and results of operations as of and for the three months ended March 31, 2020 and is also not expected to have a material impact on the Company’s consolidated financial position and results of operations as of and for the year ending December 31, 2020.

In August 2018, the FASB issued ASU No. 2018-15, Intangibles–Goodwill and Other—Internal-Use Software (Subtopic 350-40): Customer’s Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract, to provide additional guidance on the accounting for costs of implementing cloud computing arrangements that are service contracts. The amendments in this update require the capitalization of implementation costs during the application development stage of such hosting arrangements and amortization of the expense over the term of the arrangement including any option to extend reasonably certain to be exercised or option to terminate reasonably certain not to be exercised. Capitalized implementation costs and amortization thereof are also required to be classified in the same line item in the statements of financial position, operations and cash flows associated with the hosting service fees. The amendments in this update are effective for the Company beginning with fiscal year 2020. The Company selected prospective application to all implementation costs incurred after the adoption date. The adoption of the amendments in this update did not have a material impact on the Company’s property and equipment, net and results of operations as of and for the three months ended March 31, 2020 and is also not expected to have a material impact on the Company’s consolidated financial position and results of operations as of and for the year ending December 31, 2020.

Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12 Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes, to remove certain exceptions and improve consistency of application, including, among other things, requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The amendments in this update will be effective for the Company beginning with fiscal year 2021, with early adoption permitted. Most amendments within the standard are required to be applied on a prospective basis, while certain amendments must be applied on a retrospective or modified retrospective basis. The adoption of the amendments in this update is not expected to have a material impact on the Company’s consolidated financial position and results of operations.
2. Net Income (Loss) Per Share
Basic earnings per share, or EPS, is calculated by dividing net income (loss) by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. Diluted EPS is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period and the weighted-average number of dilutive common stock equivalents outstanding for the period determined using the treasury-stock method. For purposes of this calculation, common stock options, restricted stock units and restricted stock awards are considered to be common stock equivalents and are only included in the calculation of diluted EPS when their effect is dilutive. In periods in which the Company has a net loss, dilutive common stock equivalents are excluded from the calculation of diluted EPS.
12

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The table below presents the computation of basic and diluted EPS:
Three Months Ended March 31,
20202019
(in thousands, except per share amounts)
Numerator:
Net loss$(15,469) $(4,851) 
Denominator:
Weighted average common shares outstanding—basic72,039  69,968  
Dilutive common stock equivalents—  —  
Weighted average common shares outstanding—diluted72,039  69,968  
Net loss per share:
Basic$(0.21) $(0.07) 
Diluted$(0.21) $(0.07) 
For the three months ended March 31, 2020 and 2019, the Company incurred net losses and accordingly excluded common stock equivalents for outstanding stock-based awards, which represented all potentially dilutive securities, of 3.3 million for the 2020 period and 2.9 million for the 2019 period, respectively, from the calculation of diluted net loss per share due to their anti-dilutive nature.

3. Restructuring Activity

From time to time, the Company approves and implements restructuring plans as a result of internal resource alignment and cost saving measures. Such restructuring plans include vacating certain leased facilities, terminating employees, and cancellation of contracts.

The following table presents the activity related to the restructuring plans, which is included in restructuring charges in the consolidated statements of operations:
Three Months Ended March 31,
20202019
(in thousands)
Employee separation expenses$44  $472  
Lease related charges275  1,345  
Other170  100  
$489  $1,917  

Lease related charges were related to exiting certain facilities. Lease-related charges for the three months ended March 31, 2019 includes the impairment of right-of-use assets of $2.2 million and leasehold improvements of $1.4 million, partially offset by a gain on the extinguishment of lease liabilities of $2.9 million following the release from such liability by the landlord. The Company does not expect to incur additional material costs related to current restructuring plans.
13

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

The following table presents a roll-forward of the Company's restructuring liability for the three months ended March 31, 2020. The restructuring liability is included in accrued expenses and other current liabilities and other long-term liabilities in the consolidated balance sheets.
Employee Separation ExpensesLease Related ChargesOtherTotal
(in thousands)
Liability as of December 31, 2019$—  $818  $19  $837  
Restructuring charges44  275  170  489  
Cash payments(44) (72) (16) (132) 
Non-cash charges and adjustments—  (208) (159) (367) 
Liability as of March 31, 2020—  813  14  827  
Less: current portion as of March 31, 2020—  (305) (14) (319) 
Long-term portion as of March 31, 2020$—  $508  $—  $508  

Remaining lease related charges as of March 31, 2020 primarily consist of common area maintenance obligations.
4. Goodwill and Intangible Assets

Goodwill

Goodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fair value of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based upon preliminary valuations and the Company’s estimates and assumptions are subject to change within the measurement period (potentially up to one year from the acquisition date).

During the three months ended March 31, 2020, there were no changes in the carrying amount of goodwill.

The Company performs an annual goodwill impairment assessment on October 31st each year, which effective in 2020, compares the fair value of each reporting unit, which the Company has determined to be the entity itself, with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds the carrying amount, the goodwill of the reporting unit is considered not impaired.

In addition to its annual review, the Company performs a test of impairment when indicators of impairment are present. During the three months ended March 31, 2020 and 2019, no goodwill impairment was recognized.
14

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Acquired Intangibles
Finite-lived Intangible Assets
The following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and other purchases:
March 31, 2020December 31, 2019
Weighted
Average
Useful Life
(in Years)
Gross Carrying AmountAccumulated AmortizationNet Carrying AmountGross Carrying ValueAccumulated AmortizationNet Carrying Amount
(in thousands)
Licensed technology3.5$2,070  $(1,685) $385  $2,156  $(1,583) $573  
Developed technology6.9243,361  (117,103) 126,258  243,361  (108,522) 134,839  
Trademarks and trade names6.113,800  (7,076) 6,724  13,800  (6,511) 7,289  
Customer relationships4.6121,100  (80,897) 40,203  121,100  (75,847) 45,253  
Non-compete covenants3.01,100  (1,100) —  1,100  (1,083) 17  
6.1$381,431  $(207,861) $173,570  $381,517  $(193,546) $187,971  

The following table sets forth amortization expense associated with finite-lived intangible assets, which is included in the consolidated statements of operations as follows:
Three Months Ended March 31,
20202019
(in thousands)
Cost of net revenue$8,591  $8,434  
Research and development 34  
Selling, general and administrative5,723  5,798  
$14,315  $14,266  

Amortization of finite-lived intangible assets in cost of net revenue in the consolidated statements of operations results primarily from acquired developed technology.

The following table sets forth the activity related to finite-lived intangible assets:
Three Months Ended March 31,
20202019
(in thousands)
Beginning balance$187,971  $240,500  
Transfers to developed technology from IPR&D—  1,500  
Amortization(14,315) (14,266) 
Impairment losses(86) —  
Ending balance$173,570  $227,734  

The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the related useful lives, to determine whether indicators of impairment may exist that warrant adjustments to carrying values or estimated useful lives. An impairment loss is recognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, the impairment loss is measured based on the excess of the carrying amount of the asset over the asset’s fair value. During the three months ended March 31, 2020 and 2019, the Company recognized impairment losses related to finite-lived intangible assets of $0.1 million and $0, respectively.
15

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The following table presents future amortization of the Company’s finite-lived intangible assets at March 31, 2020:
Amount
(in thousands)
2020 (9 months)$42,267  
202155,799  
202238,269  
202326,075  
202410,098  
Thereafter1,062  
Total$173,570  
Indefinite-lived Intangible Assets
Indefinite-lived intangible assets consisted entirely of acquired in-process research and development technology, or IPR&D. The following table sets forth the Company’s activities related to the indefinite-lived intangible assets:
Three Months Ended March 31,
20202019
(in thousands)
Beginning balance$—  $4,400  
Transfers to developed technology from IPR&D—  (1,500) 
Ending balance$—  $2,900  

The Company performs its annual assessment of indefinite-lived intangible assets on October 31 each year or more frequently if events or changes in circumstances indicate that the asset might be impaired utilizing a qualitative test as a precursor to the quantitative test comparing the fair value of the assets with their carrying amount. Based on the qualitative test, if it is more likely than not that indicators of impairment exists, the Company proceeds to perform a quantitative analysis. During the three months ended March 31, 2020 and 2019, no indicators of impairment were identified and, as a result, no IPR&D impairment losses were recorded.

5. Financial Instruments
        The composition of financial instruments is as follows:
March 31, 2020December 31, 2019
(in thousands)
Liabilities
Interest rate swap$231  $37  
The fair value of the Company’s financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants and is recorded using a hierarchical disclosure framework based upon the level of subjectivity of the inputs used in measuring assets and liabilities. The levels are described below:
Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for assets or liabilities.
Level 2: Observable prices that are based on inputs not quoted on active markets, but corroborated by market data.
Level 3: Unobservable inputs are used when little or no market data is available.
16

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The Company classifies its financial instrument within Level 2 of the fair value hierarchy on the basis of models utilizing market observable inputs. The interest rate swap has been valued on the basis of valuations provided by third-party pricing services, as derived from standard valuation or pricing models. Market-based observable inputs for the interest rate swap include one-month LIBOR-based yield curves over the term of the swap. The Company reviews third-party pricing provider models, key inputs and assumptions and understands the pricing processes at its third-party providers in determining the overall reasonableness of the fair value of its Level 2 financial instruments. The Company also considers the risk of nonperformance by assessing the swap counterparty’s credit risk in the estimate of fair value of the interest rate swap. As of March 31, 2020 and December 31, 2019, the Company has not made any adjustments to the valuations obtained from its third-party pricing providers. 
The following table presents a summary of the Company’s financial instruments that are measured on a recurring basis:
Fair Value Measurements
BalanceQuoted Prices
in Active Markets for Identical Assets
(Level 1)
Significant Other
Observable Inputs
(Level 2)
Significant
Unobservable
Inputs
(Level 3)
(in thousands)
Liabilities
Interest rate swap, March 31, 2020$231  $—  $231  $—  
Interest rate swap, December 31, 2019$37  $—  $37  $—  

The following table summarizes activity for the interest rate swap:
Three Months Ended
March 31,
2020
March 31,
2019
(in thousands)
Interest rate swap asset (liability)
Beginning balance$(37) $1,623  
Unrealized loss recognized in other comprehensive income (loss)(194) (618) 
Ending balance$(231) $1,005  
There were no transfers between Level 1, Level 2 or Level 3 financial instruments in the three months ended March 31, 2020 and 2019.
Financial Instruments Not Recorded at Fair Value on a Recurring Basis

Some of the Company’s financial instruments are not measured at fair value on a recurring basis but are recorded at amounts that approximate fair value due to their liquid or short-term nature. Such financial assets and financial liabilities include: cash and cash equivalents, restricted cash, net receivables, certain other assets, accounts payable, accrued price protection liability, accrued expenses, accrued compensation costs, and other current liabilities.

The Company’s long-term debt is not recorded at fair value on a recurring basis, but is measured at fair value for disclosure purposes (Note 7).

6. Balance Sheet Details
Cash, cash equivalents and restricted cash consist of the following:
March 31, 2020December 31, 2019
(in thousands)
Cash and cash equivalents$98,373  $92,708  
Short-term restricted cash10  349  
Long-term restricted cash57  60  
Total cash, cash equivalents and restricted cash$98,440  $93,117  
17

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
As of March 31, 2020 and December 31, 2019, cash and cash equivalents included money market funds of approximately $20.4 million. As of March 31, 2020 and December 31, 2019, the Company has restricted cash of approximately $0.1 million and $0.4 million, respectively. The cash is restricted in connection with guarantees for certain import duties and office leases.
Inventory consists of the following:
March 31, 2020December 31, 2019
(in thousands)
Work-in-process$14,485  $14,525  
Finished goods16,603  16,985  
$31,088  $31,510  
Property and equipment, net consists of the following:
Useful Life
(in Years)
March 31, 2020December 31, 2019
(in thousands)
Furniture and fixtures5$2,206  $2,199  
Machinery and equipment 3-536,851  35,660  
Masks and production equipment2-515,194  15,209  
Software36,118  5,956  
Leasehold improvements1-515,255  16,186  
Construction in progressN/A306  746  
75,930  75,956  
Less: accumulated depreciation and amortization(60,179) (59,343) 
$15,751  $16,613  

Depreciation expense for the three months ended March 31, 2020 and 2019 was $1.6 million and $2.1 million, respectively.

Accrued price protection liability consists of the following activity:
Three Months Ended March 31,
20202019
(in thousands)
Beginning balance$12,557  $16,454  
Charged as a reduction of revenue1,399  10,508  
Payments(5,932) (8,019) 
Ending balance$8,024  $18,943  
18

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Accrued expenses and other current liabilities consist of the following:
March 31, 2020December 31, 2019
(in thousands)
Accrued technology license payments$4,500  $4,500  
Accrued professional fees2,715  861  
Accrued engineering and production costs2,068  4,491  
Accrued restructuring319  294  
Accrued royalty513  923  
Short-term lease liabilities4,751  4,810  
Accrued customer credits49  832  
Income tax liability109  65  
Customer contract liabilities14  107  
Accrued obligations to customers for price adjustments9,053  8,382  
Accrued obligations to customers for stock rotation rights1,572  1,410  
Other4,998  4,496  
$30,661  $31,171  
The following table summarizes the change in balances of accumulated other comprehensive income (loss) by component:
Cumulative Translation AdjustmentsInterest Rate HedgeTotal
(in thousands)
Balance at December 31, 2019$(747) $(140) $(887) 
Current period other comprehensive income (loss)(580) (153) (733) 
Balance at March 31, 2020$(1,327) $(293) $(1,620) 

7. Debt and Interest Rate Swap

Debt
The carrying amount of the Company's long-term debt consists of the following:
March 31,
2020
December 31,
2019
(in thousands)
Principal$212,000  $212,000  
Less:
     Unamortized debt discount(1,253) (1,328) 
     Unamortized debt issuance costs(3,550) (3,763) 
Net carrying amount of long-term debt207,197  206,909  
Less: current portion of long-term debt—  —  
Long-term debt, non-current portion$207,197  $206,909  
On May 12, 2017, the Company entered into a credit agreement with certain lenders and a collateral agent in connection with the acquisition of Exar Corporation. The credit agreement provided for an initial secured term B loan facility, or the “Initial Term Loan,” in an aggregate principal amount of $425.0 million. The credit agreement permits the Company to request incremental loans in an aggregate principal amount not to exceed the sum of $160.0 million (subject to adjustments for any voluntary prepayments), plus an unlimited amount that is subject to pro forma compliance with certain secured leverage ratio and total leverage ratio tests. Incremental loans are subject to certain additional conditions, including obtaining additional
19

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
commitments from the lenders then party to the credit agreement or new lenders. The Company has requested an incremental loan under the agreement with new lenders to fund the pending acquisition of the Home Gateway Platform Division of Intel Corporation (Note 14).

Loans under the Initial Term Loan bear interest, at the Company’s option, at a 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 LIBOR rate determined on the basis of a one- three- or six-month interest period, plus 1.0% or (ii) an adjusted LIBOR rate, subject to a floor of 0.75%, in each case, plus an applicable margin of 2.50% in the case of LIBOR rate loans and 1.50% in the case of base rate loans. Commencing on September 30, 2017, the Initial Term Loan amortizes in equal quarterly installments equal to 0.25% of the original principal amount of the Initial Term Loan, with the balance payable on the maturity date. The Initial Term Loan has a term of seven years and will mature on May 12, 2024, at which time all outstanding principal and accrued and unpaid interest on the Initial Term Loan is due. The Company is also required to pay fees customary for a credit facility of this size and type.
The Company is required to make mandatory prepayments of the outstanding principal amount of term loans under the credit agreement with the net cash proceeds from the disposition of certain assets and the receipt of insurance proceeds upon certain casualty and condemnation events, in each case, to the extent not reinvested within a specified time period, from excess cash flow beyond stated threshold amounts, and from the incurrence of certain indebtedness. The Company has the right to prepay its term loans under the credit agreement, in whole or in part, at any time without premium or penalty, subject to certain limitations and a 1.0% soft call premium applicable during the first six months of the loan term. The Company exercised its right to prepay and made aggregate prepayments of principal of $213.0 million from origination of the Initial Term Loan through March 31, 2020.
The Company’s obligations under the credit agreement are required to be guaranteed by certain of its domestic subsidiaries meeting materiality thresholds set forth in the credit agreement. Such obligations, including the guaranties, are secured by substantially all of the assets of the Company and the subsidiary guarantors pursuant to a security agreement with the collateral agent.
The credit agreement contains customary affirmative and negative covenants, including covenants limiting the ability of the Company and its restricted subsidiaries to, among other things, incur debt, grant liens, undergo certain fundamental changes, make investments, make certain restricted payments, and sell assets, in each case, subject to limitations and exceptions. As of March 31, 2020, the Company was in compliance with such covenants. The credit agreement also contains customary events of default that include, among other things, certain payment defaults, cross defaults to other indebtedness, covenant defaults, change in control defaults, judgment defaults, and bankruptcy and insolvency defaults. If an event of default exists, the lenders may require immediate payment of all obligations under the credit agreement, and may exercise certain other rights and remedies provided for under the credit agreement, the other loan documents and applicable law.
As of March 31, 2020 and December 31, 2019, the weighted average effective interest rate on the long-term debt was approximately 4.6% and 4.9%, respectively.
The debt is carried at its principal amount, net of unamortized debt discount and issuance costs, and is not adjusted to fair value each period. The issuance date fair value of the liability component of the debt in the amount of $398.5 million was determined using a discounted cash flow analysis, in which the projected interest and principal payments were discounted back to the issuance date of the term loan at a market interest rate for nonconvertible debt of 4.6%, which represents a Level 3 fair value measurement. The debt discount of $2.1 million and debt issuance costs of $6.0 million are being amortized to interest expense using the effective interest method from the issuance date through the contractual maturity date of the term loan of May 12, 2024.
During each of the three months ended March 31, 2020 and 2019, the Company recognized total amortization of debt discount and debt issuance costs of $0.3 million to interest expense.
The approximate fair value of the term loan as of March 31, 2020 and December 31, 2019 was $200.8 million and $214.6 million, respectively, which was estimated on the basis of inputs that are observable in the market and which is considered a Level 2 measurement method in the fair value hierarchy.
As of March 31, 2020 and December 31, 2019, the remaining principal balance on the term loan was $212.0 million, respectively. The remaining principal balance is due on May 12, 2024 at the maturity date on the term loan.
20

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Interest Rate Swap
In November 2017, the Company entered into a fixed-for-floating interest rate swap with an amortizing notional amount to swap a substantial portion of variable rate LIBOR interest payments under its term loans for fixed interest payments bearing an interest rate of 1.74685%. The Company's outstanding debt is still subject to a 2.5% fixed applicable margin during the term of the loan. The interest rate swap is designated as a cash flow hedge of a portion of floating rate interest payments on long-term debt and effectively fixes the interest rate on a substantial portion of the Company’s long-term debt at approximately 4.25%. Accordingly, the Company applies cash flow hedge accounting to the interest rate swap and it is recorded at fair value as an asset or liability and the effective portion of changes in the fair value of the interest rate swap, as measured quarterly, are reported in other comprehensive income (loss). As of March 31, 2020 and December 31, 2019, the fair value of the interest rate swap was a $0.2 million and $0.04 million liability (Note 5), respectively, and is included in other current liabilities in the consolidated balance sheets. The decrease in fair value related to the interest rate swap liability included in other comprehensive income (loss) for the three months ended March 31, 2020 was $0.2 million. The interest rate swap expires in October 2020 and the total $0.2 million of unrealized loss before taxes recorded in accumulated other comprehensive income at March 31, 2020 is expected to be recorded against interest expense in the fourth quarter of 2020, upon expiration of the interest rate swap.

8. Stock-Based Compensation and Employee Benefit Plans
Employee Stock-Based Benefit Plans
At March 31, 2020, the Company had stock-based compensation awards outstanding under the following plans: the 2004 Stock Plan, the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP. Refer to the Company’s Annual Report for a summary of the Company's stock-based compensation and equity plans as of December 31, 2019. There have been no material changes to the terms of the Company's equity incentive plans during the three months ended March 31, 2020. All current stock awards are issued under the 2010 Plan and ESPP.
As of March 31, 2020, the number of shares of common stock available for future issuance under the 2010 Plan and awards outstanding under the 2004 Plan was 15,895,366 shares and zero shares, respectively. As of March 31, 2020, the number of shares of common stock available for future issuance under the ESPP was 3,651,326 shares.
Stock-Based Compensation
The Company recognizes stock-based compensation in the consolidated statements of operations, based on the department to which the related employee reports, as follows:
Three Months Ended March 31,
20202019
(in thousands)
Cost of net revenue$148  $130  
Research and development3,746  4,213  
Selling, general and administrative2,933  3,404  
$6,827  $7,747  
The total unrecognized compensation cost related to unvested restricted stock units and restricted stock awards as of March 31, 2020 was $58.0 million, and the weighted average period over which these equity awards are expected to vest is 3.07 years. The total unrecognized compensation cost related to unvested performance-based restricted stock units as of March 31, 2020 was $17.6 million, and the weighted average period over which these equity awards are expected to vest is 2.15 years. The total unrecognized compensation cost related to unvested stock options as of March 31, 2020 was $1.7 million, and the weighted average period over which these equity awards are expected to vest is 2.14 years.
21

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Restricted Stock Units
A summary of the Company’s restricted stock unit activity is as follows:
Number of Shares
(in thousands)
Weighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 20192,924  $21.72  
  Granted2,069  11.77  
  Vested(418) 16.72  
  Canceled(45) 21.29  
Outstanding at March 31, 20204,530  $17.64  
Performance-Based Restricted Stock Units
Performance-based restricted stock units are eligible to vest at the end of each fiscal year in a three-year performance period based on the Company’s annual growth rate in net sales and non-GAAP diluted earnings per share (subject to certain adjustments) over baseline results relative to the growth rates for a peer group of companies for the same metrics and periods.
For the performance-based restricted stock units granted to date, 60% of each performance-based award is subject to the net sales metric for the performance period and 40% is subject to the non-GAAP diluted earnings per share metric for the performance period. The maximum percentage for a particular metric is 250% of the target number of units subject to the award related to that metric, however, vesting of the performance stock units is capped at 30% and 100%, respectively, of the target number of units subject to the award in years one and two, respectively, of the three-year performance period.
As of March 31, 2020, the Company believes that it is probable that the Company will achieve certain performance metrics specified in the respective award agreements based on its expected revenue and non-GAAP diluted EPS results over the performance period and calculated growth rates relative to its peers’ expected results based on data available, as defined in the respective award agreements.
A summary of the Company’s performance-based restricted stock unit activity is as follows:
Number of Shares
(in thousands)
Weighted-Average Grant-Date Fair Value per Share
Outstanding at December 31, 2019445  $22.21  
  Granted(1)
1,416  11.67  
  Vested(21) 22.21  
  Canceled(32) 22.21  
Outstanding at March 31, 20201,808  $13.95  
________________
(1) Number of shares granted is based on the maximum percentage achievable in the performance-based restricted stock unit award.

Employee Stock Purchase Rights and Stock Options
Employee Stock Purchase Rights
During the three months ended March 31, 2020, there were no shares of common stock purchased under the ESPP.
22

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
The fair values of employee stock purchase rights were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions:
Three Months Ended March 31,
20202019
Weighted-average grant date fair value per share$5.48  $5.01  
Risk-free interest rate1.59 %2.51 %
Dividend yield— %— %
Expected life (in years)0.500.50
Volatility43.14 %38.82 %
The risk-free interest rate assumption was based on rates for United States (U.S.) Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected term is the duration of the offering period for each grant date. In addition, the estimated volatility incorporates the historical volatility over the expected term based on the Company’s daily closing stock prices.
Stock Options
A summary of the Company’s stock options activity is as follows:
Number of Options
(in thousands)
Weighted-Average Exercise PriceWeighted-Average Contractual Term (in years)Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 20191,337  $13.05  
Exercised(52) 9.50  
Canceled(22) 14.23  
Outstanding at March 31, 20201,263  $13.18  2.44$2,207  
Vested and expected to vest at March 31, 20201,258  $13.15  2.42$2,207  
Exercisable at March 31, 20201,053  $12.12  1.88$2,207  
No stock options were granted by the Company during the three months ended March 31, 2020.

The intrinsic value of stock options exercised was $0.3 million and $9.8 million in the three months ended March 31, 2020 and 2019, respectively.

Cash received from exercise of stock options was $0.5 million and $2.6 million during the three months ended March 31, 2020 and 2019, respectively.

The tax benefit from stock options exercised was $0.3 million and $9.0 million during the three months ended March 31, 2020 and 2019, respectively.
Employee Incentive Bonus
The Company settles a majority of bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company’s common stock as determined in trading on the New York Stock Exchange on a date approved by the Board of Directors. In connection with the Company’s bonus programs, in March 2020, the Company issued 0.2 million freely-tradable shares of the Company’s common stock in settlement of bonus awards to employees, including executives, for the 2019 performance period. At March 31, 2020, the Company has an accrual of $3.1 million for bonus awards for employees for year-to-date achievement in the 2020 performance period. The Company’s compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
23

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
9. Income Taxes
The provision for income taxes primarily relates to projected federal, state, and foreign income taxes. To determine the quarterly provision for income taxes, the Company uses an estimated annual effective tax rate, which is generally based on expected annual income and statutory tax rates in the various jurisdictions in which the Company operates. In addition, the tax effects of certain significant or unusual items are recognized discretely in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter.
The Company utilizes the asset and liability method of accounting for income taxes, under which deferred taxes are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using tax rates expected to be in effect during the years in which the temporary differences reverse. The Company records a valuation allowance to reduce its deferred taxes to the amount it believes is more likely than not to be realized. In making such determination, the Company considers all available positive and negative evidence quarterly, including scheduled reversals of deferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance.  Forming a conclusion that a valuation allowance is not required is difficult when there is negative evidence such as cumulative losses in recent years. Based upon the Company’s review of all positive and negative evidence, the Company continues to have a valuation allowance on its state deferred taxes, certain of its federal deferred tax assets, and certain foreign deferred tax assets in jurisdictions where the Company has cumulative losses or otherwise is not expected to utilize certain tax attributes. The Company does not incur expense or benefit in certain tax free jurisdictions in which it operates.
The Company recorded an income tax benefit of $6.7 million in the three months ended March 31, 2020 and an income tax benefit of $6.5 million for the three months ended March 31, 2019.
The income tax benefit in the three months ended March 31, 2020 and 2019, each primarily related to the mix of pre-tax income among jurisdictions, excess tax deficiencies and benefits, respectively, related to stock-based compensation, and release of certain reserves for uncertain tax positions under ASC 740-10. Also included in income tax benefit for the three months ended March 31, 2020 was a tax benefit related to the Coronavirus Aid, Relief and Economic Security Act, or CARES Act, enacted effective March 27, 2020. Such tax benefit relates to the Company’s ability to carry back its 2019 net operating loss, originally valued at a 21% federal tax rate, to offset income taxes paid in prior periods at the 35% federal tax rate in effect at that time.

Income tax positions must meet a more-likely-than-not threshold to be recognized. Income tax positions that previously failed to meet the more-likely-than-not threshold are recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not threshold are derecognized in the first financial reporting period in which that threshold is no longer met. The Company records potential penalties and interest accrued related to unrecognized tax benefits within the consolidated statements of operations as income tax expense.

During the three months ended March 31, 2020, the Company’s unrecognized tax benefits decreased by $0.1 million. The Company does not expect its unrecognized tax benefits to change significantly over the next 12 months. Accrued interest and penalties associated with uncertain tax positions as of March 31, 2020 were approximately $0.6 million and $0.1 million, respectively.

The Company is subject to federal and state income tax in the United States and is also subject to income tax in certain other foreign tax jurisdictions. At March 31, 2020, the statutes of limitations for the assessment of federal, state, and foreign income taxes are closed for the years before 2016, 2015, and 2012, respectively.
The Company’s subsidiary in Singapore operates under certain tax incentives in Singapore, which are generally effective through March 2022, and are conditional upon meeting certain employment and investment thresholds in Singapore. Under the incentives, qualifying income derived from certain sales of the Company’s integrated circuits is taxed at a concessionary rate over the incentive period, and there are reduced Singapore withholding taxes on certain intercompany royalties during the incentive period. Primarily because of the Company's Singapore net operating losses and a full valuation allowance in Singapore, the incentives did not have a material impact on the Company's income tax benefit in the three months ended March 31, 2020 and 2019.
On March 27, 2020, the U.S. government enacted the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, a $2 trillion relief package comprising a combination of tax provisions and other stimulus measures. The CARES Act broadly provides entities tax payment relief and significant business incentives and makes certain technical corrections to the 2017 Tax Cuts and Jobs Act, or the Tax Act. The tax relief measures for entities include a five-year net operating loss carry
24

MAXLINEAR, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
back, increases interest expense deduction limits, acceleration of alternative minimum tax credit refunds, payroll tax relief, and a technical correction to allow accelerated deductions for qualified improvement property. The Act also provides other non-income tax benefits, including federal funding for a range of stabilization measures and emergency funding to assist those impacted by the COVID-19 pandemic. Similar legislation is being enacted in other jurisdictions in whic