MaxLinear
Annual Report 2016

Plain-text annual report

UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549 FORM 10-KþANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACTOF 1934For the Fiscal Year Ended December 31, 2016OR¨TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGEACT OF 1934For the Transition Period From toCommission file number: 001-34666MaxLinear, Inc.(Exact name of Registrant as specified in its charter) Delaware 14-1896129(State or other jurisdiction ofincorporation or organization) (I.R.S. EmployerIdentification No.) 5966 La Place Court, Suite 100Carlsbad, California 92008(Address of principal executive offices) (Zip Code)(760) 692-0711(Registrant’s telephone number, including area code)Securities registered pursuant to Section 12(b) of the Act:Title of each class Name of the exchange on which registeredClass A Common Stock, $0.0001 par value New York Stock ExchangeSecurities registered pursuant to Section 12(g) of the Act: None Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ¨ No þIndicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ¨ No þIndicate 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 of1934 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 filingrequirements for the past 90 days. Yes þ No ¨Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data Filerequired to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorterperiod that the registrant was required to submit and post such files). Yes þ No ¨Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, andwill not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K. þIndicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.Large accelerated filer þ Accelerated filer ¨Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þThe aggregate market value of the registrant’s common stock, $0.0001 par value per share, held by non-affiliates of the registrant on June 30, 2016, thelast business day of the registrant’s most recently completed second fiscal quarter, was $1.0 billion (based on the closing sales price of the registrant’s Class Acommon stock on that date). Shares of the registrant’s Class A or Class B common stock held by each officer and director and each person known to theregistrant to own 10% or more of the outstanding voting power of the registrant have been excluded in that such persons may be deemed to be affiliates. Thisdetermination of affiliate status is not a determination for other purposes.As of February 2, 2017, the registrant has 58,454,886 shares of Class A common stock, par value $0.0001, and 6,658,380 shares of Class B commonstock, par value $0.0001, outstanding._________________________________________DOCUMENTS INCORPORATED BY REFERENCEInformation required by Part III of this Form 10-K is incorporated by reference to the registrant’s proxy statement (the “Proxy Statement”) for the 2017 annualmeeting of stockholders, which proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the fiscal yearcovered by this Form 10-K.Table of ContentsMAXLINEAR, INC.TABLE OF CONTENTS Part IPageItem 1.Business3Item 1A.Risk Factors14Item 1B.Unresolved Staff Comments37Item 2.Properties37Item 3.Legal Proceedings38Item 4.Mine Safety Disclosures39 Part II Item 5.Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities40Item 6.Selected Financial Data42Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations43Item 7A.Quantitative and Qualitative Disclosures About Market Risk58Item 8.Financial Statements and Supplementary Data59Item 9.Changes in and Disagreements with Accountants on Accounting and Financial Disclosure59Item 9A.Controls and Procedures59Item 9B.Other Information61 Part III Item 10.Directors, Executive Officers and Corporate Governance62Item 11.Executive Compensation62Item 12.Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters62Item 13.Certain Relationships and Related Transactions, and Director Independence62Item 14.Principal Accounting Fees and Services62 Part IV Item 15.Exhibits, Financial Statement Schedules632Table of ContentsMAXLINEAR, INC.PART IForward-Looking StatementsThe information in this Annual Report on Form 10-K for the fiscal year ended December 31, 2016, or this Form 10-K, contains forward-lookingstatements and information within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934, whichare subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning ourstrategy, future operations, future financial position, future revenues, projected costs, prospects and plans and objectives of management. The words“anticipates”, “believes”, “estimates”, “expects”, “intends”, “may”, “plans”, “projects”, “will”, “would” and similar expressions are intended to identifyforward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentionsor expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Actual results orevents could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. These forward-lookingstatements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including,without limitation, the risks set forth in Part I, Item 1A, “Risk Factors” in this Form 10-K. We do not assume any obligation to update any forward-lookingstatements except as required by law.ITEM 1.BUSINESSCorporate InformationWe incorporated in the State of Delaware in September 2003. Our executive offices are located at 5966 La Place Court, Suite 100, Carlsbad, California92008, and our telephone number is (760) 692-0711. In this Form 10-K, unless the context otherwise requires, the “Company,” “we,” “us” and “our” refer toMaxLinear, Inc. and its wholly owned subsidiaries. Our website address is www.maxlinear.com. The contents of our website are not incorporated by referenceinto this Form 10-K. We provide free of charge through a link on our website access to our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Qand Current Reports on Form 8-K, as well as amendments to those reports, as soon as reasonably practical after the reports are electronically filed with, orfurnished to, the Securities and Exchange Commission, or SEC. Refer to Intellectual Property Rights section below for a list of our trademarks and tradenames. All other trademarks and trade names appearing in this Form 10-K are the property of their respective owners.Overview We are a provider of radio frequency, or RF, and mixed-signal integrated circuits for cable and satellite broadband communications and the connectedhome, and wired and wireless infrastructure markets. Our high performance RF receiver products capture and process digital and analog broadband signals tobe decoded for various applications. These products include both RF receivers and RF receiver systems-on-chip, or SoCs, which incorporate our highlyintegrated radio system architecture and the functionality necessary to receive and demodulate broadband signals, modem solutions, and physical mediumdevices that provide a constant current source, current-to-voltage regulation, and data alignment and retiming functionality in optical interconnectapplications. Through our acquisition of Entropic Communications, Inc., or Entropic, in April of 2015, we provide semiconductor solutions for the connectedhome, specifically MoCA® (Multimedia over Coax Alliance) solutions that transform how traditional HDTV broadcast and Internet Protocol, or IP, basedstreaming video content is seamlessly, reliably, and securely distributed into and throughout the home. Through our acquisition of the Microsemi wirelessinfrastructure access business in April of 2016, we provide integrated circuits for wireless infrastructure markets, including wideband RF transceivers andsynthesizers for 3G, 4G, and future 5G cellular base station and remote radio head, or RRH, platforms. Through our acquisition of the Broadcom wirelessinfrastructure backhaul business in July of 2016, we also provide modem and RF transceiver solutions into cellular infrastructure backhaul applications.We combine our high-performance RF and mixed-signal semiconductor design skills with our expertise in digital communications systems, software,and embedded systems to provide highly integrated semiconductor devices that are manufactured using a range of semiconductor manufacturing processes,including low-cost complementary metal oxide semiconductor, or CMOS, process technology, Silicon Germanium, Gallium Arsenide, BiCMOS and IndiumPhosphide process technologies. Our ability to design analog and mixed-signal circuits in CMOS allows us to efficiently combine analog and digital signalprocessing functionality in the same integrated circuit. As a result, our solutions have high levels of functional3Table of Contentsintegration and performance, small silicon die size, and low power consumption. Moreover, our proprietary CMOS-based radio system architecture providesthe benefits of superior RF system performance, shorter design cycles, significant design flexibility and low system cost across a wide range of broadbandcommunications and wired and wireless infrastructure applications. It is our intention to drive future optical interconnect products to CMOS versus existingSilicon Germanium BiCMOS and Indium Phosphide process technology designs.We sell our products to original equipment manufacturers, or OEMs, module makers and original design manufacturers, or ODMs. During 2016, wesold our products to 208 end customers. For the year ended December 31, 2016, our net revenue was $387.8 million as compared to $300.4 million in theyear ended December 31, 2015.Recent DevelopmentsOn April 28, 2016, we entered into an asset purchase agreement with Microsemi Storage Solutions, Inc., formerly known as PMC-Sierra, Inc., orMicrosemi, and consummated the transactions contemplated by the asset purchase agreement. We paid cash consideration of $21.0 million for the purchaseof certain wireless access assets of Microsemi's wireless infrastructure access business, and assumed certain specified liabilities. The assets acquired include,among other things, radio frequency and analog/mixed signal patents and other intellectual property, in-production and next-generation RF transceiverdesigns, a workforce-in-place, and other intangible assets, as well as tangible assets that include but are not limited to production masks and other productionrelated assets, inventory, and other property, plant, and equipment. The liabilities assumed include, among other things, product warranty obligations andaccrued vacation and severance obligations for employees of the wireless infrastructure access business that were rehired by the Company.On May 9, 2016, we entered into a definitive agreement to purchase certain assets and assume certain liabilities of the wireless infrastructure backhaulbusiness of Broadcom Corporation, or Broadcom. On July 1, 2016, we consummated the transactions contemplated by the purchase agreement and paidaggregate cash consideration of $80.0 million and hired certain employees of the wireless infrastructure backhaul business. The assets acquired include,among other things, digital baseband, radio frequency, and analog/mixed signal patents and other intellectual property, in-production and next-generationdigital baseband and RF transceiver integrated circuit and reference platform designs, a workforce-in-place, and other intangible assets, as well as tangibleassets that include but are not limited to production masks and other production related assets, inventory, and other property and equipment. The liabilitiesassumed include, among other things, product warranty obligations, liabilities for technologies acquired, and a payable to Broadcom as reimbursement ofcosts associated with the termination of those employees of the wireless infrastructure backhaul business who were neither hired by MaxLinear, nor retainedby Broadcom, upon the closing of the acquisition. For more information, please refer to Note 3 of our consolidated financial statements.The acquired assets and liabilities, together with the rehired employees for each of these acquisitions, represent businesses as defined in ASC 805,Business Combinations. We have integrated the acquired assets and rehired employees into our existing business.As a result of the acquisitions, we believe we have benefited from increased economies of scale across engineering and supply chain operations, as wellas from elimination of redundancy across engineering, sales, and general and administrative functions. For a discussion of specific risks and uncertainties thatcould affect our ability to achieve these and other strategic objectives of our acquisitions, please refer to Part I, Item 1A, “Risk Factors” under the subsectioncaptioned “Risks Relating to Recent Acquisitions.”During the fourth quarter of fiscal 2016, we completed a restructuring plan to realign our resources with our current objectives. We incurredrestructuring expenses related to employee separation charges and lease-related impairment charges in an aggregate amount of approximately $3.4 millionfor the year ended December 31, 2016.Industry BackgroundTechnological advances in the broadband data, broadcast TV, voice, and wired and wireless communications markets are driving dramatic changes inthe way consumers access the internet and experience multimedia content. These advances include the ongoing worldwide conversion from analog to digitaltelevision broadcasting; the increasing availability of high-speed broadband and wireless data connectivity, the resolution transitions from standard-definition, to high-definition to ultra-high-definition television, the proliferation of multi-channel digital video recording, or DVR, as well as theproliferation of multimedia content being both accessible and stored in the cloud through cable, satellite and telecommunications carrier services. As a result,system designers are adding enhanced multimedia functionality to set-top boxes and digital televisions, and expanding voice, video and data accessfunctions and capabilities to home broadband gateways and mobile devices, which4Table of Contentsin turn is creating demand for higher speed optical interconnects in data center, metro, and long-haul transport network applications, as well as morebandwith capable access and backhaul links in wireless infrastructure applications. We believe that several trends, across multiple of our target markets, arecreating revenue opportunities for providers of RF and analog/mixed-signal solutions. These trends include the following:•Service Provider/Operator: Competing cable, satellite, and other broadband service providers differentiate their services by providingconsumers with bundled video, voice, and broadband data access, referred to as triple-play services. These services include advanced featuressuch as; channel guide information, video-on-demand, multi-channel digital video recording, or DVR, and picture-in-picture viewing. Manyset-top boxes, including those used for triple-play services, now enable consumers to simultaneously access, and manage multimedia contentfrom multiple locations in the same house. These advanced features require either a home gateway or a set-top box to simultaneously receive,demodulate, and decode multiple signals spread across several channels of frequency bandwidth. Traditional architectures would require thateach simultaneously accessed signal require a dedicated RF receiver. In these emerging home gateway or media servers, where content may bedelivered using internet protocol or IP, there may be “thin or remote clients” that may not have traditional TV tuners, but necessarily include abroadband RF receiver such as MoCA or WiFi. This greatly increases the number of RF receivers required to be deployed in each set-top box. Inaddition, in order to deliver increasing data bandwidth to the home, cable MSOs have deployed DOCSIS 3.0 equipment and services, whichenable channel bonding, or the concurrent reception of multiple channels, resulting in higher aggregate “sum of the channels” bandwidthavailable to DOCSIS 3.0 cable subscribers.•Infrastructure and Non-Operator Terrestrial: Growth in data traffic generated from smartphones and tablets, over-the-top, or OTT, streamingvideo, cloud computing and data analytics in hyper-scale data centers is creating demand for higher speed interconnect products addressingenterprise and telecommunications infrastructure market applications. These solutions provide the interconnect function between the top-of-rack to the core-router within a datacenter, and the metro and long-haul connections within a service provider network. Datacenter links areconsistently increasing in performance and speed, and many are currently changing from 1Gbps to 10Gbps on the servers and from 10/40Gbpsto 100Gbps on the routers and switches, and we believe that over the next several years they will likely migrate to 400Gbps. In the markets fornon-operator terrestrial solutions, consumers are utilizing a broad array of consumer electronic devices beyond the television, such as personalcomputers, netbooks, tablets, and mobile phones to access broadcast television and other multimedia content. Specifically, with the increasedpopularity of accessing multimedia content over-the-top, or OTT, via broadband-enabled streaming services, consumers are increasinglyaugmenting these OTT multimedia content services with local free-to-air broadcast programming. Consumers can access these terrestrialbroadcasts through set-top boxes containing terrestrial RF receiver solutions.As a result of these trends, RF and analog/mixed signal receiver technology is being deployed in a variety of devices for the terrestrial, cable, satellite,datacenter, and metro and long-haul telecom transport network, and wireless access and backhaul markets. The proliferation of applications with advancedfeatures has led to an increase in the number of devices with multiple RF receivers and RF receiver SoCs. RF receivers incorporate RF, digital and analogsignal processing functions.Challenges Faced by Providers of Systems and RF Receivers and Optical InterconnectsThe stringent performance requirements of broadband communications and optical interconnect applications and the distinct technological challengesassociated with the terrestrial, cable, satellite, datacenter, and metro and long-haul telecom transport and wireless infrastructure markets present significantobstacles to service providers and system designers. In particular, designing and implementing RF receivers to capture broadcast digital television signals isextremely challenging due in part to the wide frequency band across which broadcast digital television signals are transmitted. As compared to other digitalradio technologies, such as those found in cellular, WiFi and Bluetooth applications, television signals that are broadcast over air, on cable, and by satelliteare acquired over a much wider frequency band and encounter many more sources of interference. As a result, traditionally, design and implementation ofthese RF receivers have been accomplished using conventional radio system architectures that employ multiple discrete components and are fabricated usingexpensive special purpose semiconductor manufacturing processes, such as silicon germanium, gallium arsenide, and special purpose CMOS-based RFprocess technologies.The core challenges of capturing and processing high quality broadband communications signals are common to the terrestrial, cable, and satellitemarkets. These challenges include:5Table of Contents•Design Challenges of Receiving Multiple RF Signals. System designers and service providers across various markets are seeking to enhanceconsumer appeal through the addition of new features in their products. Incorporating more than one channel of RF reception in an electronicdevice enables many of these features and advanced applications that are rapidly becoming a part of the standard offering from device makersand service providers. For example, in the cable set-top box market, it is necessary to support the simultaneous reception of multiple channelsfor voice, video and data applications in many system designs. In order to meet such requirements, OEMs must employ either multiple narrow orwideband RF receivers or Full Spectrum Capture (FSCTM) receiver SoCs in their system design. Each additional RF receiver poses newchallenges to the system designer, such as increased design complexity, overall cost, circuit board space, power consumption and heatdissipation. In addition, a high level of integration in multiple-receiver designs is necessary to combat the reliability and signal interferenceissues arising from the close proximity of sensitive RF elements.•Signal Clarity Performance Requirements. Television reception requires a robust and clear signal to provide a positive user experience. One ofthe core attributes of system performance is signal clarity, often measured by the signal-to-noise ratio parameter, which measures the strength ofthe desired signal relative to the combined noise and undesired signal strength in the same channel. Television reception requires an RFreceiver that has a wide dynamic range and the ability to isolate the desired signal from the undesired signals, which include the noise generatedby extraneous radio waves and interferers produced by home networking systems such as wireless local area network, or WLAN, and Bluetooth.Traditional RF receiver implementations utilized expensive discrete components, such as band-pass filters, resonance elements and varactordiodes to meet the stringent requirements imposed by broadband television reception. In high speed mobile environments, a method known asdiversity combining of radio signals, in which the desired signal is captured using multiple RF receivers and reconstructed into a single signal,has been employed to improve the signal-to-noise ratio. Diversity combining of radio signals requires substantial RF, digital signal processingand software expertise. Both the traditional broadband reception and diversity combining of RF signals in mobile environments are difficult toimplement and pose challenges to RF receiver providers.•Multiple Standards. Worldwide, there are several regional standards for the transmission and reception of broadband analog and digital TVsignals. Technical performance, feature requirements and the predominance of a particular means of TV transmission vary regionally. Further,each major geographic region has adopted its own TV standard for cable, terrestrial, and satellite transmissions, such as DVB-T/T2/C/C2/S/S2,ATSC, NTSC, ISDB-T, PAL, SECAM, DTMB, CMMB, etc. As a result of these multiple standards, there are region-specific RF receiverrequirements and implementations, which make global standards compliance extremely challenging. Many system designers prefer a multiplestandards and protocol compliant solution that was previously not possible. Providers of RF receivers face the design challenge of providingthis flexibility to the system designer without any increase in power consumption, or any loss of performance quality or competitiveness.•Power Consumption. Power consumption is an important consideration across consumer, broadband operator, and wired and wirelessinfrastructure applications, and a critical design specification for system designers. For example, in battery-operated devices such as netbooksand notebooks, and voice-enabled cable modems, long battery life is a differentiating device attribute. In wireless infrastructure applications,power consumption is critically important consideration given both the cost of provisioning power and its related cost of consumption, and inwired infrastructure there is the additional cost and consideration regarding cooling of larger-scale and densely-configured datacenters. Inaddition, government sponsored programs, such as Energy Star in the U.S., induce consumers to purchase more energy efficient products. Forexample, in September 2009, the U.S. Environmental Protection Agency announced that Energy Star compliant televisions would be required tobe 40% more energy efficient than their noncompliant counterparts. The addition of one or more RF receivers to a system in order to enabledigital TV functionality significantly increases the overall power consumption imposing severe platform level design constraints on multiplechannel receiver systems. In fact, in some multiple receiver system designs, a majority of the system’s overall power consumption is attributableto the RF receiver and related components. Providers of RF receivers and RF receiver SoCs are confronted with the design challenge of loweringpower consumption while maintaining or improving device performance.•Size. The size of electronic components, such as RF receivers, is a key consideration for system designers and service providers. Given theproliferation of the number of RF receivers in broadband service provider video and data gateways market, size can be a determining factor forwhether or not a particular component, such as an RF receiver is designed into the product. In the television market, as system designers createthinner flat-screen6Table of Contentsdisplays, the size of RF receivers is becoming a significant consideration, especially when multiple RF receivers are incorporated in a singlesystem. In wired infrastructure applications, form-factor is a critical design consideration given network server and switch faceplate densitytrends. In wireless infrastructure opportunities, space on the towers where the radios and modems are deployed is constrained and expensive toprocure.The challenges of processing high-speed optical interconnect signals for datacenter, metro and long-haul telecommunications transport marketsinclude:•Optical Fiber Channel Impairments. The optical properties of the fiber material results in impairments to the optical signal that is beingpropagated across the fiber. These impairments include loss of light intensity, modal, chromatic and polarization dispersion as the lightpropagates through the fiber. These impairments result in degradation of signal integrity which contributes to effective reduction in datathroughput.•Optical Device Technology. The state of the art in optical device technology today lags the speeds contemplated for data traffic within clouddata centers and transport links between telecom data centers. So, there are severe physical limits to the conversion of electrical signals tooptical signals and vice versa at extremely high speeds. These limitations arise from bandwidth, nonlinearities, and noise properties in lasers,modulators, and photo detectors.•Form Factor. The form factor of the face plates in server, storage, switch, and networking racks in data centers limits the capacity to dissipateheat generated by electrical and optical devices inside the transceivers to which optical fibers are connected. As data rates increase dramatically,the physical form of the face plates and connectors does not scale to cope with accompanying increase in power density.Our RF Receiver SolutionWe are a provider of radio frequency, or RF, and mixed-signal integrated circuits for cable and satellite broadband communications and the connectedhome, and wired and wireless infrastructure markets. Our high performance RF receiver products capture and process digital and analog broadband signals tobe decoded for various applications. These products include both RF receivers and RF receiver SoCs, which incorporate our highly integrated radio systemarchitecture and the functionality necessary to receive and demodulate broadband signals, and physical medium devices that provide a constant currentsource, current-to-voltage regulation, and data alignment and retiming functionality in optical interconnect applications.We combine our high performance analog and mixed-signal semiconductor design skills with our expertise in digital communications systems,software and embedded systems to develop RF receivers and RF receiver SoCs. We integrate our RF receivers with digital demodulation and othercommunications functions in standard CMOS process technology. Our solutions have the following key features:•Proprietary Radio Architecture. Digital signal processing is at the core of our RF receivers and RF receiver SoCs. Using our proprietary CMOS-based radio architecture, we leverage both analog and digital signal processing to improve system performance across multiple products. Thepartitioning of the signal processing in the chip between analog and digital domains is designed to deliver high performance, small die size andlow power for a given application. Moreover, our architecture is implemented in standard CMOS process technology, which enables us torealize the integration benefits of analog and digital circuits on the same integrated circuit. This allows us to predictably scale the on-chipdigital circuits in successive advanced CMOS process technology nodes. Our solutions have been designed into products in markets withextremely stringent specifications for quality, performance and reliability, such as the television and automotive markets. We believe that oursuccess in these markets demonstrates that our solution can be implemented successfully across multiple markets and applications.•High Signal Clarity Performance. We design our RF receivers and RF receiver SoCs to provide high signal clarity performance regardless of theapplication in which they are employed. For example, in the satellite and cable broadband gateway markets, we deploy our core RF and mixed-signal CMOS process technology platform and radio system architecture to overcome the interference from in-home networks that can degradecable broadband signals. We believe that signal clarity is more critical in television compared to other communications applications such asvoice and data, because signal loss and interference have a more adverse impact on the end user experience.7Table of Contents•Highly Integrated. Our products integrate on a single chip the functionality associated with traditional analog and digital integrated circuitsand other expensive discrete components. This high level of integration has the cost benefits associated with smaller silicon die area, fewerexternal components and lower power. Our CMOS-based RF receiver SoC eliminates analog interface circuit blocks and external componentssituated at the interface between discrete analog and digital demodulator chips and reduces the cost associated with multiple integrated circuitpackages and related test costs. We are also able to integrate multiple RF receivers along with a demodulator onto a single die to createapplication-specific configurations for our customers. Thus, our highly integrated solution reduces the technical difficulties associated withovercoming the undesired interactions between multiple discrete analog and digital integrated circuits comprising a single system. Oursolutions reduce the technical burden on system designers in deploying enhanced television functionality in their products.•Low Power. Our products enable our customers to reduce power consumption in consumer electronic devices without compromising thestringent performance requirements of applications such as broadcast television. In addition, our products enable our customers to decreaseoverall system costs by reducing the power consumption and heat dissipation requirements in their systems. For example, in cable boxessupporting voice applications, low power consumption may enable a reduction in the number of batteries or battery capacity required to supportstandby and lifeline telephony. In certain set-top boxes and broadband gateways, reduced overall power consumption may allow systemdesigners to eliminate one or more cooling fans required to dissipate the heat generated by high power consumption. The benefits of low powerconsumption increase with the number of RF receivers included in a system.•Scalable Platform. Our product families share a highly modular, core radio system architecture, which enables us to offer RF receiver and RFreceiver SoC solutions that meet the requirements of a wide variety of geographies, broadcast standards and applications. This is in contrast tolegacy solutions that require significant customization to conform to regional standards, technical performance and feature requirements.Moreover, by leveraging our flexible core architecture platform, our integrated circuit solutions can be deployed across multiple devicecategories. As a result, our customers can minimize the design resources required to develop applications for multiple target markets. Inaddition, our engineering resources can be deployed more efficiently to design products for larger addressable markets. We believe that our coretechnology platform also can be applied to other communications markets with similar performance requirements.•Space Efficient Solution. Our highly integrated CMOS-based RF receivers and RF receiver SoCs have an extremely small silicon die size,require minimal external components and consume very little power. Our unique radio architecture, more specifically our Full-SpectrumCapture™ technology, not only enables us to integrate multiple RF receivers in a chip, but also results in a reduction in the incremental powerand die area required per each additional channel of reception. This enables our customers to design multi-receiver applications, such as cablemodems and set-top boxes, in an extremely small form factor.Our StrategyOur objective is to be the leading provider of mixed-signal RF receivers and RF receiver SoCs for broadband video and data communications, andwired and wireless infrastructure applications and, in the future, to leverage this core competency to expand into other communications markets with similarperformance requirements. The key elements of our strategy are:•Extend Technology Leadership in RF Receivers and RF Receiver + Demodulator SoCs. We believe that our success has been, and will continueto be, largely attributable to our RF and mixed-signal design capability, as well as advanced digital design, which we leverage to develop high-performance, low-cost semiconductor solutions for broadband communications applications. The broadband RF receiver market presentssignificant opportunities for innovation through the further integration of RF and mixed-signal functionality with digital signal processingcapability in CMOS process technology. By doing so, we will be able to deliver products with lower power consumption, superior performanceand increased cost benefits to system designers and service providers. We believe that our core competencies and design expertise in this marketwill enable us to acquire more customers and design wins over time. We will continue to invest in this capability and strive to be an innovationleader in this market.•Leverage and Expand our Existing Customer Base. We target customers who are leaders in their respective markets. We intend to continue tofocus on sales to customers who are leaders in our current target markets, and to build on our relationships with these leading customers todefine and enhance our product roadmap. By solving8Table of Contentsthe specific problems faced by our customers, we can minimize the risks associated with our customers’ adoption of our new integrated circuitproducts, and reduce the length of time from the start of product design to customer revenue. Further, engaging with market leaders will enableus to participate in emerging technology trends and new industry standards.•Target Additional High-Growth Markets. Our core competency is in RF analog and mixed-signal integrated circuit design in CMOS processtechnology. Several of the technological challenges involved in developing RF solutions for video broadcasting and broadband reception arecommon to a majority of communications markets. We intend to leverage our core competency in developing highly integrated RF receiver andRF receiver SoCs in standard CMOS process technology to address additional markets within broadband communications, communicationsinfrastructure, and connectivity markets that we believe offer profitable high growth potential.•Expand Global Presence. Due to the global nature of our supply chain and customer locations, we intend to continue to expand our sales,design and technical support organization both in the United States and overseas. In particular, we expect to increase the number of employeesin Asia, Europe and the United States to provide regional support to our increasing base of customers. We believe that our customers willincreasingly expect this kind of local capability and support.•Attract and Retain Top Talent. We are committed to recruiting and retaining highly talented personnel with proven expertise in the design,development, marketing and sales of communications integrated circuits. We believe that we have assembled a high-quality team in all theareas of expertise required at a semiconductor communications company. We provide an attractive work environment for all of our employees.We believe that our ability to attract the best engineers is a critical component of our future growth and success in our chosen markets.ProductsOur products are integrated into a wide range of electronic devices, including cable and terrestrial and satellite set-top boxes and gates, DOCSIS dataand voice gateways, hybrid analog and digital televisions, satellite low-noise blocker transponders or outdoor units, physical medium devices that go intooptical modules for data center, metro, and long-haul transport network applications, and RF transceiver and modem devices for wireless access and backhaulapplications.We provide our customers with guidelines, known as reference designs, so that they can efficiently use our products in their product designs. Wecurrently provide the following types of semiconductors:•RF Receivers. These semiconductor products combine RF receiver technology that traditionally required multiple external discrete components,such as very high frequency, or VHF, and ultra-high frequency, or UHF, tracking filters, surface acoustic wave, or SAW, filters, intermediate-frequency, or IF, amplifiers, low noise amplifiers and transformers. All of these external components have been either eliminated or integratedinto a single semiconductor produced entirely in standard CMOS process technology.•RF Receiver SoCs. These semiconductor products combine the functionality of RF receivers, and demodulators in a single chip. In someconfigurations, these products may incorporate multiple RF receivers and single or multiple demodulators in a single chip to provideapplication or market specific solutions to customers.•Wireless Infrastructure Backhaul Modem SoC's. These semiconductor products reside in wireless operator system deployments to enablecommunication between various metro network rings. These modem devices modulate one or more carrier wave signals to encode digitalinformation for transmission and demodulate signals to decode the transmitted information. The increasing amounts of data and video contentbeing consumed on mobile devices are creating new opportunities for innovative and efficient modem and RF receiver SoCs solutions.•Laser Modulator Drivers. These semiconductor products reside in optical modules and provide a constant current source that delivers exactlythe current to the laser diode that it needs to operate for a particular application•Transimpedance Amplifiers. These semiconductor products reside in optical modules and provide current-to-voltage conversion, converting thelow-level current of a sensor to a voltage.•Clock and Data Recovery Circuits. These semiconductor products generate a clock from an approximate frequency reference, and then phase-aligns to the transitions in the data stream with a phase-locked loop, or PLL.9Table of ContentsCustomersWe sell our products, directly and indirectly, to original equipment manufacturers, or OEMs, module makers and original design manufacturers, orODMs, and we refer to these as our end customers. By providing a highly integrated reference design solution that our customers can incorporate in theirproducts with minimal modifications, we enable our customers to design cost-effective high performance SoC-based solutions rapidly. In the year endedDecember 31, 2016, we sold our products to 208 end customers. A significant portion of our sales to these and other customers are through distributors basedin Asia, and we do not consider distributors as our end customers, despite selling the products to and being paid by the distributors.A significant portion of our net revenue has historically been generated by a limited number of customers. In the years ended December 31, 2016, 2015and 2014, ten customers accounted for approximately 74%, 76% and 67% of our net revenue, respectively. In the years ended December 31, 2016, 2015 and2014, Arris Group, Inc., or Arris, represented 27%, 28% and 31% of our net revenue. Sales to Arris as a percentage of net revenue include sales to Pace, whichwas acquired by Arris in January 2016, for the year ended December 31, 2016. In the years ended December 31, 2016 and 2015, Technicolor (which includesCisco, Inc.'s, or Cisco, former connected devices business), represented 10% and 13% of net revenue. In November 2015, Technicolor acquired Cisco'sconnected devices business. The 2015 net revenue percentage did not include 1% for Technicolor.Products shipped to Asia accounted for 93%, 91% and 94% of our net revenue in the years ended December 31, 2016, 2015 and 2014, respectively.Products shipped to China and Taiwan accounted for 78% and 6%, respectively, of our net revenue in the year ended December 31, 2016. Products shippedto China and Taiwan accounted for 77% and 8%, respectively, of our net revenue in the year ended December 31, 2015. Products shipped to China andTaiwan accounted for 71% and 6%, respectively, of our net revenue in the year ended December 31, 2014. Although a large percentage of our products areshipped to Asia, we believe that a significant number of the systems designed by these customers and incorporating our semiconductor products are then soldoutside Asia. For example, we believe revenue generated from sales of our digital terrestrial set-top box products during the years ended December 31, 2016,2015 and 2014 related principally to sales to Asian set-top box manufacturers delivering products into Europe, Middle East, and Africa, or EMEA markets.Similarly, revenue generated from sales of our cable modem products during the years ended December 31, 2016, 2015 and 2014 related principally to salesto Asian ODM’s and contract manufacturers delivering products into European and North American markets. To date, all of our sales have been denominatedin United States dollars. See Note 12 to our consolidated financial statements, included in Part IV, Item 15 of this Report for a discussion of total revenue bygeographical region for the years ended December 31, 2016, 2015 and 2014.Sales and MarketingWe sell our products worldwide through multiple channels, using our direct sales force, third party sales representatives, and a network of domestic andinternational distributors. We have direct sales personnel covering the United States, Europe and Asia, and operate customer engineering support offices inCarlsbad and Irvine in California; Tokyo in Japan; Shanghai and Shenzhen in China; Hsinchu in Taiwan; Seoul in South Korea; Bangalore in India; Burnabyin Canada; and Herzliya in Israel. We also employ a staff of field applications engineers to provide direct engineering support locally to some of ourcustomers.Our distributors are independent entities that assist us in identifying and servicing customers in a particular territory, usually on a non-exclusive basis.Sales through distributors accounted for approximately 19%, 13% and 28% of our net revenue in the years ended December 31, 2016, 2015 and 2014,respectively.Our sales cycles typically require a significant amount of time and a substantial expenditure of resources before we can realize revenue from the sale ofproducts, if any. Our typical sales cycle consists of a multi-month sales and development process involving our customers’ system designers andmanagement. The typical time from early engagement by our sales force to actual product introduction ranges from nine to twelve months for the consumermarket, to as much as 18 to 24 months for the cable and satellite markets, and 36 months or longer for wired and wireless infrastructure markets. If successful,this process culminates in a customer’s decision to use our products in its system, which we refer to as a design-win. Volume production may begin withinthree to twelve months after a design-win, depending on the complexity of our customer’s product and other factors upon which we may have little or noinfluence. Once our products have been incorporated into a customer’s design, they are likely to be used for the life cycle of the customer’s product. Thus, adesign-win may result in an extended period of revenue generation. Conversely, a design-loss to our competitors, may adversely impact our financial resultsfor an extended period of time.10Table of ContentsWe generally receive purchase orders from our customers approximately six to twenty-four weeks prior to the scheduled product delivery date. Thesepurchase orders may be cancelled without charge upon notification, so long as notification is received within an agreed-upon period of time in advance ofthe delivery date. Because of the scheduling requirements of our foundries and assembly and test contractors, we generally provide our contractorsproduction forecasts and place firm orders for products with our suppliers up to twenty-four weeks prior to the anticipated delivery date, often without apurchase order from our own customers. Our standard warranty provides that products containing defects in materials, workmanship or product performancemay be returned for a refund of the purchase price or for replacement, at our discretion.ManufacturingWe use third-party foundries and assembly and test contractors to manufacture, assemble and test our semiconductor products. This outsourcedmanufacturing approach allows us to focus our resources on the design, sale and marketing of our products. Our engineers work closely with our foundriesand other contractors to increase yield, lower manufacturing costs and improve product quality.Wafer Fabrication. We utilize an increasing range of process technologies to manufacture our products, from standard CMOS to more exotic processesincluding SiGe and GaAs. Within this range of processes, we use a variety of process technology nodes ranging from 0.18µ down to 16 nanometer. Wedepend on independent silicon foundry manufacturers to support our wafer fabrication requirements. Our key foundry partners include UnitedMicroelectronics Corporation or UMC in Taiwan and Singapore, Taiwan Semiconductor Manufacturing Corporation or TSMC in Taiwan, SemiconductorManufacturing International Corporation or SMIC in China, Global Foundries Inc. in Singapore, Silterra Malaysia Sdn. Bhd. in Malaysia, Tower-Jazz inNewport Beach California, and WIN Semiconductor in Taiwan.Assembly/packaging and Test. Upon completion of the silicon processing at the foundry, we forward the finished silicon wafers to independentassembly/packaging and test service subcontractors. The majority of our assembly/packaging and test requirements are supported by the followingindependent subcontractors: Advanced Semiconductor Engineering or ASE in Taiwan (assembly/packaging and test), Giga Solution Technology Co. Ltd. inTaiwan (test only), Amkor Technology in Korea, Philippines, and China (assembly/packaging and test), United Test and Assembly Center or UTAC HoldingsLtd. in Singapore and China (assembly/packaging and test), SIGURD Microelectronics Corp. in Taiwan (test only), Siliconware Precision Industries Co. Ltd.or SPIL in Taiwan (assembly/packaging only) and Unisem (M) Berhad in China (assembly/packaging only).Quality Assurance. We have implemented significant quality assurance procedures to assure high levels of product quality for our customers. Weclosely monitor the work-in-progress information and production records maintained by our suppliers, and communicate with our third-party contractors toassure high levels of product quality and an efficient manufacturing time cycle. Upon successful completion of the quality assurance procedures, all of ourproducts are stored and shipped to our customers or distributors directly from our third-party contractors in accordance with our shipping instructions.Research and DevelopmentWe believe that our future success depends on our ability to both improve our existing products and to develop new products for both existing andnew markets. We direct our research and development efforts largely to the development of new high performance, mixed-signal semiconductor solutions forbroadband communications, datacenter, and metro and long-haul telecommunications transport market applications. We target applications that requirestringent overall system performance and low power consumption. As new and challenging communication applications proliferate, we believe that many ofthese applications may benefit from our SoC solutions combining analog and mixed-signal processing with digital signal processing functions. We haveassembled a team of highly skilled semiconductor and embedded software design engineers with expertise in broadband RF and mixed-signal integratedcircuit design, digital signal processing, communications systems and SoC design. As of December 31, 2016, we had approximately 401 employees in ourresearch and development group. Our engineering design teams are located in Carlsbad, Irvine, and Camarillo in California; Shenzhen in China; Bangalore inIndia; Burnaby in Canada; and Herzliya in Israel. Our research and development expense was $97.7 million, $85.4 million and $56.6 million in 2016, 2015and 2014, respectively.CompetitionWe compete with both established and development-stage semiconductor companies that design, manufacture and market analog and mixed-signalbroadband RF receiver and optical interconnect products. Our competitors include companies with much longer operating histories, greater namerecognition, access to larger customer bases and substantially greater financial, technical and operational resources. In addition, our industry is experiencingsubstantial consolidation. As a result, our competitors are increasingly large multi-national semi-conductor companies with substantial market influence. Our11Table of Contentscompetitors may develop products that are similar or superior to ours. We consider our primary competitors to be companies with a proven track record ofsupporting market leaders and the technical capability to develop and bring to market competing broadband RF receiver and RF receiver SoC, modem, andoptical interconnect products. Our primary competitors include NXP B.V. in cable and terrestrial TV markets, Silicon Laboratories in terrestrial TV markets,RDA Microelectronics and Rafael Microelectronics, Inc. in TV and terrestrial set-top-box markets, and Broadcom Corporation in terrestrial, cable, andsatellite markets. Competitors we face in our datacenter, and metro and long-haul telecommunications transport applications include Inphi, M/A-COM,Semtech, Qorvo, Broadcom, and Microsemi amongst others. Competitors we face in our wireless infrastructure markets, resulting from our recent Microsemiand Broadcom asset acquisitions, include most notably Analog Devices and Texas Instruments, in addition to competition from captive semiconductordevelopment initiatives within our current and target system OEM customers who may choose to develop their own custom integrated circuits, or developFPGA based solutions. In addition, it is very likely that a number of other public and private companies, including some of our customers and semiconductorplatform partners, could be developing competing products for broadband communications, datacenter, and metro and long-haul telecommunicationstransport, and wireless access and backhaul applications.The market for analog and mixed-signal semiconductor products is highly competitive, and we believe that it will grow more competitive as a result ofcontinued technological advances. We believe that the principal competitive factors in our markets include the following:•product performance;•features and functionality;•energy efficiency;•size;•ease of system design;•customer support;•product roadmap;•reputation;•reliability; and•price.We believe that we compete favorably as measured against each of these criteria. However, our ability to compete in the future will depend upon thesuccessful design, development and marketing of compelling RF and mixed-signal semiconductor integrated solutions for high growth communicationsmarkets. In addition, our competitive position will depend on our ability to continue to attract and retain talent while protecting our intellectual property.Intellectual Property RightsOur success and ability to compete depend, in part, upon our ability to establish and adequately protect our proprietary technology and confidentialinformation. To protect our technology and confidential information, we rely on a combination of intellectual property rights, including patents, tradesecrets, copyrights and trademarks. We also protect our proprietary technology and confidential information through the use of internal and external controls,including contractual protections with employees, contractors, business partners, consultants and advisors. Protecting mask works, or the “topography” orsemiconductor material designs, of our integrated circuit products is of particular importance to our business and we seek to prevent or limit the ability ofothers to copy, reproduce or distribute our mask works.We have 836 issued patents and 339 patent applications pending in the United States. We also have 9 issued foreign patents and 10 other pendingforeign patent applications, based on our issued patents and pending patent applications in the United States. Of the total 845 domestic and foreign issuedpatents, 531 are related to Entropic and 314 are related to MaxLinear. Of the total 349 domestic and foreign pending patents, 88 are related to Entropic and261 are related to MaxLinear.We are the owner of thirteen trademarks (“MXL,” “MXLWARE,” “BNC,” “FULL-SPECTRUM CAPTURE,” “FSC,” “FULL SPECTRUMTRANSCEIVER,” “FULL-SPECTRUM TRANSCEIVER,” “FST,” “C.LINK,” “ENTROPIC,”12Table of Contents“ENTROPIC BUILT-IN and Design,” “PROVIGENT” and “PVG”) that have been registered and/or published for opposition in the United States. We ownforeign counterparts (including seven foreign registrations) of certain of these registered trademarks in Chile, China, the EU, Israel, India and Taiwan. Wealso own the registration for the trademark “ENTROPIC and Design” in Chile. We also claim common law rights in certain other trademarks that are notregistered.We may not gain any competitive advantages from our patents and other intellectual property rights. Our existing and future patents may becircumvented, designed around, blocked or challenged as to inventorship, ownership, scope, validity or enforceability. It is possible that we may be providedwith information in the future that could negatively affect the scope or enforceability of either our present or future patents. Furthermore, our pending andfuture patent applications may or may not be granted under the scope of the claims originally submitted in our patent applications. The scope of the claimssubmitted or granted may or may not be sufficiently broad to protect our proprietary technologies. Moreover, we have adopted a strategy of seeking limitedpatent protection with respect to the technologies used in or relating to our products.We are a party to a number of license agreements for various technologies, such as a license agreement with Intel Corporation relating to demodulatortechnologies that are licensed specifically for use in our products for cable set-top boxes. The agreement was originally entered into with Texas Instrumentsbut was subsequently assigned to Intel Corporation as part of Intel Corporation’s acquisition of Texas Instruments’ cable modem product line in 2010. Thelicense agreement with Intel Corporation has a perpetual term, but Intel Corporation may terminate the agreement for any uncured material breach or in theevent of bankruptcy. If the agreement is terminated, we would not be able to manufacture or sell products that contain the demodulator technology licensedfrom Intel Corporation, and there would be a delay in the shipment of our products containing the technology until we found a replacement for thedemodulator technology in the marketplace on commercially reasonable terms or we developed the demodulator technology itself. We believe we could finda substitute for the currently licensed demodulator technology in the marketplace on commercially reasonable terms or develop the demodulator technologyourselves. In either case, obtaining new licenses or replacing existing technology could have a material adverse effect on our business, as described in “RiskFactors—Risks Related to Our Business—We utilize a significant amount of intellectual property in our business. If we are unable to protect our intellectualproperty, our business could be adversely affected.”The semiconductor industry is characterized by frequent litigation and other vigorous offensive and protective enforcement actions over rights tointellectual property. Moreover, there are numerous patents in the semiconductor industry, and new patents are being granted rapidly worldwide. Ourcompetitors may obtain patents that block or limit our ability to develop new technology and/or improve our existing products. If our products were found toinfringe any patents or other intellectual property rights held by third parties, we could be prevented from selling our products or be subject to litigation fees,statutory fines and/or other significant expenses. We may be required to initiate litigation in order to enforce any patents issued to us, or to determine thescope or validity of a third-party’s patent or other proprietary rights. We may in the future be contacted by third parties suggesting that we seek a license tointellectual property rights that they may believe we are infringing. In addition, in the future, we may be subject to lawsuits by third parties seeking toenforce their own intellectual property rights, as described in “Risk Factors—Risks Related to Our Business—We recently settled and are currently a party tointellectual property litigation and may face additional claims of intellectual property infringement. Current litigation and any future litigation could betime-consuming, costly to defend or settle and result in the loss of significant rights” and in “Item 3—Legal Proceedings.”EmployeesAs of December 31, 2016, we had approximately 553 employees, including 401 in research and development, 59 in sales and marketing, 17 inoperations and semiconductor technology and 76 in administration. None of our employees is represented by a labor organization or under any collectivebargaining arrangement, and we have never had a work stoppage. We consider our employee relations to be good.BacklogOur sales are made primarily pursuant to standard purchase orders. Because industry practice allows customers to reschedule, or in some cases, cancelorders on relatively short notice, we do not believe that backlog is a good indicator of our future sales.Geographic InformationDuring our last three years, over 90% of our revenue was generated from products shipped to Asia, including over 70% from products shipped toChina. As of December 31, 2016, 55% and 39% of our long-lived assets were located within the13Table of ContentsUnited States and Singapore, respectively. As of December 31, 2015, substantially all of our long-lived assets were located within the United States.SeasonalityThe semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and priceerosion, evolving technical standards, short product life cycles and wide fluctuations in product supply and demand. From time to time, these and otherfactors, together with changes in general economic conditions, cause significant upturns and downturns in the industry, and in our business in particular.In addition, our operating results are subject to substantial quarterly and annual fluctuations due to a number of factors, such as the demand forsemiconductor solutions for broadband communications applications, the timing of receipt, reduction or cancellation of significant orders, the gain or loss ofsignificant customers, market acceptance of our products and our customers’ products, our ability to timely develop, introduce and market new products andtechnologies, the availability and cost of products from our suppliers, new product and technology introductions by competitors, intellectual propertydisputes and the timing and extent of product development costs.ITEM 1A.RISK FACTORSThis Annual Report on Form 10-K, or Form 10-K, including any information incorporated by reference herein, contains forward-looking statementswithin the meaning of Section 27A of the Securities Act of 1933, as amended, referred to as the Securities Act, and Section 21E of the Securities ExchangeAct of 1934, as amended, referred to as the Exchange Act. In some cases, you can identify forward-looking statements by terms such as “may,” “will,”“should,” “expect,” “plan,” “intend,” “forecast,” “anticipate,” “believe,” “estimate,” “predict,” “potential,” “continue” or the negative of these terms orother comparable terminology. The forward-looking statements contained in this 10-K involve known and unknown risks, uncertainties and situations thatmay cause our or our industry’s actual results, level of activity, performance or achievements to be materially different from any future results, levels ofactivity, performance or achievements expressed or implied by these statements. These factors include those listed below in this Item 1A and those discussedelsewhere in this Form 10-K. We encourage investors to review these factors carefully. We may from time to time make additional written and oral forward-looking statements, including statements contained in our filings with the SEC. We do not undertake to update any forward-looking statement that may bemade from time to time by or on behalf of us, whether as a result of new information, future events or otherwise, except as required by law.Before you invest in our securities, you should be aware that our business faces numerous financial and market risks, including those describedbelow, as well as general economic and business risks. The following discussion provides information concerning the material risks and uncertainties thatwe have identified and believe may adversely affect our business, our financial condition and our results of operations. Before you decide whether to investin our securities, you should carefully consider these risks and uncertainties, together with all of the other information included in this Form 10-K and inour other public filings.During 2016, we acquired certain wireless infrastructure assets from Microsemi and Broadcom. For the risks relating to our recent acquisitions,please refer to the section of these risk factors captioned “Risks Relating to Our Recent Acquisitions.”Risks Related to Our BusinessWe face intense competition and expect competition to increase in the future, which could have an adverse effect on our revenue, revenue growthrate, if any, and market share.The global semiconductor market in general, and the RF receiver market in particular, are highly competitive. We compete in different target marketsto various degrees on the basis of a number of principal competitive factors, including our products’ performance, features and functionality, energyefficiency, size, ease of system design, customer support, product roadmap, reputation, reliability and price, as well as on the basis of our customer support,the quality of our product roadmap and our reputation. We expect competition to increase and intensify as a result of industry consolidation and the resultingcreation of larger semiconductor companies. In addition, we expect the internal resources of large, integrated original equipment manufacturers, or OEMs,may continue to enter our markets. Increased competition could result in price pressure, reduced profitability and loss of market share, any of which couldmaterially and adversely affect our business, revenue, revenue growth rates and operating results.14Table of ContentsAs our products are integrated into a variety of electronic devices, we compete with suppliers of both can tuners and traditional silicon RF receivers,and with providers of physical medium devices for optical interconnect markets. Our competitors range from large, international companies offering a widerange of semiconductor products to smaller companies specializing in narrow markets and internal engineering groups within television, set-top box, datamodems and gateway, satellite low-noise blocker, and optical module manufacturers, some of which may be our customers. Our primary competitors includeSilicon Labs, NXP B.V., RDA Microelectronics, Inc., Broadcom Ltd (created through the merger of Broadcom Corporation and Avago Technologies Limited),and Rafael Microelectronics, Inc. Inphi Corporation, M/A-COM Technology Solutions Holdings, Inc., Semtech Corporation, Qorvo Inc., MicrosemiCorporation (which acquired PMC-Sierra), Texas Instruments, and Analog Devices. It is quite likely that competition in the markets in which we participatewill increase in the future as existing competitors improve or expand their product offerings. In addition, it is quite likely that a number of other public andprivate companies are in the process of developing competing products for digital television and other broadband communication applications. Because ourproducts often are building block semiconductors which provide functions that in some cases can be integrated into more complex integrated circuits, wealso face competition from manufacturers of integrated circuits, some of which may be existing customers or platform partners that develop their ownintegrated circuit products. If we cannot offer an attractive solution for applications where our competitors offer more fully integratedtuner/demodulator/video processing products, we may lose significant market share to our competitors. Certain of our competitors have fully integratedtuner/demodulator/video processing solutions targeting high performance cable, satellite, or DTV applications, and thereby potentially provide customerswith smaller and cheaper solutions. Some of our targeted customers for our optical interconnect solutions are module makers who are vertically integrated,where we compete with internally supplied components.Our ability to compete successfully depends on factors both within and outside of our control, including industry and general economic trends. Duringpast periods of downturns in our industry, competition in the markets in which we operate intensified as manufacturers of semiconductors reduced prices inorder to combat production overcapacity and high inventory levels. Many of our competitors have substantially greater financial and other resources withwhich to withstand similar adverse economic or market conditions in the future. Moreover, the competitive landscape is changing as a result of consolidationwithin our industry as some of our competitors have merged with or been acquired by other competitors, and other competitors have begun to collaboratewith each other. These developments may materially and adversely affect our current and future target markets and our ability to compete successfully inthose markets.We depend on a limited number of customers, that have undergone or are undergoing consolidation and who themselves are dependent on aconsolidating set of service provider customers, for a substantial portion of our revenue, and the loss of, or a significant reduction in orders from one ormore of our major customers could have a material adverse effect on our revenue and operating results.For fiscal 2016, two customers accounted for 37% of our net revenue, and our ten largest customers accounted for 74% of our net revenue. For fiscal2015, two customers accounted for approximately 41% of our net revenue, and our ten largest customers collectively accounted for approximately 76% ofour net revenue. For fiscal 2014, one customer accounted for approximately 31% of our net revenue, and our ten largest customers collectively accounted forapproximately 67% of our net revenue. We expect that our operating results for the foreseeable future will continue to show a substantial but decliningpercentage of sales dependent on a relatively small number of customers and on the ability of these customers to sell products that incorporate our RFreceivers or RF receiver SoCs, digital STB video SoCs, DBS ODU, and MoCA® connectivity solutions. In the future, these customers may decide not topurchase our products at all, may purchase fewer products than they did in the past, or may defer or cancel purchases or otherwise alter their purchasingpatterns. Factors that could affect our revenue from these large customers include the following:•substantially all of our sales to date have been made on a purchase order basis, which permits our customers to cancel, change or delay productpurchase commitments with little or no notice to us and without penalty;•some of our customers have sought or are seeking relationships with current or potential competitors which may affect their purchasingdecisions; and•service provider and OEM consolidation across cable, satellite, and fiber markets could result in significant changes to our customers’technology development and deployment priorities and roadmaps, which could affect our ability to forecast demand accurately and could leadto increased volatility in our business.In addition, delays in development could impair our relationships with our strategic customers and negatively impact sales of the products underdevelopment. Moreover, it is possible that our customers may develop their own product or adopt a15Table of Contentscompetitor’s solution for products that they currently buy from us. If that happens, our sales would decline and our business, financial condition and resultsof operations could be materially and adversely affected.Our relationships with some customers may deter other potential customers who compete with these customers from buying our products. To attractnew customers or retain existing customers, we may offer these customers favorable prices on our products. In that event, our average selling prices and grossmargins would decline. The loss of a key customer, a reduction in sales to any key customer or our inability to attract new significant customers couldseriously impact our revenue and materially and adversely affect our results of operations.A significant portion of our revenue is attributable to demand for our products in markets for broadband and pay-TV operator applications, anddevelopment delays and consolidation trends among cable and satellite television operators could adversely affect our future revenues and operatingresults.For fiscal 2016, revenue directly attributable to operator applications accounted for approximately 75% of our net revenue. For fiscal 2015, revenuedirectly attributable to these applications accounted for approximately 75% of our net revenue. For fiscal 2014, revenue directly attributable to cable andsatellite operator applications accounted for approximately 76% of our net revenue. Delays in the development of, or unexpected developments in theoperator applications markets could have an adverse effect on order activity by manufacturers in these markets and, as a result, on our business, revenue,operating results and financial condition. In addition, consolidation trends among television operators may continue, which could have a material adverseeffect on our future operating results and financial condition. Most recently, we experienced sharper than previously anticipated declines in our legacy videoSoC revenues as a result of the acquisition of Time Warner Cable by Charter CommunicationIf we fail to penetrate new markets, including in particular the market for satellite set-top and gateway boxes and outdoor units, our revenue, revenuegrowth rate, if any, and financial condition could be materially and adversely affected.Currently, we sell most of our products to manufacturers of applications for television, terrestrial set-top boxes for sale in various markets worldwideincluding, but not limited to, cable broadband voice and data modems and gateways, pay-TV set-top boxes and gateways into cable and satellite operatormarkets, satellite outdoor units or LNB’s, optical modules for long-haul and metro telecommunications markets and RF transceivers and modem solutions forwireless infrastructure markets. Our future revenue growth, if any, will depend in part on our ability to further penetrate into, and expand beyond, thesemarkets with analog and mixed-signal solutions targeting the markets for high-speed optical interconnects for datacenter, metro, and long-haul opticalmodules, telecommunications wireless infrastructure, and cable DOCSIS 3.1 network infrastructure products. Each of these markets presents distinct andsubstantial risks. If any of these markets do not develop as we currently anticipate, or if we are unable to penetrate them successfully, it could materially andadversely affect our revenue and revenue growth rate, if any.Broadband data modems/gateways and pay-TV and satellite set-top boxes and video gateways continue to represent our largest North American andEuropean revenue generator. The North American and European pay-TV set-top box market is dominated by only a few OEMs, including Technicolor (whichincludes Cisco's former connected devices business), Arris Group, Inc. (includes Pace plc acquired by Arris Group, Inc. in January 2016), Humax Co., Ltd. andSamsung Electronics Co., Ltd. These OEMs are large multinational corporations with substantial negotiating power relative to us and are undergoingsignificant consolidation. Securing design wins with any of these companies requires a substantial investment of our time and resources. Even if we succeed,additional testing and operational certifications will be required by the OEMs’ customers, which include large pay-TV television companies such as ComcastCorporation, Liberty Global plc, Charter Spectrum, AT&T and EchoStar Corporation. In addition, our products will need to be compatible with othercomponents in our customers’ designs, including components produced by our competitors or potential competitors. There can be no assurance that theseother companies will support or continue to support our products.If we fail to penetrate these or other new markets upon which we target our resources, our revenue and revenue growth rate, if any, likely will decreaseover time and our financial condition could suffer.We may be unable to make the substantial and productive research and development investments which are required to remain competitive in ourbusiness.The semiconductor industry requires substantial investment in research and development in order to develop and bring to market new and enhancedtechnologies and products. Many of our products originated with our research and development efforts and we believe have provided us with a significantcompetitive advantage. For fiscal 2016, our research and development expense was $97.7 million. For fiscal 2015, our research and development expensewas $85.4 million. For fiscal16Table of Contents2014, our research and development expense was $56.6 million. For fiscal 2016 and 2015, we continued to increase our research and developmentexpenditures as part of our strategy of devoting focused research and development efforts on the development of innovative and sustainable productplatforms. We are committed to investing in new product development internally in order to stay competitive in our markets and plan to maintain researchand development and design capabilities for new solutions in advanced semiconductor process nodes such as 28nm and 16nm and beyond. We do not knowwhether we will have sufficient resources to maintain the level of investment in research and development required to remain competitive as semiconductorprocess nodes continue to shrink and become increasingly complex. In addition, we cannot assure you that the technologies which are the focus of ourresearch and development expenditures will become commercially successful.We may not sustain our growth rate, and we may not be able to manage future growth effectively.We have been experiencing significant growth in a short period of time. Our net revenue increased from approximately $133.1 million in 2014, to$300.4 million in 2015 and $387.8 million in 2016, in part due to acquisitions. We may not achieve similar growth rates in future periods. You should notrely on our operating results for any prior quarterly or annual periods as an indication of our future operating performance. If we are unable to maintainadequate revenue growth, our financial results could suffer and our stock price could decline.To manage our growth successfully and handle the responsibilities of being a public company, we believe we must effectively, among other things:•recruit, hire, train and manage additional qualified engineers for our research and development activities, especially in the positions of designengineering, product and test engineering and applications engineering;•add sales personnel and expand customer engineering support offices;•implement and improve our administrative, financial and operational systems, procedures and controls; and•enhance our information technology support for enterprise resource planning and design engineering by adapting and expanding our systemsand tool capabilities, and properly training new hires as to their use.If we are unable to manage our growth effectively, we may not be able to take advantage of market opportunities or develop new products and we mayfail to satisfy customer requirements, maintain product quality, execute our business plan or respond to competitive pressures.In addition to our recent acquisitions, we may, from time to time, make additional business acquisitions or investments, which involve significantrisks.In addition to the acquisition of the wireless infrastructure backhaul business of Broadcom Corporation, which we completed in the third quarter offiscal 2016, we also acquired the wireless infrastructure access business of Microsemi Storage Solutions, Inc., formerly known as PMC-Sierra, Inc., which wecompleted in the second quarter of fiscal 2016, Entropic Communications, Inc., which we completed in the second quarter of fiscal 2015, and Physpeed, Co.,Ltd., which we completed in the fourth quarter of fiscal 2014, we may, from time to time, make acquisitions, enter into alliances or make investments in otherbusinesses to complement our existing product offerings, augment our market coverage or enhance our technological capabilities. However, any suchtransactions could result in:•issuances of equity securities dilutive to our existing stockholders;•substantial cash payments;•the incurrence of substantial debt and assumption of unknown liabilities;•large one-time write-offs;•amortization expenses related to intangible assets;•a limitation on our ability to use our net operating loss carryforwards;•the diversion of management's time and attention from operating our business to acquisition integration challenges;17Table of Contents•stockholder or other litigation relating to the transaction;•adverse tax consequences; and•the potential loss of key employees, customers and suppliers of the acquired business.Additionally, in periods subsequent to an acquisition, we must evaluate goodwill and acquisition-related intangible assets for impairment. If suchassets are found to be impaired, they will be written down to estimated fair value, with a charge against earnings.Integrating acquired organizations and their products and services, including the integration of completed acquisitions, may be expensive, time-consuming and a strain on our resources and our relationships with employees, customers, distributors and suppliers, and ultimately may not be successful.The benefits or synergies we may expect from the acquisition of complementary or supplementary businesses may not be realized to the extent or in the timeframe we initially anticipate. Some of the risks that may affect our ability to successfully integrate acquired businesses, including the wireless infrastructurebackhaul business of Broadcom Corporation, the wireless infrastructure access business of Microsemi Storage Solutions, Inc., Entropic Communications, Inc.and Physpeed, Co., Ltd., include those associated with:•failure to successfully further develop the acquired products or technology;•conforming the acquired company’s standards, policies, processes, procedures and controls with our operations;•coordinating new product and process development, especially with respect to highly complex technologies;•loss of key employees or customers of the acquired company;•hiring additional management and other critical personnel;•in the case of foreign acquisitions, the need to integrate operations across different cultures and languages and to address the particulareconomic, currency, political and regulatory risks associated with specific countries;•increasing the scope, geographic diversity and complexity of our operations;•consolidation of facilities, integration of the acquired company’s accounting, human resource and other administrative functions andcoordination of product, engineering and sales and marketing functions;•the geographic distance between the companies;•liability for activities of the acquired company before the acquisition, including patent and trademark infringement claims, violations of laws,commercial disputes, tax liabilities and other known and unknown liabilities; and•litigation or other claims in connection with the acquired company, including claims for terminated employees, customers, former stockholdersor other third parties.On or about August 2, 2016, Trango Systems, Inc., or Trango, filed a complaint in the Superior Court of California, County of San Diego, CentralDivision, against defendants Broadcom Corporation, Inc., or Broadcom, and us, collectively, Defendants. On or about December 6, 2016 Trango filed itssecond amended complaint. Trango is a purchaser that alleges various fraud, breach of contract, and interference with economic relations claims inconnection with the discontinuance of a chip line we recently acquired from Broadcom. Trango seeks unspecified general and special damages, pre-judgmentinterest, expenses and costs, statutory penalties, attorneys’ fees, punitive damages, and unspecified injunctive and equitable relief. We intend to vigorouslydefend against the lawsuit. On January 11, 2017, we filed our demurrer to each cause of action in the second amended complaint.We cannot predict the outcome of the Trango Systems, Inc. litigation. Any adverse determination in the Trango Systems, Inc. litigation could have amaterial adverse effect on our business and operating results.18Table of ContentsThe complexity of our products could result in unforeseen delays or expenses caused by undetected defects or bugs, which could reduce the marketacceptance of our new products, damage our reputation with current or prospective customers and adversely affect our operating costs.Highly complex products like our RF receivers and RF receiver SoCs, physical medium devices for optical modules, and RF transceiver and modemsolutions for wireless infrastructure markets may contain defects and bugs when they are first introduced or as new versions are released. We have previouslyexperienced, and may in the future experience, defects and bugs and, in particular, have identified several million dollars of liabilities arising from warrantyclaims related to legacy Entropic products. Where any of our products, including legacy acquired products, contain defects or bugs, or have reliability,quality or compatibility problems, we may not be able to successfully correct these problems. Consequently, our reputation may be damaged and customersmay be reluctant to buy our products, which could materially and adversely affect our ability to retain existing customers and attract new customers, and ourfinancial results. In addition, these defects or bugs could interrupt or delay sales to our customers. If any of these problems are not found until after we havecommenced commercial production of a new product (as in the case of the legacy Entropic products experiencing warranty claims), we may be required toincur additional development costs and product recall, repair or replacement costs, and our operating costs could be adversely affected. These problems mayalso result in warranty or product liability claims against us by our customers or others that may require us to make significant expenditures to defend theseclaims or pay damage awards. In the event of a warranty claim, we may also incur costs if we compensate the affected customer. We maintain product liabilityinsurance, but this insurance is limited in amount and subject to significant deductibles. There is no guarantee that our insurance will be available oradequate to protect against all claims. We also may incur costs and expenses relating to a recall of one of our customers’ products containing one of ourdevices. The process of identifying a recalled product in devices that have been widely distributed may be lengthy and require significant resources, and wemay incur significant replacement costs, contract damage claims from our customers and reputational harm. Costs or payments made in connection withwarranty and product liability claims and product recalls could materially affect our financial condition and results of operations.Average selling prices of our products could decrease rapidly, which would have a material adverse effect on our revenue and gross margins.We may experience substantial period-to-period fluctuations in future operating results due to the erosion of our average selling prices. From time totime, we have reduced the average unit price of our products due to competitive pricing pressures, new product introductions by us or our competitors, andfor other reasons, and we expect that we will have to do so again in the future. If we are unable to offset any reductions in our average selling prices byincreasing our sales volumes or introducing new products with higher margins, our revenue and gross margins will suffer. To support our gross margins, wemust develop and introduce new products and product enhancements on a timely basis and continually reduce our and our customers’ costs. Our inability todo so would cause our revenue and gross margins to decline.If we fail to develop and introduce new or enhanced products on a timely basis, our ability to attract and retain customers could be impaired and ourcompetitive position could be harmed.We operate in a dynamic environment characterized by rapidly changing technologies and industry standards and technological obsolescence. Tocompete successfully, we must design, develop, market and sell new or enhanced products that provide increasingly higher levels of performance andreliability and meet the cost expectations of our customers. The introduction of new products by our competitors, the market acceptance of products based onnew or alternative technologies, or the emergence of new industry standards could render our existing or future products obsolete. Our failure to anticipate ortimely develop new or enhanced products or technologies in response to technological shifts could result in decreased revenue and our competitors winningmore competitive bid processes, known as “design wins.” In particular, we may experience difficulties with product design, manufacturing, marketing orcertification that could delay or prevent our development, introduction or marketing of new or enhanced products. If we fail to introduce new or enhancedproducts that meet the needs of our customers or penetrate new markets in a timely fashion, we will lose market share and our operating results will beadversely affected.In particular, we believe that we will need to develop new products in part to respond to changing dynamics and trends in our end user markets,including (among other trends) consolidation among cable and satellite operators, potential industry shifts away from the hardware devices and othertechnologies that incorporate our products, and changes in consumer television viewing habits and how consumers access and receive broadcast content anddigital broadband services. We cannot predict how these trends will continue to develop or how or to what extent they may affect our future revenues andoperating results. We believe that we will need to continue to make substantial investments in research and development in an attempt to ensure a productroadmap that anticipates these types of changes; however, we cannot provide any assurances that we will accurately19Table of Contentspredict the direction in which our markets will evolve or that we will be able to develop, market, or sell new products that respond to such changessuccessfully or in a timely manner, if at all.We have settled in the past and are currently a party to intellectual property litigation and may face additional claims of intellectual propertyinfringement. Current litigation and any future litigation could be time-consuming, costly to defend or settle and result in the loss of significant rights.The semiconductor industry is characterized by companies that hold large numbers of patents and other intellectual property rights and thatvigorously pursue, protect and enforce intellectual property rights. Third parties have in the past and may in the future assert against us and our customersand distributors their patent and other intellectual property rights to technologies that are important to our business. In particular, from time to time, wereceive correspondence from competitors seeking to engage us in discussions concerning potential claims against us, and we receive correspondence fromcustomers seeking indemnification for potential claims related to infringement claims asserted against down-stream users of our products. We investigatethese requests as received and could be required to enter license agreements with respect to third party intellectual property rights or indemnify third parties,either of which could have an adverse effect on our future operating results.On January 21, 2014, CrestaTech Technology Corporation, or CrestaTech, filed a complaint for patent infringement against us in the United StatesDistrict Court of Delaware, or the District Court Litigation. In its complaint, CrestaTech alleges that we infringe U.S. Patent Nos. 7,075,585, or the '585 Patentand 7,265,792, or the '792 Patent. In addition to asking for compensatory damages, CrestaTech alleges willful infringement and seeks a permanentinjunction. CrestaTech also names Sharp Corporation, Sharp Electronics Corp. and VIZIO, Inc. as defendants based upon their alleged use of our televisiontuners.On January 28, 2014, CrestaTech filed a complaint with the U.S. International Trade Commission, or ITC, again naming, among others, us, Sharp,Sharp Electronics, and VIZIO, or the ITC Investigation. On May 16, 2014, the ITC granted CrestaTech’s motion to file an amended complaint adding sixOEM Respondents, namely, SIO International, Inc., Hon Hai Precision Industry Co., Ltd., Wistron Corp., Wistron Infocomm Technology (America) Corp., TopVictory Investments Ltd. and TPV International (USA), Inc. which are collectively referred to with us, Sharp and VIZIO as the Company Respondents.CrestaTech’s ITC complaint alleged a violation of 19 U.S.C. § 1337 through the importation into the United States, the sale for importation, or the sale withinthe United States after importation of MaxLinear’s accused products that CrestaTech alleged infringe the same two patents asserted in the Delaware action.Through its ITC complaint, CrestaTech sought an exclusion order preventing entry into the United States of certain of our television tuners and televisionscontaining such tuners from Sharp, Sharp Electronics, and VIZIO. CrestaTech also sought a cease and desist order prohibiting the Company Respondentsfrom engaging in the importation into, sale for importation into, the sale after importation of, or otherwise transferring within the United States certain of ourtelevision tuners or televisions containing such tuners.On March 10, 2014, the court stayed the District Court Litigation pending resolution of the ITC Investigation.On December 15, 2014, the ITC held a trial in the ITC Investigation. On February 27, 2015, the Administrative Law Judge, or the ALJ, issued a writtenInitial Determination, or ID, ruling that the Company Respondents do not violate Section 1337 in connection with CrestaTech’s asserted patents becauseCrestaTech failed to satisfy the economic prong of the domestic industry requirement pursuant to Section 1337(a)(2). In addition, the ID stated that certain ofour television tuners and televisions incorporating those tuners manufactured and sold by certain customers infringe three claims of the ‘585 Patent, andthese three claims were not determined to be invalid. On April 30, 2015, the ITC issued a notice indicating that it intended to review portions of the IDfinding no violation of Section 1337, including the ID’s findings of infringement with respect to, and validity of, the ‘585 Patent, and the ID’s finding thatCrestaTech failed to establish the existence of a domestic industry within the meaning of Section 1337.The ITC has subsequently issued its opinion, which terminated its investigation. The opinion affirmed the findings of the ALJ that no violation ofSection 1337 had occurred because CrestaTech had failed to establish the economic prong of the domestic industry requirement. The ITC also affirmed theALJ's finding of infringement with respect to the three claims of the '585 Patent that were not held to be invalid.On November 30, 2015, CrestaTech filed an appeal of the ITC decision with the United States Court of Appeals for the Federal Circuit, or the FederalCircuit. On March 7, 2016, CrestaTech voluntarily dismissed its appeal, resulting in a final determination of the ITC Investigation in our favor.In addition, we have filed four petitions for inter partes review, or IPR, by the US Patent Office, two for each of the CrestaTech patents asserted againstus. The Patent Trial and Appeal Board, or the PTAB, did not institute two of these IPRs as20Table of Contentsbeing redundant to IPRs filed by another party that were already underway for the same CrestaTech patent. The remaining two petitions were instituted orinstituted-in-part and, together with the IPRs filed by third parties, there are currently six pending IPR proceedings involving the two CrestaTech patentsasserted against us. In October 2015, the PTAB issued final decisions in two of the six pending IPR proceedings (one for each of the two asserted patents), holding that allof the reviewed claims are unpatentable. Included in these decisions was one of the three claims of the ‘585 Patent mentioned above in connection with theITC’s final decision. CrestaTech appealed the PTAB’s decisions at the Federal Circuit. On November 8, 2016, the Federal Circuit issued an opinion affirmingthe PTAB’s finding of unpatentability.In August 2016, the PTAB issued final written decisions in the remaining four pending IPR proceedings (two for each of the asserted patents), holdingthat many of the reviewed claims - including the two remaining claims of the ‘585 Patent which the ITC held were infringed - are unpatentable. As a result ofthese IPR decisions, all 13 claims that CrestaTech asserted against us in the ITC Investigation have been found to be unpatentable by the PTAB. The partieshave filed notices to appeal the two decisions related to the ‘585 Patent. Opening briefs are currently due in late January - early February 2017. CrestaTech,however, did not appeal the PTAB’s rulings related to the ‘792 Patent.On March 18, 2016, CrestaTech filed a petition for Chapter 7 bankruptcy in the Northern District of California. As a result of this proceeding, all rightsin the CrestaTech asserted patents, including the right to control the pending litigation, were assigned to CF Crespe LLC, or CF Crespe. CF Crespe is now thenamed party in the pending IPRs, the Federal Circuit appeal and District Court Litigation. CF Crespe has not sought to lift the stay in the District CourtLitigation given the resolution of the ITC Investigation.We cannot predict the outcome of any appeal by CF Crespe, CrestaTech, the District Court Litigation, or the IPRs. Any adverse determination in theDistrict Court Litigation could have a material adverse effect on our business and operating results.Claims that our products, processes or technology infringe third-party intellectual property rights, regardless of their merit or resolution and includingthe CrestaTech claims, are costly to defend or settle and could divert the efforts and attention of our management and technical personnel. In addition, manyof our customer and distributor agreements require us to indemnify and defend our customers or distributors from third-party infringement claims and paydamages in the case of adverse rulings. Claims of this sort also could harm our relationships with our customers or distributors and might deter futurecustomers from doing business with us. In order to maintain our relationships with existing customers and secure business from new customers, we have beenrequired from time to time to provide additional assurances beyond our standard terms. If any future proceedings result in an adverse outcome, we could berequired to:•cease the manufacture, use or sale of the infringing products, processes or technology;•pay substantial damages for infringement;•expend significant resources to develop non-infringing products, processes or technology;•license technology from the third-party claiming infringement, which license may not be available on commercially reasonable terms, or at all;•cross-license our technology to a competitor to resolve an infringement claim, which could weaken our ability to compete with that competitor;or•pay substantial damages to our customers or end users to discontinue their use of or to replace infringing technology sold to them with non-infringing technology.Any of the foregoing results could have a material adverse effect on our business, financial condition and results of operations.We utilize a significant amount of intellectual property in our business. If we are unable to protect our intellectual property, our business could beadversely affected.Our success depends in part upon our ability to protect our intellectual property. To accomplish this, we rely on a combination of intellectual propertyrights, including patents, copyrights, trademarks and trade secrets in the United States and in selected foreign countries where we believe filing for suchprotection is appropriate. Effective patent, copyright, trademark21Table of Contentsand trade secret protection may be unavailable, limited or not applied for in some countries. Some of our products and technologies are not covered by anypatent or patent application. We cannot guarantee that:•any of our present or future patents or patent claims will not lapse or be invalidated, circumvented, challenged or abandoned;•our intellectual property rights will provide competitive advantages to us;•our ability to assert our intellectual property rights against potential competitors or to settle current or future disputes will not be limited by ouragreements with third parties;•any of our pending or future patent applications will be issued or have the coverage originally sought;•our intellectual property rights will be enforced in jurisdictions where competition may be intense or where legal protection may be weak;•any of the trademarks, copyrights, trade secrets or other intellectual property rights that we presently employ in our business will not lapse or beinvalidated, circumvented, challenged or abandoned; or•we will not lose the ability to assert our intellectual property rights against or to license our technology to others and collect royalties or otherpayments.In addition, our competitors or others may design around our protected patents or technologies. Effective intellectual property protection may beunavailable or more limited in one or more relevant jurisdictions relative to those protections available in the United States, or may not be applied for in oneor more relevant jurisdictions. If we pursue litigation to assert our intellectual property rights, an adverse decision in any of these legal actions could limit ourability to assert our intellectual property rights, limit the value of our technology or otherwise negatively impact our business, financial condition and resultsof operations.Monitoring unauthorized use of our intellectual property is difficult and costly. Unauthorized use of our intellectual property may have occurred ormay occur in the future. Although we have taken steps to minimize the risk of this occurring, any such failure to identify unauthorized use and otherwiseadequately protect our intellectual property would adversely affect our business. Moreover, if we are required to commence litigation, whether as a plaintiffor defendant as has occurred with CrestaTech, not only will this be time-consuming, but we will also be forced to incur significant costs and divert ourattention and efforts of our employees, which could, in turn, result in lower revenue and higher expenses.We also rely on customary contractual protections with our customers, suppliers, distributors, employees and consultants, and we implement securitymeasures to protect our trade secrets. We cannot assure you that these contractual protections and security measures will not be breached, that we will haveadequate remedies for any such breach or that our suppliers, employees or consultants will not assert rights to intellectual property arising out of suchcontracts.In addition, we have a number of third-party patent and intellectual property license agreements. Some of these license agreements require us to makeone-time payments or ongoing royalty payments. Also, a few of our license agreements contain most-favored nation clauses or other price restriction clauseswhich may affect the amount we may charge for our products, processes or technology. We cannot guarantee that the third-party patents and technology welicense will not be licensed to our competitors or others in the semiconductor industry. In the future, we may need to obtain additional licenses, renewexisting license agreements or otherwise replace existing technology. We are unable to predict whether these license agreements can be obtained or renewedor the technology can be replaced on acceptable terms, or at all.When we settled a trademark dispute with Linear Technology Corporation, we agreed not to register the “MAXLINEAR” mark or any other markscontaining the term “LINEAR”. We may continue to use “MAXLINEAR” as a corporate identifier, including to advertise our products and services, but maynot use that mark on our products. The agreement does not affect our ability to use our registered trademark “MxL”, which we use on our products. Due to ouragreement not to register the “MAXLINEAR” mark, our ability to effectively prevent third parties from using the “MAXLINEAR” mark in connection withsimilar products or technology may be affected. If we are unable to protect our trademarks, we may experience difficulties in achieving and maintainingbrand recognition and customer loyalty.22Table of ContentsOur business, revenue and revenue growth, if any, will depend in part on the timing and development of the global transition from analog to digitaltelevision, which is subject to numerous regulatory and business risks outside our control.In the year ended December 31, 2016, sales of our RF receiver products used in digital terrestrial television applications, or DTT, including digitaltelevisions, terrestrial set-top boxes, and terrestrial receivers in satellite video gateways represented a declining, but not insignificant, portion of our revenues.We expect a declining but not insignificant portion of our revenue in future periods to continue to depend on the demand for DTT applications. In contrast tothe United States, where the transition from analog to digital television occurred on a national basis in June 2009, in Europe and other parts of the world, thedigital transition is being phased in on a local and regional basis and is expected to occur over many years. Many countries in Eastern Europe and LatinAmerica are expected to convert to digital television by the end of 2018, with other countries targeting dates as late as 2024. As a result, our future revenuewill depend in part on government mandates requiring conversion from analog to digital television and on the timing and implementation of those mandates.If the ongoing global transition to digital TV standards does not continue to progress or experiences significant delays, our business, revenue, operatingresults and financial condition would be materially and adversely affected. If during the transition to digital TV standards, consumers disproportionatelypurchase TV’s with digital or hybrid tuning capabilities, this could diminish the size of the market for our digital-to-analog converter set-top box solutions,and as result our business, revenue, operating results and financial condition would be materially and adversely affected.We rely on a limited number of third parties to manufacture, assemble and test our products, and the failure to manage our relationships with ourthird-party contractors successfully could adversely affect our ability to market and sell our products.We do not have our own manufacturing facilities. We operate an outsourced manufacturing business model that utilizes third-party foundry andassembly and test capabilities. As a result, we rely on third-party foundry wafer fabrication and assembly and test capacity, including sole sourcing for manycomponents or products. Currently, all of our products are manufactured by United Microelectronics Corporation, or UMC, Silterra Malaysia Sdn Bhd,Global Foundries, Semiconductor Manufacturing International Corporation, or SMIC, Taiwan Semiconductor Manufacturing Corp, or TSMC, Tower-JazzSemiconductor, and WIN Semiconductor at foundries in Taiwan, Singapore, Malaysia, China, and the United States. We also use third-party contractors forall of our assembly and test operations.Relying on third party manufacturing, assembly and testing presents significant risks to us, including the following:•failure by us, our customers, or their end customers to qualify a selected supplier;•capacity shortages during periods of high demand;•reduced control over delivery schedules and quality;•shortages of materials;•misappropriation of our intellectual property;•limited warranties on wafers or products supplied to us; and•potential increases in prices.The ability and willingness of our third-party contractors to perform is largely outside our control. If one or more of our contract manufacturers or otheroutsourcers fails to perform its obligations in a timely manner or at satisfactory quality levels, our ability to bring products to market and our reputationcould suffer. For example, in the event that manufacturing capacity is reduced or eliminated at one or more facilities, including as a response to the recentworldwide decline in the semiconductor industry, manufacturing could be disrupted, we could have difficulties fulfilling our customer orders and our netrevenue could decline. In addition, if these third parties fail to deliver quality products and components on time and at reasonable prices, we could havedifficulties fulfilling our customer orders, our net revenue could decline and our business, financial condition and results of operations would be adverselyaffected.Additionally, our manufacturing capacity may be similarly reduced or eliminated at one or more facilities due to the fact that our fabrication andassembly and test contractors are all located in the Pacific Rim region, principally in China, Taiwan, Singapore and Malaysia. The risk of earthquakes inthese geographies is significant due to the proximity of major earthquake fault lines, and Taiwan in particular is also subject to typhoons and other Pacificstorms. Earthquakes, fire, flooding, or other natural disasters in Taiwan or the Pacific Rim region, or political unrest, war, labor strikes, work stoppages orpublic health23Table of Contentscrises, such as outbreaks of H1N1 flu, in countries where our contractors’ facilities are located could result in the disruption of our foundry, assembly or testcapacity. Any disruption resulting from these events could cause significant delays in shipments of our products until we are able to shift our manufacturing,assembly or test from the affected contractor to another third-party vendor. There can be no assurance that alternative capacity could be obtained onfavorable terms, if at all.We do not have any long-term supply contracts with our contract manufacturers or suppliers, and any disruption in our supply of products ormaterials could have a material adverse effect on our business, revenue and operating results.We currently do not have long-term supply contracts with any of our third-party vendors, including UMC, Silterra Malaysia Sdn Bhd, GlobalFoundries, SMIC, TSMC, Jazz Semiconductor, and WIN Semiconductor. We make substantially all of our purchases on a purchase order basis, and neitherUMC nor our other contract manufacturers are required to supply us products for any specific period or in any specific quantity. Foundry capacity may not beavailable when we need it or at reasonable prices. Availability of foundry capacity has in the past been reduced from time to time due to strong demand.Foundries can allocate capacity to the production of other companies’ products and reduce deliveries to us on short notice. It is possible that foundrycustomers that are larger and better financed than we are, or that have long-term agreements with our foundry, may induce our foundry to reallocate capacityto them. This reallocation could impair our ability to secure the supply of components that we need. We expect that it would take approximately nine totwelve months to transition performance of our foundry or assembly services to new providers. Such a transition would likely require a qualification processby our customers or their end customers. We generally place orders for products with some of our suppliers approximately four to five months prior to theanticipated delivery date, with order volumes based on our forecasts of demand from our customers. Accordingly, if we inaccurately forecast demand for ourproducts, we may be unable to obtain adequate and cost-effective foundry or assembly capacity from our third-party contractors to meet our customers’delivery requirements, or we may accumulate excess inventories. On occasion, we have been unable to adequately respond to unexpected increases incustomer purchase orders and therefore were unable to benefit from this incremental demand. None of our third-party contractors has provided any assuranceto us that adequate capacity will be available to us within the time required to meet additional demand for our products.To address capacity considerations, we are in the process of qualifying additional semiconductor fabricators. Qualification will not occur if we identifya defect in a fabricator’s manufacturing process or if our customers choose not to invest the time and expense required to qualify the proposed fabricator. Iffull qualification of a fabricator does not occur, we may not be able to sell all of the materials produced by this fabricator or to fulfill demand for our products,which would adversely affect our business, revenue and operating results. In addition, the resulting write-off of unusable inventories would have an adverseeffect on our operating results.We may have difficulty accurately predicting our future revenue and appropriately budgeting our expenses particularly as we seek to enter newmarkets where we may not have prior experience.Our recent operating history has focused on developing integrated circuits for specific terrestrial, cable and satellite television, and broadband voiceand data applications, and as part of our strategy, we seek to expand our addressable market into new product categories. For example, we have recentlyexpanded into the market for satellite set-top and gateway boxes and outdoor units and physical medium devices for the optical interconnect markets, andthrough the Broadcom and Microsemi business line acquisitions have entered the markets for wireless telecommunications infrastructure and cable networkinfrastructure. Our limited operating experience in these new markets or potential markets we may enter, combined with the rapidly evolving nature of ourmarkets in general, substantial uncertainty concerning how these markets may develop and other factors beyond our control, reduces our ability to accuratelyforecast quarterly or annual revenue. If our revenue does not increase as anticipated, we could incur significant losses due to our higher expense levels if weare not able to decrease our expenses in a timely manner to offset any shortfall in future revenue.If we are unable to attract, train and retain qualified personnel, especially our design and technical personnel, we may not be able to execute ourbusiness strategy effectively.Our future success depends on our ability to retain, attract and motivate qualified personnel, including our management, sales and marketing andfinance, and especially our design and technical personnel. We do not know whether we will be able to retain all of these personnel as we continue to pursueour business strategy. Historically, we have encountered difficulties in hiring and retaining qualified engineers because there is a limited pool of engineerswith the expertise required in our field. Competition for these personnel is intense in the semiconductor industry. As the source of our technological andproduct innovations, our design and technical personnel represent a significant asset. The loss of the services of one or more of our key employees, especiallyour key design and technical personnel, or our inability to retain, attract and motivate qualified design and technical personnel, could have a materialadverse effect on our business, financial condition and results of operations.24Table of ContentsOur business would be adversely affected by the departure of existing members of our senior management team.Our success depends, in large part, on the continued contributions of our senior management team. None of our senior management team is bound bywritten employment contracts to remain with us for a specified period. In addition, we have not entered into non-compete agreements with members of oursenior management team. The loss of any member of our senior management team could harm our ability to implement our business strategy and respond tothe rapidly changing market conditions in which we operate.Our customers require our products and our third-party contractors to undergo a lengthy and expensive qualification process which does not assureproduct sales.Prior to purchasing our products, our customers require that both our products and our third-party contractors undergo extensive qualificationprocesses, which involve testing of the products in the customer’s system and rigorous reliability testing. This qualification process may continue for sixmonths or more. However, qualification of a product by a customer does not assure any sales of the product to that customer. Even after successfulqualification and sales of a product to a customer, a subsequent revision to the RF receiver or RF receiver SoC and physical medium devices for opticalmodules, changes in our customer’s manufacturing process or our selection of a new supplier may require a new qualification process, which may result indelays and in us holding excess or obsolete inventory. After our products are qualified, it can take six months or more before the customer commencesvolume production of components or devices that incorporate our products. Despite these uncertainties, we devote substantial resources, including design,engineering, sales, marketing and management efforts, to qualifying our products with customers in anticipation of sales. If we are unsuccessful or delayed inqualifying any of our products with a customer, sales of this product to the customer may be precluded or delayed, which may impede our growth and causeour business to suffer.We are subject to risks associated with our distributors’ product inventories and product sell-through. Should any of our distributors cease or beforced to stop distributing our products, our business would suffer.We currently sell a significant portion of our products to customers through our distributors, who maintain their own inventories of our products.For fiscal 2016, sales through distributors accounted for 19% of our net revenue. For fiscal 2015, sales through distributors accounted for 13% of ournet revenue. For fiscal 2014, sales through distributors accounted for 28% of our net revenue. For these distributor transactions, revenue is not recognizeduntil product is shipped to the end customer and the amount that will ultimately be collected is fixed or determinable. Upon shipment of product to thesedistributors, title to the inventory transfers to the distributor and the distributor is invoiced, generally with 30 to 60 day terms. On shipments to ourdistributors where revenue is not recognized, we record a trade receivable for the selling price as there is a legally enforceable right to payment, relieving theinventory for the carrying value of goods shipped since legal title has passed to the distributor, and record the corresponding gross profit in the consolidatedbalance sheet as a component of deferred revenue and deferred profit, representing the difference between the receivable recorded and the cost of inventoryshipped. Future pricing credits and/or stock rotation rights from our distributors may result in the realization of a different amount of profit included ourfuture consolidated statements of operations than the amount recorded as deferred profit in our consolidated balance sheets.If our distributors are unable to sell an adequate amount of their inventories of our products in a given quarter to manufacturers and end users or if theydecide to decrease their inventories of our products for any reason, our sales through these distributors and our revenue may decline. In addition, if somedistributors decide to purchase more of our products than are required to satisfy end customer demand in any particular quarter, inventories at thesedistributors would grow in that quarter. These distributors likely would reduce future orders until inventory levels realign with end customer demand, whichcould adversely affect our product revenue in a subsequent quarter.Our reserve estimates with respect to the products stocked by our distributors are based principally on reports provided to us by our distributors,typically on a weekly basis. To the extent that this resale and channel inventory data is inaccurate or not received in a timely manner, we may not be able tomake reserve estimates for future periods accurately or at all.We are subject to order and shipment uncertainties, and differences between our estimates of customer demand and product mix and our actualresults could negatively affect our inventory levels, sales and operating results.Our revenue is generated on the basis of purchase orders with our customers rather than long-term purchase commitments. In addition, our customerscan cancel purchase orders or defer the shipments of our products under certain circumstances. Our products are manufactured using a silicon foundryaccording to our estimates of customer demand, which25Table of Contentsrequires us to make separate demand forecast assumptions for every customer, each of which may introduce significant variability into our aggregateestimate. We have limited visibility into future customer demand and the product mix that our customers will require, which could adversely affect ourrevenue forecasts and operating margins. Moreover, because our target markets are relatively new, many of our customers have difficulty accuratelyforecasting their product requirements and estimating the timing of their new product introductions, which ultimately affects their demand for our products.Historically, because of this limited visibility, actual results have been different from our forecasts of customer demand. Some of these differences have beenmaterial, leading to excess inventory or product shortages and revenue and margin forecasts above those we were actually able to achieve. These differencesmay occur in the future, and the adverse impact of these differences between forecasts and actual results could grow if we are successful in selling moreproducts to some customers. In addition, the rapid pace of innovation in our industry could render significant portions of our inventory obsolete. Excess orobsolete inventory levels could result in unexpected expenses or increases in our reserves that could adversely affect our business, operating results andfinancial condition. Conversely, if we were to underestimate customer demand or if sufficient manufacturing capacity were unavailable, we could foregorevenue opportunities, potentially lose market share and damage our customer relationships. In addition, any significant future cancellations or deferrals ofproduct orders or the return of previously sold products due to manufacturing defects could materially and adversely impact our profit margins, increase ourwrite-offs due to product obsolescence and restrict our ability to fund our operations.Winning business is subject to lengthy competitive selection processes that require us to incur significant expenditures. Even if we begin a productdesign, customers may decide to cancel or change their product plans, which could cause us to generate no revenue from a product and adversely affect ourresults of operations.We are focused on securing design wins to develop RF receivers and RF receiver SoCs, MoCA SoCs, DBS-ODU SoCs, physical medium devices foroptical modules, and SoC solutions targeting infrastructure opportunities within the telecommunications, wireless, and cable operator markets for use in ourcustomers’ products. These selection processes typically are lengthy and can require us to incur significant design and development expenditures anddedicate scarce engineering resources in pursuit of a single customer opportunity. We may not win the competitive selection process and may never generateany revenue despite incurring significant design and development expenditures. These risks are exacerbated by the fact that some of our customers’ productslikely will have short life cycles. Failure to obtain a design win could prevent us from offering an entire generation of a product, even though this has notoccurred to date. This could cause us to lose revenue and require us to write off obsolete inventory, and could weaken our position in future competitiveselection processes. After securing a design win, we may experience delays in generating revenue from our products as a result of the lengthy developmentcycle typically required. Our customers generally take a considerable amount of time to evaluate our products. The typical time from early engagement byour sales force to actual product introduction runs from nine to twelve months for the consumer market, to as much as 36 months for the cable and satelliteoperator markets, and beyond 36 months in the wired and wireless infrastructure markets. The delays inherent in these lengthy sales cycles increase the riskthat a customer will decide to cancel, curtail, reduce or delay its product plans, causing us to lose anticipated sales. In addition, any delay or cancellation of acustomer’s plans could materially and adversely affect our financial results, as we may have incurred significant expense and generated no revenue. Finally,our customers’ failure to successfully market and sell their products could reduce demand for our products and materially and adversely affect our business,financial condition and results of operations. If we were unable to generate revenue after incurring substantial expenses to develop any of our products, ourbusiness would suffer.Our operating results are subject to substantial quarterly and annual fluctuations and may fluctuate significantly due to a number of factors thatcould adversely affect our business and our stock price.Our revenue and operating results have fluctuated in the past and are likely to fluctuate in the future. These fluctuations may occur on a quarterly andon an annual basis and are due to a number of factors, many of which are beyond our control. These factors include, among others:•changes in end-user demand for the products manufactured and sold by our customers;•the receipt, reduction or cancellation of significant orders by customers;•fluctuations in the levels of component inventories held by our customers;•the gain or loss of significant customers;•market acceptance of our products and our customers’ products;26Table of Contents•our ability to develop, introduce and market new products and technologies on a timely basis;•the timing and extent of product development costs;•new product announcements and introductions by us or our competitors;•incurrence of research and development and related new product expenditures;•seasonality or cyclical fluctuations in our markets;•currency fluctuations;•fluctuations in IC manufacturing yields;•significant warranty claims, including those not covered by our suppliers;•changes in our product mix or customer mix;•intellectual property disputes;•loss of key personnel or the shortage of available skilled workers;•impairment of long-lived assets, including masks and production equipment; and•the effects of competitive pricing pressures, including decreases in average selling prices of our products.These factors are difficult to forecast, and these, as well as other factors, could materially adversely affect our quarterly or annual operating results. Wetypically are required to incur substantial development costs in advance of a prospective sale with no certainty that we will ever recover these costs. Asubstantial amount of time may pass between a design win and the generation of revenue related to the expenses previously incurred, which can potentiallycause our operating results to fluctuate significantly from period to period. In addition, a significant amount of our operating expenses are relatively fixed innature due to our significant sales, research and development costs. Any failure to adjust spending quickly enough to compensate for a revenue shortfallcould magnify its adverse impact on our results of operations.We are subject to the cyclical nature of the semiconductor industry.The semiconductor industry is highly cyclical and is characterized by constant and rapid technological change, rapid product obsolescence and priceerosion, evolving standards, short product life cycles and wide fluctuations in product supply and demand. Any future downturns may result in diminishedproduct demand, production overcapacity, high inventory levels and accelerated erosion of average selling prices. Furthermore, any upturn in thesemiconductor industry could result in increased competition for access to third-party foundry and assembly capacity. We are dependent on the availabilityof this capacity to manufacture and assemble our all of our products. None of our third-party foundry or assembly contractors has provided assurances thatadequate capacity will be available to us in the future. A significant downturn or upturn could have a material adverse effect on our business and operatingresults.The use of open source software in our products, processes and technology may expose us to additional risks and harm our intellectual property.Our products, processes and technology sometimes utilize and incorporate software that is subject to an open source license. Open source software istypically freely accessible, usable and modifiable. Certain open source software licenses require a user who intends to distribute the open source software as acomponent of the user’s software to disclose publicly part or all of the source code to the user’s software. In addition, certain open source software licensesrequire the user of such software to make any derivative works of the open source code available to others on unfavorable terms or at no cost. This can subjectpreviously proprietary software to open source license terms.While we monitor the use of all open source software in our products, processes and technology and try to ensure that no open source software is usedin such a way as to require us to disclose the source code to the related product, processes or technology when we do not wish to do so, such use couldinadvertently occur. Additionally, if a third party software provider has incorporated certain types of open source software into software we license from suchthird party for our products, processes or technology, we could, under certain circumstances, be required to disclose the source code to our products,27Table of Contentsprocesses or technology. This could harm our intellectual property position and have a material adverse effect on our business, results of operations andfinancial condition.We rely on third parties to provide services and technology necessary for the operation of our business. Any failure of one or more of our partners,vendors, suppliers or licensors to provide these services or technology could have a material adverse effect on our business.We rely on third-party vendors to provide critical services, including, among other things, services related to accounting, billing, human resources,information technology, network development, network monitoring, in-licensing and intellectual property that we cannot or do not create or provideourselves. We depend on these vendors to ensure that our corporate infrastructure will consistently meet our business requirements. The ability of these third-party vendors to successfully provide reliable and high quality services is subject to technical and operational uncertainties that are beyond our control.While we may be entitled to damages if our vendors fail to perform under their agreements with us, our agreements with these vendors limit the amount ofdamages we may receive. In addition, we do not know whether we will be able to collect on any award of damages or that these damages would be sufficientto cover the actual costs we would incur as a result of any vendor’s failure to perform under its agreement with us. Any failure of our corporate infrastructurecould have a material adverse effect on our business, financial condition and results of operations. Upon expiration or termination of any of our agreementswith third-party vendors, we may not be able to replace the services provided to us in a timely manner or on terms and conditions, including service levelsand cost, that are favorable to us and a transition from one vendor to another vendor could subject us to operational delays and inefficiencies until thetransition is complete.Additionally, we incorporate third-party technology into and with some of our products, and we may do so in future products. The operation of ourproducts could be impaired if errors occur in the third-party technology we use. It may be more difficult for us to correct any errors in a timely manner if at allbecause the development and maintenance of the technology is not within our control. There can be no assurance that these third parties will continue tomake their technology, or improvements to the technology, available to us, or that they will continue to support and maintain their technology. Further, dueto the limited number of vendors of some types of technology, it may be difficult to obtain new licenses or replace existing technology. Any impairment ofthe technology or our relationship with these third parties could have a material adverse effect on our business.Unanticipated changes in our tax rates or unanticipated tax obligations could affect our future results.Since we operate in different countries and are subject to taxation in different jurisdictions, our future effective tax rates could be impacted by changesin such countries’ tax laws or their interpretations. Both domestic and international tax laws are subject to change as a result of changes in fiscal policy,changes in legislation, evolution of regulation and court rulings. The application of these tax laws and related regulations is subject to legal and factualinterpretation, judgment and uncertainty. We cannot determine whether any legislative proposals may be enacted into law or what, if any, changes may bemade to such proposals prior to their being enacted into law. If U.S. or international tax laws change in a manner that increases our tax obligation, it couldresult in a material adverse impact on our net income and our financial position. We adopted amendments to U.S. generally accepted accounting principlesrelated to stock-based compensation in the second quarter of 2016 and included excess tax benefits associated with employee stock-based compensation inincome tax expense, which reduced our income tax expense for the fiscal year 2016 by $8.3 million. However, since the amount of such excess tax benefitsand deficiencies depend on the fair market value of our common stock, our income tax provision is now subject to volatility in our stock price and in thefuture, could unfavorably affect our future effective tax rate.We are not currently under any tax examinations, but we are still subject to examination in various jurisdictions. In the event we are determined tohave any unaccrued tax obligation arising from future audits, our operating results would be adversely affected.Our future effective tax rate could be unfavorably affected by unanticipated changes in the valuation of our deferred tax assets and liabilities, and theultimate use and depletion of these various tax credits and net operating loss carryforwards. Changes in our effective tax rate could have a material adverseimpact on our results of operations. We record a valuation allowance to reduce our net deferred tax assets to the amount that we believe is more likely thannot to be realized. In assessing the need for a valuation allowance, we consider historical levels of income, expectations and risks associated with estimates offuture taxable income and ongoing prudent and practical tax planning strategies. On a periodic basis we evaluate our deferred tax asset balance forrealizability. To the extent we believe it is more likely than not that some portion of our deferred tax assets will not be realized, we will recognize a valuationallowance against the deferred tax asset. Realization of our deferred tax28Table of Contentsassets is dependent primarily upon future U.S. taxable income. Based upon our review of all positive and negative evidence, we concluded that a fullvaluation allowance should continue to be recorded against our U.S. and certain foreign net deferred tax assets at December 31, 2016. However, in the pastyear, we have generated significant taxable income. If we continue to generate taxable income, we could remove some or all of the valuation allowanceagainst federal, California and certain foreign deferred tax assets if we meet the more-likely-than-not threshold. The impact of releasing some or all of suchvaluation allowance will be material in the period in which such release occurs.Global economic conditions, including factors that adversely affect consumer spending for the products that incorporate our integrated circuits,could adversely affect our revenues, margins, and operating results.Our products are incorporated in numerous consumer devices, and demand for our products will ultimately be driven by consumer demand for productssuch as televisions, automobiles, cable modems, and set-top boxes. Many of these purchases are discretionary. Global economic volatility and economicvolatility in the specific markets in which the devices that incorporate our products are ultimately sold can cause extreme difficulties for our customers andthird-party vendors in accurately forecasting and planning future business activities. This unpredictability could cause our customers to reduce spending onour products, which would delay and lengthen sales cycles. Furthermore, during challenging economic times our customers may face challenges in gainingtimely access to sufficient credit, which could impact their ability to make timely payments to us. These events, together with economic volatility that mayface the broader economy and, in particular, the semiconductor and communications industries, may adversely affect, our business, particularly to the extentthat consumers decrease their discretionary spending for devices deploying our products.Our business, financial condition and results of operations could be adversely affected by the political and economic conditions of the countries inwhich we conduct business and other factors related to our international operations.We sell our products throughout the world. Products shipped to Asia accounted for 93% of our net revenue in the year ended December 31, 2016. Inaddition, approximately 43% of our employees are located outside of the United States. All of our products are manufactured, assembled and tested in Asia,and all of our major distributors are located in Asia. Multiple factors relating to our international operations and to particular countries in which we operatecould have a material adverse effect on our business, financial condition and results of operations. These factors include:•changes in political, regulatory, legal or economic conditions;•restrictive governmental actions, such as restrictions on the transfer or repatriation of funds and foreign investments and trade protectionmeasures, including export duties and quotas and customs duties and tariffs;•disruptions of capital and trading markets;•changes in import or export licensing requirements;•transportation delays;•civil disturbances or political instability;•geopolitical turmoil, including terrorism, war or political or military coups;•public health emergencies;•differing employment practices and labor standards;•limitations on our ability under local laws to protect our intellectual property;•local business and cultural factors that differ from our customary standards and practices;•nationalization and expropriation;•changes in tax laws;•currency fluctuations relating to our international operating activities; and•difficulty in obtaining distribution and support.29Table of ContentsIn addition to a significant portion of our wafer supply coming from Taiwan, Singapore, China and Malaysia, substantially all of our products undergopackaging and final testing in Taiwan, Singapore, China, South Korea, and the Philippines. Any conflict or uncertainty in these countries, including due tonatural disaster or public health or safety concerns, could have a material adverse effect on our business, financial condition and results of operations. Inaddition, if the government of any country in which our products are manufactured or sold sets technical standards for products manufactured in or importedinto their country that are not widely shared, it may lead some of our customers to suspend imports of their products into that country, require manufacturersin that country to manufacture products with different technical standards and disrupt cross-border manufacturing relationships which, in each case, couldhave a material adverse effect on our business, financial condition and results of operations. We also are subject to risks associated with internationalpolitical conflicts involving the U.S. government. For example, in 2008 we were instructed by the U.S. Department of Homeland Security to cease using PolarStar International Company Limited, a distributor based in Hong Kong, that delivered third-party products, to a political group that the U.S. government didnot believe should have been provided with the products in question. As a result, we immediately ceased all business operations with that distributor.Similarly, we ceased business operations with entities affiliated with ZTE Corp. when the Bureau of Industry and Security at the U.S. Department ofCommerce imposed an export licensing requirement, which was subsequently suspended through February 27, 2017. We cannot provide assurances thatsimilar disruptions in the future of distribution arrangements or the imposition of governmental prohibitions on selling our products to particular customerswill not adversely affect our revenues and operating results. Loss of a key distributor or customer under similar circumstances could have an adverse effect onour business, revenues and operating results.If we suffer losses to our facilities or distribution system due to catastrophe, our operations could be seriously harmed.Our facilities and distribution system, and those of our third-party contractors, are subject to risk of catastrophic loss due to fire, flood or other naturalor man-made disasters. A number of our facilities and those of our contract manufacturers are located in areas with above average seismic activity. Thefoundries that manufacture all of our wafers are located in Taiwan, Singapore, Malaysia, Southern California and China, and all of the third-party contractorswho assemble and test our products also are located in Asia. In addition, our headquarters are located in Southern California. The risk of an earthquake in thePacific Rim region or Southern California is significant due to the proximity of major earthquake fault lines. For example, in 2002 and 2003, majorearthquakes occurred in Taiwan. Any catastrophic loss to any of these facilities would likely disrupt our operations, delay production, shipments and revenueand result in significant expenses to repair or replace the facility.Our business is subject to various governmental regulations, and compliance with these regulations may cause us to incur significant expenses. If wefail to maintain compliance with applicable regulations, we may be forced to recall products and cease their manufacture and distribution, and we couldbe subject to civil or criminal penalties.Our business is subject to various international and U.S. laws and other legal requirements, including packaging, product content, labor, import/exportcontrol regulations, and the Foreign Corrupt Practices Act. These regulations are complex, change frequently and have generally become more stringent overtime. We may be required to incur significant costs to comply with these regulations or to remedy violations. Any failure by us to comply with applicablegovernment regulations could result in cessation of our operations or portions of our operations, product recalls or impositions of fines and restrictions on ourability to conduct our operations. In addition, because many of our products are regulated or sold into regulated industries, we must comply with additionalregulations in marketing our products.Our products and operations are also subject to the rules of industrial standards bodies, like the International Standards Organization, as well asregulation by other agencies, such as the U.S. Federal Communications Commission. If we fail to adequately address any of these rules or regulations, ourbusiness could be harmed.For example, the SEC adopted a final rule to implement Section 1502 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, whichrequires new disclosures concerning the use of conflict minerals, generally tantalum, tin, gold, or tungsten that originated in the Democratic Republic of theCongo or an adjoining country. These disclosures are required whether or not these products containing conflict minerals are manufactured by us or thirdparties. Verifying the source of any conflict minerals in our products has created and will continue to create additional costs in order to comply with the newdisclosure requirements and we may not be able to certify that the metals in our products are conflict free, which may create issues with our customers. Inaddition, the new rule may affect the pricing, sourcing and availability of minerals used in the manufacture of our products.We must conform the manufacture and distribution of our semiconductors to various laws and adapt to regulatory requirements in all countries as theserequirements change. If we fail to comply with these requirements in the manufacture or30Table of Contentsdistribution of our products, we could be required to pay civil penalties, face criminal prosecution and, in some cases, be prohibited from distributing ourproducts in commerce until the products or component substances are brought into compliance.We may be subject to information technology failures, including data protection breaches and cyber-attacks, that could disrupt our operations,damage our reputation and adversely affect our business, operations, and financial results.We rely on our information technology systems for the effective operation of our business and for the secure maintenance and storage of confidentialdata relating to our business and third party businesses. Although we have implemented security controls to protect our information technology systems,experienced programmers or hackers may be able to penetrate our security controls, and develop and deploy viruses, worms and other malicious softwareprograms that compromise our confidential information or that of third parties and cause a disruption or failure of our information technology systems. Anysuch compromise of our information technology systems could result in the unauthorized publication of our confidential business or proprietary information,result in the unauthorized release of customer, supplier or employee data, result in a violation of privacy or other laws, expose us to a risk of litigation, ordamage our reputation. The cost and operational consequences of implementing further data protection measures either as a response to specific breaches oras a result of evolving risks, could be significant. In addition, our inability to use or access our information systems at critical points in time could adverselyaffect the timely and efficient operation of our business. Any delayed sales, significant costs or lost customers resulting from these technology failures couldadversely affect our business, operations and financial results.Third parties with which we conduct business, such as foundries, assembly and test contractors, and distributors, have access to certain portions of oursensitive data. In the event that these third parties do not properly safeguard our data that they hold, security breaches could result and negatively impact ourbusiness, operations and financial results.Investor confidence may be adversely impacted if we are unable to comply with Section 404 of the Sarbanes-Oxley Act of 2002, and as a result, ourstock price could decline.We are subject to rules adopted by the Securities Exchange Commission, or SEC, pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, orSarbanes-Oxley Act, which require us to include in our Annual Report on Form 10-K our management’s report on, and assessment of the effectiveness of, ourinternal controls over financial reporting.If we fail to maintain the adequacy of our internal controls, there is a risk that we will not comply with all of the requirements imposed by Section 404.Moreover, effective internal controls, particularly those related to revenue recognition, are necessary for us to produce reliable financial reports and areimportant to helping prevent financial fraud. Any of these possible outcomes could result in an adverse reaction in the financial marketplace due to a loss ofinvestor confidence in the reliability of our consolidated financial statements and could result in investigations or sanctions by the SEC, the New York StockExchange, or NYSE, or other regulatory authorities or in stockholder litigation. Any of these factors ultimately could harm our business and could negativelyimpact the market price of our securities. Ineffective control over financial reporting could also cause investors to lose confidence in our reported financialinformation, which could adversely affect the trading price of our common stock.Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their objectives. However, our management,including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures will prevent all error andall fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of thecontrol system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must beconsidered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that allcontrol issues and instances of fraud, if any, have been detected.Our products must conform to industry standards in order to be accepted by end users in our markets.Generally, our products comprise only a part of a communications device. All components of these devices must uniformly comply with industrystandards in order to operate efficiently together. We depend on companies that provide other components of the devices to support prevailing industrystandards. Many of these companies are significantly larger and more influential in driving industry standards than we are. Some industry standards may notbe widely adopted or implemented uniformly, and competing standards may emerge that may be preferred by our customers or end users. If larger companiesdo not support the same industry standards that we do, or if competing standards emerge, market acceptance of our products could be adversely affected,which would harm our business.31Table of ContentsProducts for communications applications are based on industry standards that are continually evolving. Our ability to compete in the future willdepend on our ability to identify and ensure compliance with these evolving industry standards. The emergence of new industry standards could render ourproducts incompatible with products developed by other suppliers. As a result, we could be required to invest significant time and effort and to incursignificant expense to redesign our products to ensure compliance with relevant standards. If our products are not in compliance with prevailing industrystandards for a significant period of time, we could miss opportunities to achieve crucial design wins. We may not be successful in developing or using newtechnologies or in developing new products or product enhancements that achieve market acceptance. Our pursuit of necessary technological advances mayrequire substantial time and expense.Risks Relating to Our Common StockThe dual class structure of our common stock as contained in our charter documents will have the effect of allowing our founders, executive officers,employees and directors and their affiliates to limit your ability to influence corporate matters that you may consider unfavorable.We sold Class A common stock in our initial public offering. Our founders, executive officers, directors and their affiliates and employees hold sharesof our Class B common stock, which is not publicly traded. Until March 29, 2017, the dual class structure of our common stock will have the followingeffects with respect to the holders of our Class A common stock:•allows the holders of our Class B common stock to have the sole right to elect two management directors to the Board of Directors;•with respect to change of control matters, allows the holders of our Class B common stock to have ten votes per share compared to the holders ofour Class A common stock who will have one vote per share on these matters; and•with respect to the adoption of or amendments to our equity incentive plans, allows the holders of our Class B common stock to have ten votesper share compared to the holders of our Class A common stock who will have one vote per share on these matters, subject to certain limitations.Thus, our dual class structure will limit your ability to influence corporate matters, including with respect to transactions involving a change ofcontrol, and, as a result, we may take actions that our stockholders do not view as beneficial, which may adversely affect the market price of our Class Acommon stock. In addition to the additional voting rights granted to holders of our Class B common stock, which is held principally by certain of ourexecutive officers and founders, we have entered change of control agreements with our executive officers, which could have an adverse effect on a thirdparty’s willingness to consider acquiring us, either because it may be more difficult to retain key employees with change of control benefits or because of theincremental cost associated with these benefits.The concentration of our capital stock ownership with our founders will limit your ability to influence corporate matters and their interests maydiffer from other stockholders.As of December 31, 2016, our founders who are existing employees of MaxLinear, including our Chairman, President and Chief Executive Officer,Dr. Seendripu, together control approximately 10% of our outstanding capital stock. Until the elimination of our dual class stock on March 29, 2017, thiswill represent approximately 48% of the voting power of our outstanding capital stock with respect to change of control matters and the adoption of oramendment to our equity incentive plans. Dr. Seendripu and the other founders therefore have significant influence over our management and affairs and overall matters requiring stockholder approval, including the election of two Class B directors and significant corporate transactions, such as a merger or othersale of MaxLinear or its assets.Our management team may use our available cash, cash equivalents, and liquid investment assets in ways with which you may not agree or in wayswhich may not yield a return.We use our cash, cash equivalents, and liquid investment assets for general corporate purposes, including working capital. We may also use a portionof these assets to acquire complementary businesses, products, services or technologies. Our management has considerable discretion in the application ofour cash, cash equivalents, and investment resources, and you will not have the opportunity to assess whether these liquid assets are being used in a mannerthat you deem best to maximize your return. We may use our available resources for corporate purposes that do not increase our operating results or marketvalue. In addition, our cash, cash equivalents, and liquid investment resources may be placed in investments that do not produce significant income or thatmay lose value.32Table of ContentsAnti-takeover provisions in our charter documents and under Delaware law could make an acquisition of us more difficult, limit attempts by ourstockholders to replace or remove our current management and limit the market price of our common stock.Provisions in our certificate of incorporation and bylaws, as amended and restated, may have the effect of delaying or preventing a change of control orchanges in our management. These provisions provide for the following:•authorize our Board of Directors to issue, without further action by the stockholders, up to 25,000,000 shares of undesignated preferred stock;•require that any action to be taken by our stockholders be effected at a duly called annual or special meeting and not by written consent;•specify that special meetings of our stockholders can be called only by our Board of Directors, our Chairman of the Board of Directors, ourPresident or by unanimous written consent of our directors appointed by the holders of Class B common stock (until the Class B common stockis eliminated);•establish an advance notice procedure for stockholder approvals to be brought before an annual meeting of our stockholders, includingproposed nominations of persons for election to our Board of Directors;•establish that our Board of Directors is divided into three classes, Class I, Class II and Class III, with each class serving staggered terms;•provide for a dual class common stock structure until March 29, 2017, which provides our founders, current investors, executives andemployees with significant influence over all matters requiring stockholder approval, including the election of directors and significantcorporate transactions, such as a merger or other sale of our Company or its assets;•provide that our directors may be removed only for cause;•provide that vacancies on our Board of Directors may be filled only by a majority of directors then in office, even though less than a quorum;•specify that no stockholder is permitted to cumulate votes at any election of directors; and•require supermajority votes of the holders of our common stock to amend specified provisions of our charter documents.These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficultfor stockholders to replace members of our Board of Directors, which is responsible for appointing the members of our management. In addition, because weare incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits aDelaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years followingthe date on which the stockholder became an “interested” stockholder.Our share price may be volatile as a result of limited trading volume and other factors.Our shares of Class A common stock began trading on the New York Stock Exchange in March 2010. An active public market for our shares on theNew York Stock Exchange may not be sustained. In particular, limited trading volumes and liquidity may limit the ability of stockholders to purchase or sellour common stock in the amounts and at the times they wish. Trading volume in our common stock tends to be modest relative to our total outstandingshares, and the price of our common stock may fluctuate substantially (particularly in percentage terms) without regard to news about us or general trends inthe stock market. An inactive market may also impair our ability to raise capital to continue to fund operations by selling shares and may impair our ability toacquire other companies or technologies by using our shares as consideration.In addition, the trading price of our common stock could become highly volatile and could be subject to wide fluctuations in response to variousfactors, some of which are beyond our control. These factors include those discussed in this “Risk Factors” section of this Annual Report on Form 10-K andothers such as:•actual or anticipated fluctuations in our financial condition and operating results;33Table of Contents•overall conditions in the semiconductor market;•addition or loss of significant customers;•changes in laws or regulations applicable to our products;•actual or anticipated changes in our growth rate relative to our competitors;•announcements of technological innovations by us or our competitors;•announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;•additions or departures of key personnel;•competition from existing products or new products that may emerge;•issuance of new or updated research or reports by securities analysts;•fluctuations in the valuation of companies perceived by investors to be comparable to us;•disputes or other developments related to proprietary rights, including patents, litigation matters and our ability to obtain intellectual propertyprotection for our technologies;•the recently completed acquisition of Entropic and the wireless infrastructure access and backhaul businesses may not be accretive and maycause dilution to our earnings per shares;•announcement or expectation of additional financing efforts;•sales of our common stock by us or our stockholders;•share price and volume fluctuations attributable to inconsistent trading volume levels of our shares; and•general economic and market conditions.Furthermore, the stock markets recently have experienced extreme price and volume fluctuations that have affected and continue to affect the marketprices of equity securities of many companies. These fluctuations often have been unrelated or disproportionate to the operating performance of thosecompanies. These broad market and industry fluctuations, as well as general economic, political and market conditions such as recessions, interest ratechanges or international currency fluctuations, may negatively impact the market price of our common stock. In the past, companies that have experiencedvolatility in the market price of their stock have been subject to securities class action litigation. We may be the target of this type of litigation in the future.Securities litigation against us could result in substantial costs and divert our management’s attention from other business concerns, which could seriouslyharm our business.If securities or industry analysts do not publish research or reports about our business, or publish negative reports about our business, especially dueto our dual-class voting structure, our share price and trading volume could decline.The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us or ourbusiness, especially with respect to our unique dual-class voting structure as to the election of directors, change of control matters and matters related to ourequity incentive plans. We do not have any control over these analysts. If one or more of the analysts who cover us downgrade our shares or change theiropinion of our shares, our share price would likely decline. If one or more of these analysts cease coverage of our Company or fail to regularly publish reportson us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.Future sales of our common stock in the public market could cause our share price to decline.Sales of a substantial number of shares of our common stock in the public market, or the perception that these sales might occur, could depress themarket price of our common stock and could impair our ability to raise capital through the sale of additional equity securities. As of December 31, 2016, wehad 58.4 million shares of Class A common stock and 6.7 million shares of Class B common stock outstanding. On March 29, 2017, the then outstandingClass A and Class B common stock will convert on a one-for-one basis into a single class of common stock.34Table of ContentsAll shares of common stock are freely tradable without restrictions or further registration under the Securities Act of 1933, as amended, or the SecuritiesAct, except for any shares held by our affiliates as defined in Rule 144 under the Securities Act.We have filed registration statements on Form S-8 under the Securities Act to register 22.1 million shares of our common stock for issuance under our2010 Equity Incentive Plan and 2010 Employee Stock Purchase Plan in addition to 3.2 million awards that were assumed and remain outstanding inconnection with the Entropic acquisition. These shares may be freely sold in the public market upon issuance and once vested, subject to other restrictionsprovided under the terms of the applicable plan and/or the option agreements entered into with option holder.Our Executive Incentive Bonus Plan permits the settlement of awards under the plan in the form of shares of its common stock. We issued 0.2 millionshares of our common stock for the 2014 performance period upon settlement of the bonus awards on May 14, 2015. We issued 0.3 million shares of ourcommon stock for the January 1, 2015 to June 30, 2015 performance period upon settlement of the bonus awards on August 20, 2015. We issued 0.2 millionshares of our common stock for the July 1, 2015 to December 31, 2015 performance period on May 13, 2016. We issued 0.2 million shares of our commonstock for the January 1, 2016 to June 30, 2016 performance period on August 12, 2016. We expect to issue additional shares of common stock for second halfof 2016 fiscal performance period in February 2017. These shares may be freely sold in the public market immediately following the issuance of such sharesand the issuance of such shares may have an adverse effect on our share price once they are issued.We do not intend to pay dividends for the foreseeable future.We have never declared or paid any cash dividends on our common stock and do not intend to pay any cash dividends in the foreseeable future. Weanticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination topay dividends in the future will be at the discretion of our Board of Directors. Accordingly, investors must rely on sales of their common stock after priceappreciation, which may never occur, as the only way to realize any future gains on their investments.Risks Relating to Our Recent AcquisitionsActual financial and operating results could differ materially from any expectations or guidance provided by us concerning future results, including(without limitation) expectations or guidance with respect to the financial impact of any cost savings and other potential synergies resulting from ourrecent acquisitions.We currently expect to continue realizing material cost savings and other synergies as a result of recent acquisitions, and as a result, we currentlybelieve that these acquisitions will continue to be accretive to our earnings per share, excluding upfront non-recurring charges, transaction related expenses,and the amortization of purchased intangible assets. The expectations and guidance we have provided with respect to the potential financial impact of theacquisitions are subject to numerous assumptions, however, including assumptions derived from our diligence efforts concerning the status of and prospectsfor the acquired businesses, and assumptions relating to the near-term prospects for the semiconductor industry generally and the markets for the legacyacquired products in particular. Additional assumptions we have made relate to numerous matters, including (without limitation) the following:•projections of future revenues in the legacy acquired businesses;•the anticipated financial performance of legacy acquired products and products currently in development;•anticipated cost savings and other synergies associated with the acquisitions, including potential revenue synergies;•the amount of goodwill and intangibles that will result from the acquisitions;•certain other purchase accounting adjustments that we have recorded in our financial statements in connection with the acquisitions;•acquisition costs, including restructuring charges and transactions costs payable to our financial, legal, and accounting advisors; and•our ability to maintain, develop, and deepen relationships with customers of the legacy acquired businesses.35Table of ContentsWe cannot provide any assurances with respect to the accuracy of our assumptions, including our assumptions with respect to future revenues orrevenue growth rates, if any, of the legacy acquired businesses, and we cannot provide assurances with respect to our ability to realize further cost savings.Risks and uncertainties that could cause our actual results to differ materially from currently anticipated results include, but are not limited to, risks relatingto our ability to integrate the legacy acquired businesses successfully; currently unanticipated additional incremental costs that we may incur in connectionwith integrating the acquired companies; risks relating to our ability to continue to realize incremental revenues from the acquisitions in the amounts that wecurrently anticipate; risks relating to the willingness of legacy acquired customers and other partners to continue to conduct business with MaxLinear; andnumerous risks and uncertainties that affect the semiconductor industry generally and the markets for our products and those of the legacy acquiredbusinesses specifically. Any failure to integrate the legacy acquired businesses successfully and to continue to realize the financial benefits we currentlyanticipate from the acquisitions would have a material adverse impact on our future operating results and financial condition and could materially andadversely affect the trading price or trading volume of our common stock.Failure to integrate our business and operations successfully with those of acquired businesses in the expected time-frame or otherwise mayadversely affect our operating results and financial condition.Our history of acquiring businesses is recent, and prior to our acquisition of Entropic, we had never pursued an acquisition of that size and complexity.We may complete larger-scale acquisitions in the future. The success of our recent and future acquisitions depends, in substantial part, on our ability tointegrate acquired businesses and operations efficiently and successfully with those of MaxLinear and to realize fully the anticipated benefits and potentialsynergies from combining our companies, including, among others, cost savings from eliminating duplicative functions; operational efficiencies in ourrespective supply chains and in research and development investments; and revenue growth resulting from the addition of acquired product portfolios. If weare unable to achieve these objectives, the anticipated benefits and potential synergies from the acquisitions may not be realized fully, or may take longer torealize than expected. Any failure to timely realize these anticipated benefits would have a material adverse effect on our business, operating results, andfinancial condition.We completed our recent acquisitions in April 2015, April 2016 and July 2016. We believe the integration process is substantially complete for our2015 acquisition of Entropic and our 2016 wireless infrastructure business acquisitions. We have incurred material restructuring costs in recent periods, someof which included employees from acquired businesses. To the extent we acquire additional businesses in the future, we cannot ensure that integrationobjectives will not adversely affect our operating results. In connection with the integration process, we could experience the loss of key customers, decreasesin revenues relative to current expectations and increases in operating costs, as well as the disruption of our ongoing businesses, any or all of which couldlimit our ability to achieve the anticipated benefits and potential synergies from the acquisitions and have a material adverse effect on our business,operating results, and financial condition.Our business relationships, including customer relationships, and those of our acquired businesses may be subject to disruption due to uncertaintyassociated with the acquisitions.In response to the completion of our recent acquisitions, customers, vendors, licensors, and other third parties with whom we do business or theacquired entities did business or otherwise have relationships may experience uncertainty associated with the acquisitions, and this uncertainty couldmaterially affect their decisions with respect to existing or future business relationships with us. Moreover, with respect to Entropic’s prior acquisition ofcertain television and set-top box assets from Trident Microsystems, Inc., or Trident, we were unable to conduct substantial diligence with respect to certainlicenses and intellectual property rights because Entropic acquired these assets through Trident’s bankruptcy proceedings. As a result, we are in manyinstances unable to evaluate the impact of the acquisition on certain assumed contract rights and obligations, including intellectual property rights.These business relationships may be subject to disruption as customers and others may elect to delay or defer purchase or design-win decisions orswitch to other suppliers due to the uncertainty about the direction of our offerings, any perceived unwillingness on our part to support existing legacyacquired products, or any general perceptions by customers or other third parties that impute operational or business challenges to us arising from theacquisitions. In addition, customers or other third parties may attempt to negotiate changes in existing business relationships, which may result in additionalobligations imposed on us. These disruptions could have a material adverse effect on our business, operating results, and financial condition. Any loss ofcustomers, customer products, design win opportunities, or other important strategic relationships could have a material adverse effect on our business,operating results, and financial condition and could have a material and adverse effect on the trading price or trading volume of our common stock.36Table of ContentsWe have incurred and expect to continue to incur substantial expenses related to the operational integration of our recent acquisitions.We have incurred and expect to continue to incur substantial expenses in connection with integrating the operations, technologies, and businesssystems of MaxLinear and acquired businesses. Business systems integration between the companies requires, and we expect it to continue to require into theforeseeable future, substantial management attention, including integration of information management, purchasing, accounting and finance, sales, andregulatory compliance functions. Numerous factors, many of which, are beyond our control, could affect the total cost or the timing of expected integrationexpenses. Moreover, many of the expenses that will be incurred are by their nature difficult to estimate accurately at the present time. These expenses couldreduce the savings that we expect to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings relatedto the integration of the businesses. These integration expenses have resulted in MaxLinear’s taking significant charges against earnings following thecompletion of the acquisitions.We have recorded goodwill that could become impaired and adversely affect our future operating results.The acquisitions of Entropic, the wireless infrastructure access business of Microsemi, and the wireless infrastructure backhaul business of Broadcomare accounted for under the acquisition method of accounting by MaxLinear in accordance with accounting principles generally accepted in the UnitedStates. Under the acquisition method of accounting, the assets and liabilities of acquired businesses are recorded, as of completion, at their respective fairvalues and added to our assets and liabilities. Our reported financial condition and results of operations after completion of the acquisition reflect acquiredbusinesses' balances and results but are not restated retroactively to reflect the historical financial position or results of operations of acquired businesses forperiods prior to the acquisition. As a result, comparisons of future results against prior period results will be more difficult for investors.Under the acquisition method of accounting, the total purchase price is allocated to tangible assets and liabilities and identifiable intangible assets ofacquired businesses based on their fair values as of the date of completion of the acquisition. The excess of the purchase price over those fair values isrecorded as goodwill. The acquisitions have resulted in the creation of goodwill based upon the application of the acquisition method of accounting. To theextent the value of goodwill or intangibles becomes impaired, we may be required to incur material charges relating to such impairment. We conduct ourannual goodwill impairment analysis on October 31 each year, or more frequently if we believe indicators of impairment exist. In addition, there can be noguarantee that acquired intangible assets, particularly in-process research and development, will generate revenues or profits that we include in our forecastthat is the basis for their fair values as of the acquisition date. Any such impairment charges relating to goodwill or other intangible assets could have amaterial impact on our operating results in future periods, and the announcement of a material impairment could have an adverse effect on the trading priceand trading volume of our common stock. For example, in the year ended December 31, 2016, we recognized IPR&D impairment losses of $1.3 millionrelated principally to acquired wireless infrastructure access assets, and in the year ended December 31, 2015, we recognized IPR&D impairment losses of$21.6 million related principally to acquired Entropic assets. As of December 31, 2016, our balance sheet reflected goodwill of $76.0 million and otherintangible assets of $104.3 million, including IPR&D intangible assets of $22.4 million, and we could recognize impairment charges in the future.ITEM 1B.UNRESOLVED STAFF COMMENTSNone.ITEM 2.PROPERTIESOur corporate headquarters occupy approximately 68,000 square feet in Carlsbad, California under a lease that expires in June 2022. A full range ofbusiness and engineering functions are represented at our corporate headquarters, including a laboratory for research and development and manufacturingoperations. In addition to our principal office spaces in Carlsbad, we have leased facilities in Irvine, California; Bangalore, India; Singapore; Taiwan;Shenzhen, China; Burnaby, Canada; and in Herzliya, Israel. 37Table of ContentsITEM 3.LEGAL PROCEEDINGSCrestaTech LitigationOn January 21, 2014, CrestaTech Technology Corporation, or CrestaTech, filed a complaint for patent infringement against us in the United StatesDistrict Court of Delaware, or the District Court Litigation. In its complaint, CrestaTech alleges that we infringe U.S. Patent Nos. 7,075,585, or the '585 Patentand 7,265,792, or the '792 Patent. In addition to asking for compensatory damages, CrestaTech alleges willful infringement and seeks a permanentinjunction. CrestaTech also names Sharp Corporation, Sharp Electronics Corp. and VIZIO, Inc. as defendants based upon their alleged use of our televisiontuners.On January 28, 2014, CrestaTech filed a complaint with the U.S. International Trade Commission, or ITC, again naming, among others, us, Sharp,Sharp Electronics, and VIZIO, or the ITC Investigation. On May 16, 2014, the ITC granted CrestaTech’s motion to file an amended complaint adding sixOEM Respondents, namely, SIO International, Inc., Hon Hai Precision Industry Co., Ltd., Wistron Corp., Wistron Infocomm Technology (America) Corp., TopVictory Investments Ltd. and TPV International (USA), Inc. which are collectively referred to with us, Sharp and VIZIO as the Company Respondents.CrestaTech’s ITC complaint alleged a violation of 19 U.S.C. § 1337 through the importation into the United States, the sale for importation, or the sale withinthe United States after importation of MaxLinear’s accused products that CrestaTech alleged infringe the same two patents asserted in the Delaware action.Through its ITC complaint, CrestaTech sought an exclusion order preventing entry into the United States of certain of our television tuners and televisionscontaining such tuners from Sharp, Sharp Electronics, and VIZIO. CrestaTech also sought a cease and desist order prohibiting the Company Respondentsfrom engaging in the importation into, sale for importation into, the sale after importation of, or otherwise transferring within the United States certain of ourtelevision tuners or televisions containing such tuners.On March 10, 2014, the court stayed the District Court Litigation pending resolution of the ITC Investigation.On December 15, 2014, the ITC held a trial in the ITC Investigation. On February 27, 2015, the Administrative Law Judge, or the ALJ, issued a writtenInitial Determination, or ID, ruling that the Company Respondents do not violate Section 1337 in connection with CrestaTech’s asserted patents becauseCrestaTech failed to satisfy the economic prong of the domestic industry requirement pursuant to Section 1337(a)(2). In addition, the ID stated that certain ofour television tuners and televisions incorporating those tuners manufactured and sold by certain customers infringe three claims of the ‘585 Patent, andthese three claims were not determined to be invalid. On April 30, 2015, the ITC issued a notice indicating that it intended to review portions of the IDfinding no violation of Section 1337, including the ID’s findings of infringement with respect to, and validity of, the ‘585 Patent, and the ID’s finding thatCrestaTech failed to establish the existence of a domestic industry within the meaning of Section 1337.The ITC has subsequently issued its opinion, which terminated its investigation. The opinion affirmed the findings of the ALJ that no violation ofSection 1337 had occurred because CrestaTech had failed to establish the economic prong of the domestic industry requirement. The ITC also affirmed theALJ's finding of infringement with respect to the three claims of the '585 Patent that were not held to be invalid.On November 30, 2015, CrestaTech filed an appeal of the ITC decision with the United States Court of Appeals for the Federal Circuit, or the FederalCircuit. On March 7, 2016, CrestaTech voluntarily dismissed its appeal, resulting in a final determination of the ITC Investigation in our favor.In addition, we have filed four petitions for inter partes review, or IPR, by the US Patent Office, two for each of the CrestaTech patents asserted againstus. The Patent Trial and Appeal Board, or the PTAB, did not institute two of these IPRs as being redundant to IPRs filed by another party that were alreadyunderway for the same CrestaTech patent. The remaining two petitions were instituted or instituted-in-part and, together with the IPRs filed by third parties,there are currently six pending IPR proceedings involving the two CrestaTech patents asserted against us. In October 2015, the PTAB issued final decisions in two of the six pending IPR proceedings (one for each of the two asserted patents), holding that allof the reviewed claims are unpatentable. Included in these decisions was one of the three claims of the ‘585 Patent mentioned above in connection with theITC’s final decision. CrestaTech appealed the PTAB’s decisions at the Federal Circuit. On November 8, 2016, the Federal Circuit issued an opinion affirmingthe PTAB’s finding of unpatentability.In August 2016, the PTAB issued final written decisions in the remaining four pending IPR proceedings (two for each of the asserted patents), holdingthat many of the reviewed claims - including the two remaining claims of the ‘585 Patent which the ITC held were infringed - are unpatentable. As a result ofthese IPR decisions, all 13 claims that CrestaTech asserted against us in the ITC Investigation have been found to be unpatentable by the PTAB. The partieshave filed notices to appeal the two38Table of Contentsdecisions related to the ‘585 Patent. Opening briefs are currently due in late January - early February 2017. CrestaTech, however, did not appeal the PTAB’srulings related to the ‘792 Patent.On March 18, 2016, CrestaTech filed a petition for Chapter 7 bankruptcy in the Northern District of California. As a result of this proceeding, all rightsin the CrestaTech asserted patents, including the right to control the pending litigation, were assigned to CF Crespe LLC, or CF Crespe. CF Crespe is now thenamed party in the pending IPRs, the Federal Circuit appeal and District Court Litigation. CF Crespe has not sought to lift the stay in the District CourtLitigation given the resolution of the ITC Investigation.We cannot predict the outcome of any appeal by CF Crespe, CrestaTech, the District Court Litigation, or the IPRs. Any adverse determination in theDistrict Court Litigation could have a material adverse effect on our business and operating results.Trango Systems, Inc. LitigationOn or about August 2, 2016, Trango Systems, Inc., or Trango, filed a complaint in the Superior Court of California, County of San Diego, CentralDivision, against defendants Broadcom Corporation, Inc., or Broadcom, and us, collectively, Defendants. On or about December 6, 2016, Trango filed itssecond amended complaint. Trango is a purchaser that alleges various fraud, breach of contract, and interference with economic relations claims inconnection with the discontinuance of a chip line we recently acquired from Broadcom. Trango seeks unspecified general and special damages, pre-judgmentinterest, expenses and costs, statutory penalties, attorneys’ fees, punitive damages, and unspecified injunctive and equitable relief. We intend to vigorouslydefend against the lawsuit. On January 11, 2017, we filed our demurrer to each cause of action in the second amended complaint.We cannot predict the outcome of the Trango Systems, Inc. litigation. Any adverse determination in the Trango Systems, Inc. litigation could have amaterial adverse effect on our business and operating results.Other MattersIn addition, from time to time, we are subject to threats of litigation or actual litigation in the ordinary course of business, some of which may bematerial. Other than the CrestaTech and Trango litigation described above, we believe that there are no other currently pending litigation matters that, ifdetermined adversely by us, would have a material effect on our business or that would not be covered by our existing liability insurance.ITEM 4.MINE SAFETY DISCLOSURESNot applicable.39Table of ContentsPART II — FINANCIAL INFORMATIONITEM 5.MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OFEQUITY SECURITIESMarket Information and HoldersIn March 2010, we completed the initial public offering of our Class A common stock. Our Class A common stock is traded on the New York StockExchange, or the NYSE, under the symbol MXL. The following table sets forth, for the periods indicated, the high and low sale prices for our Class Acommon stock as reported by the NYSE: Year Ended December 31, 2016 High LowFirst Quarter (January 1, 2016 to March 31, 2016)$18.62 $13.49Second Quarter (April 1, 2016 to June 30, 2016)$20.91 $15.86Third Quarter (July 1, 2016 to September 30, 2016)$22.36 $17.30Fourth Quarter (October 1, 2016 to December 31, 2016)$22.70 $18.37 Year Ended December 31, 2015 High LowFirst Quarter (January 1, 2015 to March 31, 2015)$9.21 $7.15Second Quarter (April 1, 2015 to June 30, 2015)$13.33 $8.06Third Quarter (July 1, 2015 to September 30, 2015)$12.96 $9.00Fourth Quarter (October 1, 2015 to December 31, 2015)$17.75 $11.76On December 31, 2016, the last reported sales price of our common stock was $21.80 and, according to our transfer agent, as of February 2, 2017, therewere 53 record holders of our Class A common stock and 48 record holders of our Class B common stock. We believe we have approximately 25,000beneficial holders of our Class A common stock.Our Class B common stock is not publicly traded. Each share of Class B common stock is convertible at any time at the option of the holder into oneshare of Class A common stock and in most instances automatically converts upon sale or other transfer. In addition, on March 29, 2017, our Class A andClass B common stock will be converted on a one-for-one basis into a single class of common stock.Dividend PolicyWe have never declared or paid cash dividends on our common stock. We currently intend to retain all available funds and any future earnings for usein the operation of our business and do not anticipate paying any dividends on our common stock in the foreseeable future. Any future determination todeclare dividends will be made at the discretion of our Board of Directors and will depend on our financial condition, operating results, capital requirements,general business conditions and other factors that our Board of Directors may deem relevant.Stock Performance GraphNotwithstanding any statement to the contrary in any of our previous or future filings with the SEC, the following information relating to the priceperformance of our common stock shall not be deemed “filed” with the SEC or “Soliciting Material” under the Exchange Act, or subject to Regulation 14Aor 14C, or to liabilities of Section 18 of the Exchange Act except to the extent we specifically request that such information be treated as soliciting materialor to the extent we specifically incorporate this information by reference.The graph below compares the cumulative total stockholder return on our Class A common stock with the cumulative total return on The NYSEComposite Index and The Philadelphia Semiconductor Index. The period shown commences on December 31, 2011 and ends on December 31, 2016, the endof our last fiscal year. The graph assumes an investment of $100 on December 31, 2011, and the reinvestment of any dividends.40Table of ContentsThe comparisons in the graph below are required by the Securities and Exchange Commission and are not intended to forecast or be indicative ofpossible future performance of our common stock.Recent Sales of Unregistered SecuritiesIn the year ended December 31, 2016, we issued an aggregate of 0.2 million shares of our Class B common stock to certain employees upon theexercise of options awarded under our 2004 Stock Plan. We received aggregate proceeds of approximately $0.4 million in the year ended December 31, 2016as a result of the exercise of these options. We believe these transactions were exempt from the registration requirements of the Securities Act in reliance onRule 701 thereunder as transactions pursuant to compensatory benefit plans and contracts relating to compensation as provided under Rule 701. As ofDecember 31, 2016, options to purchase an aggregate of 1.2 million shares of our Class B common stock remain outstanding. All issuances of shares of ourClass B common stock pursuant to the exercise of these options will be made in reliance on Rule 701. All option grants made under the 2004 Stock Plan weremade prior to the effectiveness of our initial public offering. No further option grants will be made under our 2004 Stock Plan.None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering.Each share of our Class B common stock is convertible at any time at the option of the holder into one share of our Class A common stock. In addition,each share of our Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value,except for certain transfers described in our certificate of incorporation.41Table of ContentsITEM 6.SELECTED FINANCIAL DATAWe have derived the selected consolidated statement of operations data for the years ended December 31, 2016, 2015 and 2014 and selectedconsolidated balance sheet data as of December 31, 2016 and 2015 from our consolidated financial statements and related Notes included elsewhere in thisreport. We have derived the consolidated statement of operations data for the years ended December 31, 2013 and 2012 and the consolidated balance sheetdata as of December 31, 2014, 2013 and 2012 from our consolidated financial statements not included in this report. Our historical results are not necessarilyindicative of the results to be expected for any future period. The following selected consolidated financial data should be read in conjunction with“Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notesincluded elsewhere in this report. Years Ended December 31, 2016 2015 2014 2013 2012 (in thousands, except per share amounts)Consolidated Statement of Operations Data: Net revenue$387,832 $300,360 $133,112 $119,646 $97,728Cost of net revenue157,842 144,937 51,154 46,683 37,082Gross profit229,990 155,423 81,958 72,963 60,646Operating expenses: Research and development97,745 85,405 56,625 53,132 46,458Selling, general and administrative64,454 77,981 34,191 32,181 27,254IPR&D impairment losses1,300 21,600 — — —Restructuring charges3,432 14,086 — — —Total operating expenses166,931 199,072 90,816 85,313 73,712Income (loss) from operations63,059 (43,649) (8,858) (12,350) (13,066)Interest income572 275 236 222 282Other income (expense), net59 468 (123) (203) (127)Income (loss) before income taxes63,690 (42,906) (8,745) (12,331) (12,911)Provision (benefit) for income taxes2,398 (575) (1,704) 402 341Net income (loss)$61,292 $(42,331) $(7,041) $(12,733) $(13,252)Net income (loss) per share: Basic$0.96 $(0.79) $(0.19) $(0.37) $(0.40)Diluted$0.91 $(0.79) $(0.19) $(0.37) $(0.40)Shares used to compute net income (loss) per share: Basic63,781 53,378 36,472 34,012 33,198Diluted67,653 53,378 36,472 34,012 33,198 As of December 31, 2016 2015 2014 2013 2012 (in thousands)Consolidated Balance Sheet Data: Cash, cash equivalents and short- and long-term investments, available-for-sale$136,805 $130,498 $79,351 $86,354 $77,256Working capital159,500 134,170 67,668 56,558 68,450Total assets422,652 334,505 135,711 124,929 110,597Total stockholders’ equity352,424 262,924 99,102 86,674 80,23342Table of ContentsITEM 7.MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSForward-Looking StatementsThe following discussion and analysis of the financial condition and results of our operations should be read in conjunction with the consolidatedfinancial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements that involve risks anduncertainties. Our actual results could differ materially from those discussed below. Factors that could cause or contribute to such differences include, butare not limited to, those identified below, and those discussed in the section titled “Risk Factors” included elsewhere in this report.OverviewWe are a provider of radio frequency, or RF, and mixed-signal integrated circuits for cable and satellite broadband communications and the connectedhome, and wired and wireless infrastructure markets. Our high performance RF receiver products capture and process digital and analog broadband signals tobe decoded for various applications. These products include both RF receivers and RF receiver systems-on-chip, or SoCs, which incorporate our highlyintegrated radio system architecture and the functionality necessary to receive and demodulate broadband signals, and physical medium devices that providea constant current source, current-to-voltage regulation, and data alignment and retiming functionality in optical interconnect applications. Through ouracquisition of Entropic Communications, Inc., or Entropic, in April of 2015, we provide semiconductor solutions for the connected home, ranging fromMoCA® (Multimedia over Coax Alliance) solutions that transform how traditional HDTV broadcast and Internet Protocol, or IP, based streaming videocontent is seamlessly, reliably, and securely delivered, processed, and distributed into and throughout the home. Through our acquisition of the Microsemiwireless infrastructure access business in April of 2016, we provide integrated circuits for wireless infrastructure markets, including wideband RF transceiversand synthesizers for 3G, 4G, and future 5G cellular base station and remote radio head (RRH) unit platforms. Through our recently closed acquisition of theBroadcom wireless infrastructure backhaul business in July of 2016, we also provide modem and RF transceiver solutions into cellular infrastructurebackhaul applications.Our net revenue has grown from approximately $0.6 million in fiscal 2006 to $387.8 million in fiscal 2016. In fiscal 2016, our net revenue was derivedprimarily from sales of RF receivers and RF receiver systems-on-chip and MoCA connectivity solutions into operator voice and data modems and gatewaysand global analog and digital RF receiver products for analog and digital television applications. These analog and digital television applications includeDirect Broadcast Satellite outdoor unit, or DBS ODU, solutions, which consist of our translation switch, or BTS, and channel stacking switch, or CSS,products. These products simplify the installation required to support simultaneous reception of multiple channels from multiple satellites over a singlecable. Our ability to achieve revenue growth in the future will depend, among other factors, on our ability to further penetrate existing markets; our ability toexpand our target addressable markets by developing new and innovative products; and our ability to obtain design wins with device manufacturers, inparticular manufacturers of set-top boxes, data modems, and gateways for the broadband service provider and Pay-TV industries, manufacturers selling intothe Cable infrastructure market, and manufacturers of optical module and telecommunications infrastructure equipment.Products shipped to Asia accounted for 93%, 91% and 94% of net revenue during the years ended December 31, 2016, 2015 and 2014, respectively.Although a large percentage of our products is shipped to Asia, we believe that a significant number of the systems designed by these customers andincorporating our semiconductor products are then sold outside Asia. For example, we believe revenue generated from sales of our digital terrestrial set-topbox products during the years ended December 31, 2016, 2015 and 2014 related principally to sales to Asian set-top box manufacturers delivering productsinto Europe, Middle East, and Africa, or EMEA markets. Similarly, revenue generated from sales of our cable modem products during the years endedDecember 31, 2016, 2015 and 2014 related principally to sales to Asian ODMs and contract manufacturers delivering products into European and NorthAmerican markets. To date, most of our sales have been denominated in United States dollars. There is a growing portion of our business, related specificallyto our high-speed optical interconnect products, that are shipped to, and are ultimately consumed in Asian markets, with the majority of these products beingpurchased by end customers in China.43Table of ContentsA significant portion of our net revenue has historically been generated by a limited number of customers. In the year ended December 31, 2016, twoof our customers, Arris and Technicolor (which includes Cisco's former connected devices business), accounted for 37% of our net revenue, and our tenlargest customers collectively accounted for 74% of our net revenue. Sales to Arris as a percentage of revenue include sales to Pace, which was acquired byArris in January 2016, for the year ended December 31, 2016. In the year ended December 31, 2015, two of our customers, Arris and Technicolor (whichincludes Cisco's former connected devices business), accounted for 41% of our net revenue, and our ten largest customers collectively accounted for 76% ofour net revenue. In November 2015, Technicolor completed its purchase of Cisco’s connected devices business. For the year ended December 31, 2015, therevenue percentage did not include the 1% revenue percentage for Technicolor. In the year ended December 31, 2014, one of our customers, Arris, accountedfor 31% of our net revenue, and our ten largest customers collectively accounted for 67% of our net revenue. For the year ended December 31, 2014, sales toArris as a percentage of revenue include sales to Motorola Home, which was acquired by Arris in April 2013. For certain customers, we sell multiple productsinto disparate end user applications such as cable modems and both cable and satellite cable set-top boxes and broadband gateways.Our business depends on winning competitive bid selection processes, known as design wins, to develop semiconductors for use in our customers’products. These selection processes are typically lengthy, and as a result, our sales cycles will vary based on the specific market served, whether the designwin is with an existing or a new customer and whether our product being designed in our customer’s device is a first generation or subsequent generationproduct. Our customers’ products can be complex and, if our engagement results in a design win, can require significant time to define, design and result involume production. Because the sales cycle for our products is long, we can incur significant design and development expenditures in circumstances wherewe do not ultimately recognize any revenue. We do not have any long-term purchase commitments with any of our customers, all of whom purchase ourproducts on a purchase order basis. Once one of our products is incorporated into a customer’s design, however, we believe that our product is likely toremain a component of the customer’s product for its life cycle because of the time and expense associated with redesigning the product or substituting analternative chip. Product life cycles in our target markets will vary by application. For example, in the hybrid television market, a design-in can have aproduct life cycle of 9 to 18 months. In the terrestrial retail digital set-top box market, a design-in can have a product life cycle of 18 to 24 months. In thecable operator modem and gateway sectors, a design-in can have a product life cycle of 24 to 48 months. In the satellite operator gateway and DBS ODUsectors, a design-in can have a product life cycle of 24 to 60 months and beyond.On April 30, 2015, the Company completed its acquisition of Entropic. Pursuant to the terms of the merger agreement or merger agreements dated as ofFebruary 3, 2015, by and among MaxLinear, Entropic, and two wholly-owned subsidiaries of the Company, all of the Entropic outstanding shares wereconverted into the right to receive consideration consisting of cash and shares of our Class A common stock. We paid an aggregate of $111.1 million in cashand issued an aggregate of 20.4 million shares of our Class A common stock to the stockholders of Entropic. In addition, we assumed all outstandingEntropic stock options and unvested restricted stock units that were held by continuing service providers (as defined in the merger agreement). The Companyused Entropic’s cash and cash equivalents to fund a significant portion of the cash portion of the merger consideration and, to a lesser extent, our own cashand cash equivalents.Recent DevelopmentsOn April 28, 2016, we entered into an asset purchase agreement with Microsemi Storage Solutions, Inc., formerly known as PMC-Sierra, Inc., orMicrosemi, and consummated the transactions contemplated by the asset purchase agreement. We paid cash consideration of $21.0 million for the purchaseof certain wireless access assets of Microsemi's wireless infrastructure access business, and assumed certain specified liabilities. The assets acquired include,among other things, radio frequency and analog/mixed signal patents and other intellectual property, in-production and next-generation RF transceiverdesigns, a workforce-in-place, and other intangible assets, as well as tangible assets that include but are not limited to production masks and other productionrelated assets, inventory, and other property, plant, and equipment. The liabilities assumed include, among other things, product warranty obligations andaccrued vacation and severance obligations for employees of the wireless infrastructure access business that were rehired by the Company.On May 9, 2016, we entered into a definitive agreement to purchase certain assets and assume certain liabilities of the wireless infrastructure backhaulbusiness of Broadcom Corporation, or Broadcom. On July 1, 2016, we consummated the transactions contemplated by the purchase agreement and paidaggregate cash consideration of $80.0 million and hired certain employees of the wireless infrastructure backhaul business. The assets acquired include,among other things, digital baseband, radio frequency, or RF, and analog/mixed signal patents and other intellectual property, in-production and next-generation digital baseband and RF transceiver integrated circuit and reference platform designs, a workforce-in-place, and other intangible assets, as well astangible assets that include but are not limited to production masks and other production related assets, inventory, and other property and equipment. Theliabilities assumed include, among other things, product warranty obligations, liabilities for technologies acquired, and a payable to Broadcom asreimbursement of costs associated with the44Table of Contentstermination of those employees of the wireless infrastructure backhaul business who were not hired by MaxLinear upon the closing of the acquisition. Formore information, please refer to Note 3 of our consolidated financial statements.The acquired assets and liabilities, together with the rehired employees for each of these acquisitions, represent businesses as defined in ASC 805,Business Combinations. We have integrated the acquired assets and rehired employees into our existing business.On March 29, 2017, each share of our then outstanding Class A common stock and Class B common stock will convert automatically into a singleclass of common stock pursuant to the terms of our Amended and Restated Certificate of Incorporation. Holders of our Class A common stock are entitled toone vote per share and holders of Class B common stock are entitled to ten votes per share with respect to transactions that would result in a change of controlof the Company or that relate to our equity incentive plans. In addition, holders of Class B common stock have the exclusive right to elect two members ofour Board of Directors, each referred to as a Class B Director. Following the conversion, each share of common stock will be entitled to one vote per share andotherwise have the same designations, rights, powers and preferences as the Class A common stock prior to the conversion. In addition, holders of thecommon stock will vote as a single class of stock on any matter that is submitted to a vote of stockholders.Critical Accounting Policies and EstimatesManagement’s discussion and analysis of our financial condition and results of operations is based upon our financial statements which are preparedin accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to makeestimates and judgments that affect the reported amounts of assets and liabilities, related disclosure of contingent assets and liabilities at the date of thefinancial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments,the most critical of which are those related to revenue recognition, allowance for doubtful accounts, inventory valuation, income taxes and stock-basedcompensation. We base our estimates and judgments on historical experience and other factors that we believe to be reasonable under the circumstances.Materially different results can occur as circumstances change and additional information becomes known.We believe that the following accounting policies involve a greater degree of judgment and complexity than our other accounting policies.Accordingly, these are the policies we believe are the most critical to understanding and evaluating our consolidated financial condition and results ofoperations.Revenue RecognitionRevenue is generated from sales of our integrated circuits. We recognize revenue when all of the following criteria are met: 1) there is persuasiveevidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable and 4) collectability is reasonably assured.Title to product transfers to customers either when it is shipped to or received by the customer, based on the terms of the specific agreement with thecustomer.Revenue is recorded based on the facts at the time of sale. Transactions for which we cannot reliably estimate the amount that will ultimately becollected at the time the product has shipped and title has transferred to the customer are deferred until the amount that is probable of collection can bedetermined. Items that are considered when determining the amounts that will be ultimately collected are a customer’s overall creditworthiness and paymenthistory, customer rights to return unsold product, customer rights to price protection, customer payment terms conditioned on sale or use of product by thecustomer, or extended payment terms granted to a customer.A portion of our revenues are generated from sales made through distributors under agreements allowing for pricing credits and/or stock rotation rightsof return. Revenues from sales through our distributors accounted for 19%, 13% and 28% of net revenue during the years ended December 31, 2016, 2015and 2014, respectively. Pricing credits to our distributors may result from our price protection and unit rebate provisions, among other factors. These pricingcredits and/or stock rotation rights prevent us from being able to reliably estimate the final sales price of the inventory sold and the amount of inventory thatcould be returned pursuant to these agreements. As a result, for sales through distributors, we have determined that it does not meet all of the required revenuerecognition criteria at the time we deliver our products to distributors as the final sales price is not fixed or determinable.For these distributor transactions, revenue is not recognized until product is shipped to the end customer and the amount that will ultimately becollected is fixed or determinable. Upon shipment of product to these distributors, title to the inventory transfers to the distributor and the distributor isinvoiced, generally with 30 to 60 day terms. On shipments to our distributors where revenue is not recognized, we record a trade receivable for the sellingprice as there is a legally enforceable right to payment, relieving the inventory for the carrying value of goods shipped since legal title has passed to thedistributor, and record the corresponding gross profit in our consolidated balance sheet as a component of deferred revenue and deferred profit,45Table of Contentsrepresenting the difference between the receivable recorded and the cost of inventory shipped. Future pricing credits and/or stock rotation rights from ourdistributors may result in the realization of a different amount of profit included in our future consolidated statements of operations than the amount recordedas deferred profit in our consolidated balance sheets.We record reductions in revenue for estimated pricing adjustments related to price protection agreements with our end customers in the same periodthat the related revenue is recorded. Price protection pricing adjustments are recorded at the time of sale as a reduction to revenue and an increase in ouraccrued liabilities. The amount of these reductions is based on specific criteria included in the agreements and other factors known at the time. We accrue100% of potential price protection adjustments at the time of sale and do not apply a breakage factor. We de-recognize the accrual for unclaimed priceprotection amounts as specific programs contractually end or when we believe unclaimed amounts are no longer subject to payment and will not be paid. SeeNote 7 for a summary of our price protection activity.Allowance for Doubtful AccountsWe perform ongoing credit evaluations of our customers and assess each customers’ credit worthiness. We monitor collections and payments from ourcustomers and maintain an allowance for doubtful accounts based upon our historical experience, our anticipation of uncollectible accounts receivable andany specific customer collection issues that we have identified. While our credit losses have historically been insignificant, we may experience higher creditloss rates in the future than we have in the past. Our receivables are concentrated in relatively few customers. Therefore, a significant change in the liquidityor financial position of any one significant customer could make collection of our accounts receivable more difficult, require us to increase our allowance fordoubtful accounts and negatively affect our working capital.Inventory ValuationWe assess the recoverability of our inventory based on assumptions about demand and market conditions. Forecasted demand is determined based onhistorical sales and expected future sales. Inventory is stated at the lower of cost or market. Cost approximates actual cost on a first-in, first-out basis andmarket reflects current replacement cost (e.g. net replacement value) which cannot exceed net realizable value or fall below net realizable value less anallowance for an approximately normal profit margin. We reduce our inventory to its lower of cost or market on a part-by-part basis to account for itsobsolescence or lack of marketability. Reductions are calculated as the difference between the cost of inventory and its market value based upon assumptionsabout future demand and market conditions. Once established, these adjustments are considered permanent and are not revised until the related inventory issold or disposed of. If actual market conditions are less favorable than those projected by management, additional inventory write-downs may be requiredthat may adversely affect our operating results. If actual market conditions are more favorable, we may have higher gross profits when products are sold.Production MasksProduction masks with alternative future uses or discernible future benefits are capitalized and amortized over their estimated useful life of two years.To determine if the production mask has alternative future uses or benefits, we evaluate risks associated with developing new technologies and capabilities,and the related risks associated with entering new markets. Production masks that do not meet the criteria for capitalization are expensed as research anddevelopment costs.Business CombinationsWe apply the provisions of ASC 805, Business Combinations, in the accounting for our acquisitions. ASC 805 requires us to recognize separately fromgoodwill the assets acquired and the liabilities assumed, at the acquisition date fair values. Goodwill as of the acquisition date is measured as the excess ofconsideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While we use our best estimates andassumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration, where applicable, ourestimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisitiondate, we record adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Upon the conclusion of the measurementperiod or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to theconsolidated statements of operations.46Table of ContentsCosts to exit or restructure certain activities of an acquired company or our internal operations are accounted for as termination and exit costs pursuantto ASC 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costs associated with an exitor disposal activity is recognized and measured at its fair value in the consolidated statement of operations in the period in which the liability is incurred.When estimating the fair value of facility restructuring activities, assumptions are applied regarding estimated sub-lease payments to be received, which candiffer materially from actual results. This may require us to revise our initial estimates which may materially affect the results of operations and financialposition in the period the revision is made.For a given acquisition, we may identify certain pre-acquisition contingencies as of the acquisition date and may extend our review and evaluation ofthese pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether we include thesecontingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimated amounts.If we cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurement period,which is generally the case given the nature of such matters, we will recognize an asset or a liability for such pre-acquisition contingency if (i) it is probablethat an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonably estimated.Subsequent to the measurement period, changes in estimates of such contingencies will affect earnings and could have a material effect on results ofoperations and financial position.In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated asof the acquisition date. We reevaluate these items quarterly based upon facts and circumstances that existed as of the acquisition date with any adjustments tothe preliminary estimates being recorded to goodwill if identified within the measurement period. Subsequent to the measurement period or finaldetermination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax relatedvaluation allowances will affect the provision for income taxes in the consolidated statement of operations and could have a material impact on the results ofoperations and financial position.Goodwill and Intangible AssetsGoodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired nettangible and intangible assets. Intangible assets represent purchased intangible assets including developed technology and in-process research anddevelopment, or IPR&D, and technologies acquired or licensed from other companies, customer relationships, backlog and tradenames. Purchased intangibleassets with definitive lives are capitalized and amortized over their estimated useful life. Technologies acquired or licensed from other companies, customerrelationships, backlog and tradenames are capitalized and amortized over the greater of the terms of the agreement, or estimated useful life. We capitalizeIPR&D projects acquired as part of a business combination. On completion of each project, IPR&D assets are reclassified to developed technology andamortized over their estimated useful lives.Impairment of Goodwill and Long-Lived AssetsGoodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under theacquisition method. Goodwill is not amortized but is tested for impairment using a qualitative assessment, and subsequently the two-step method as needed.This involves comparing the fair value of each reporting unit, which we have 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 and the second step of theimpairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fair value, the second step of the impairment test is performed to measurethe amount of impairment loss, if any. We test by reporting unit, goodwill and other indefinite-lived intangible assets for impairment at October 31 each yearor more frequently if we believe indicators of impairment exist.During development, IPR&D is not subject to amortization and is tested for impairment annually or more frequently if events or changes incircumstances indicate that the asset might be impaired. We review indefinite-lived intangible assets each year for impairment using a qualitative assessment,followed by a quantitative assessment, as needed, each year as of October 31, the date of our annual goodwill impairment review, or whenever events orchanges in circumstances indicate the carrying value may not be recoverable. Recoverability of indefinite-lived intangible assets is measured by comparingthe carrying amount of the asset to its fair value. Once an IPR&D project is complete, it becomes a finite-lived intangible asset and is evaluated forimpairment in accordance with our policy for long-lived assets.We regularly review the carrying amount of our long-lived assets, as well as the useful lives, to determine whether indicators of impairment may existwhich warrant adjustments to carrying values or estimated useful lives. An impairment loss47Table of Contentswould be 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 would be measured based on the excess of the carrying amount of the asset over the asset’s fair value.Income TaxesWe provide for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxes representthe future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are presented net asnoncurrent. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxes during theyear. Deferred taxes result from the differences between the financial and tax bases of our assets and liabilities and are adjusted for changes in tax rates andtax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when a judgment is made that is considered more likelythan not that a tax benefit will not be realized. A decision to record a valuation allowance results in an increase in income tax expense or a decrease inincome tax benefit. If the valuation allowance is released in a future period, income tax expense will be reduced accordingly.The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The impact of an uncertainincome tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. Anuncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be lessthan the ultimate assessment, a further charge to expense would result.In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred taxassets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichthose temporary differences become deductible. We continue to assess the need for a valuation allowance on the deferred tax asset by evaluating bothpositive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the income statementfor the period that the adjustment is determined to be required.Stock-Based CompensationWe measure the cost of employee services received in exchange for equity incentive awards, including stock options, employee stock purchase rights,restricted stock units and restricted stock awards based on the grant date fair value of the award. We use the Black-Scholes valuation model to calculate thefair value of stock options and employee stock purchase rights granted to employees. We calculate the fair value of restricted stock units and restricted stockawards based on the fair market value of our Class A common stock on the grant date. Stock-based compensation expense is recognized over the periodduring which the employee is required to provide services in exchange for the award, which is usually the vesting period. We recognize compensationexpense over the vesting period using the straight-line method and classify these amounts in the statements of operations based on the department to whichthe related employee reports. We calculate the weighted-average expected life of options using the simplified method as prescribed by guidance provided bythe Securities and Exchange Commission. This decision was based on the lack of historical data due to our limited number of stock option exercises underthe 2010 Equity Incentive Plan. We will continue to assess the appropriateness of the use of the simplified method as we develop a history of optionexercises.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board, or FASB, issued new accounting guidance related to revenue recognition. This new standardwill replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides aunified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goodsor services. This guidance will be effective for us beginning in the first quarter of fiscal year 2018 and can be applied either retrospectively to each periodpresented or as a cumulative-effect adjustment as of the date of adoption. Adoption of the amendments in this guidance is expected to accelerate the timingof our revenue recognition on products sold via distributors which will change from the sell-through method to the sell-in method. We currently have noplans to alter our selling practices or terms of sales through distributors in anticipation of adoption of the amendments in this guidance. We have performed apreliminary assessment of the impact of adopting this new accounting standard on our consolidated financial position and results of operations and believethe change would not have a material impact on our revenues for the year ending December 31, 2018 and comparative periods expected to be presented,based on the current volume and amount of distributor transactions. We plan to apply the guidance prospectively with an adjustment to retained earnings forthe cumulative effect of adoption.48Table of ContentsIn July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires inventory to be subsequently measuredusing the lower of cost and net realizable value, and thereby eliminating the market value approach. The FASB has defined net realizable value to be the“estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 iseffective for us beginning in the first quarter of fiscal year 2017 and is applied prospectively. The adoption of the amendments in this update are not expectedto have a material impact on our consolidated financial position and results of operations.In September 2015, the FASB issued ASU No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. Tosimplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments in this update eliminate therequirement to retrospectively account for those adjustments and to revise comparative information for prior periods presented as a result of changes made toprovisional amounts. Instead, those adjustments are recognized in the reporting period that the adjustments are determined. Those adjustments are requiredwhen new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurementof the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The amendments in this update also require anentity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by lineitem that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisitiondate. The amendments in this update were effective for us beginning in the first quarter of fiscal year 2016, and were applied prospectively. The adoption ofASU No. 2015-16 in 2016 did not have a material impact on our consolidated financial position and results of operations.In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments inthis update include a requirement to measure equity investments (except equity method investments) at fair value with changes in fair value recognized innet income; previously changes in fair value were recognized in other comprehensive income. The amendments in this update are effective for us beginningin the first quarter of fiscal year 2018. The adoption of the amendments in this update are not expected to have a material impact on our consolidatedfinancial position and results of operations.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this update require a lessee to recognize in the statementof financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for thelease term for all leases with terms greater than twelve months. For leases less than twelve months, an entity is permitted to make an accounting policyelection by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense forsuch leases generally on a straight-line basis over the lease term. The amendments in this update are effective for us for fiscal years beginning with fiscal year2019, including interim periods within those years, with early adoption permitted. We are currently in the process of evaluating the impact of adoption of theamendments in this update on our consolidated financial position and results of operations; however, adoption of the amendments in this update areexpected to be material for most entities, including us, that have material leases greater than twelve months.In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify therevenue recognition implementation guidance on principal versus agent considerations. The amendments in this update clarify that when another party isinvolved in providing goods or services to a customer, an entity that is the principal has obtained control of a good or service before it is transferred to acustomer, and provides indicators to assist an entity in determining whether it controls a specified good or service prior to the transfer to the customer. Anentity that is the principal recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good orservice transferred to the customer, whereas an agent recognizes revenue in the amount of any fee or commission to which it expects to be entitled inexchange for arranging for the specified good or service to be provided by the other party. The amendments in this update are effective for us beginning inthe first quarter of fiscal year 2018, concurrent with the new revenue recognition standard. The adoption of the amendments in this update are not expected tohave a material impact on our consolidated financial position and results of operations.In March 2016, the FASB issued ASU No. 2016-09, Improvements to Share-Based Compensation to simplify certain aspects of accounting for share-based payment transactions associated with income taxes, classification as equity or liabilities, and classification on the statement of cash flows. Theamendments in this update are effective for us for fiscal years beginning with fiscal year 2017, including interim periods within those years, with earlyadoption permitted. Early adoption, if elected, must be completed for all of the amendments in the same period. The new guidance requires, among otherthings, excess tax benefits and tax deficiencies to be recorded in the income statement in the provision for income taxes when awards vest or are49Table of Contentssettled. Also, because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stockmethod when computing earnings per share is amended to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital.We adopted ASU No. 2016-09 during the quarter ended June 30, 2016, as previously described in our Report on Form 10-Q for the period ended June 30,2016 filed with the Securities Exchange Commission on August 8, 2016. For the year ended December 31, 2016, the impact on the Company's results ofoperations was to reduce the provision for income taxes and increase net income by $8.3 million and increase basic net income per share by $0.13, andincrease diluted net income per share by $0.12. The increase to diluted net income per share includes the effect of the reduction of the tax provision and anincrease in the number of incremental shares used in computing diluted EPS by 846,000 shares for the year ended December 31, 2016 (Note 2).There was no cumulative effect on retained earnings in the consolidated balance sheet since we have a full valuation allowance against U.S. deferredtax assets. We elected to continue to estimate forfeitures of share-based awards resulting in no impact to stock-based compensation expense, and we are alsocontinuing to classify cash paid by us when directly withholding shares for tax withholding purposes in cash flows from financing activities.In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments to eliminate the diversity in practiceregarding the presentation and classification of certain cash receipts and cash payments, including, among other things, contingent consideration paymentsmade following a business combination and proceeds from the settlement of insurance claims in the statement of cash flows. Cash payments not made soonafter the acquisition date up to the amount of the contingent consideration liability recognized at the acquisition date should be classified as financingactivities, with any excess payments classified as operating activities, whereas cash payments made soon after the acquisition date to settle the contingentconsideration should be classified as investing activities. Cash proceeds received from settlement of insurance claims should be classified on the basis of thenature of the related losses. The amendments in this update are effective for fiscal years beginning with fiscal year 2017, including interim periods withinthose years, with early adoption permitted. We do not expect the adoption of the amendments in this update to have a material impact on our consolidatedstatement of cash flows.In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740) to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transferuntil the asset has been sold to an outside party. The Board decided that an entity should recognize the income tax consequences of an intra-entity transfer ofan asset other than inventory when the transfer occurs. The amendments in this update are effective for us beginning in the first quarter of fiscal 2018. Theimpact of adoption of the amendments in this update could be material depending on the size of any intra-entity transfers we may implement in 2018 andfuture periods.Results of OperationsThe following describes the line items set forth in our consolidated statements of operations.Net Revenue. Net revenue is generated from sales of radio-frequency and mixed-signal integrated circuits for cable and satellite broadbandcommunications and the connected home, and wired and wireless infrastructure markets. A significant portion of our end customers purchases productsindirectly from us through distributors. Although we actually sell the products to, and are paid by, the distributors, we refer to these end customers as ourcustomers.Cost of Net Revenue. Cost of net revenue includes the cost of finished silicon wafers processed by third-party foundries; costs associated with ouroutsourced packaging and assembly, test and shipping; costs of personnel, including stock-based compensation, and equipment associated withmanufacturing support, logistics and quality assurance; amortization of certain production mask costs; cost of production load boards and sockets; and anallocated portion of our occupancy costs.Research and Development. Research and development expense includes personnel-related expenses, including stock-based compensation, newproduct engineering mask costs, prototype integrated circuit packaging and test costs, computer-aided design software license costs, intellectual propertylicense costs, reference design development costs, development testing and evaluation costs, depreciation expense and allocated occupancy costs. Researchand development activities include the design of new products, refinement of existing products and design of test methodologies to ensure compliance withrequired specifications. All research and development costs are expensed as incurred.Selling, General and Administrative. Selling, general and administrative expense includes personnel-related expenses, including stock-basedcompensation, distributor and other third-party sales commissions, field application engineering support, travel costs, professional and consulting fees, legalfees, depreciation expense and allocated occupancy costs.50Table of ContentsImpairment Losses. Impairment losses are attributed to the impairment charges to intangible assets.Restructuring Charges. Restructuring charges consist of employee severance and stock compensation expenses, and lease and leasehold impairmentcharges related to certain of our restructuring plans entered into as a result of our acquisition of Entropic and internal operations, and an adjustment related torestructuring plan implemented by Entropic prior to acquisition.Interest Income. Interest income consists of interest earned on our cash, cash equivalents and investment balances.Other Income (Expense). Other income (expense) generally consists of income (expense) generated from non-operating transactions.Provision (Benefit) for Income Taxes. We make certain estimates and judgments in determining income tax expense (benefit) for financial statementpurposes. These estimates and judgments occur in the calculation of certain tax assets and liabilities, which arise from differences in the timing of recognitionof revenue and expenses for tax and financial statement purposes and the realizability of assets in future years.The following table sets forth our consolidated statement of operations data as a percentage of net revenue for the periods indicated: Years Ended December 31, 2016 2015 2014Net revenue100% 100% 100%Cost of net revenue41 48 38Gross profit59 52 62Operating expenses: Research and development25 28 42Selling, general and administrative17 26 26IPR&D impairment losses— 7 —Restructuring charges1 5 —Total operating expenses43 66 68Income (loss) from operations16 (14) (6)Interest income— — —Other income (expense), net— — —Income (loss) before income taxes16 (14) (6)Provision (benefit) for income taxes— — (1)Net income (loss)16 % (14)% (5)%Net Revenue Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Operator$293,313 $225,265 $101,393 30 % 122 %% of net revenue75% 75% 76% Infrastructure and other60,568 29,585 31,719 105 % (7)%% of net revenue16% 10% 24% Legacy video SoC33,951 45,510 — (25)% N/A% of net revenue9% 15% — Total net revenue$387,832 $300,360 $133,112 29 % 126 %51Table of ContentsNet revenue increased $87.5 million to $387.8 million for the year ended December 31, 2016, as compared to $300.4 million for the year endedDecember 31, 2015. The change was primarily due to an increase of $68.0 million in operator applications, related primarily to increased cable and satelliteRF receivers, digital channel-stacking, and both satellite and cable MoCA product shipments. The increase in infrastructure and other revenues of $31.0million were primarily driven by the continued ramp of high-speed interconnect product shipments as well as contributions from our wireless accessacquisition starting in May 2016 and our wireless backhaul acquisition starting in July 2016. Shipments of legacy video SoC products declined by $11.6million in the year ended December 31, 2016 as compared to the year ended December 31, 2015. We expect year-over-year revenue declines in the legacyvideo SoC and analog channel stacking, or aCSS, products we acquired from Entropic to continue, as these products are near the end of their life cycles,which along with other factors, including but not limited to operator consolidation, could adversely affect future revenues for these product categories.Net revenue increased $167.2 million to $300.4 million in the year ended December 31, 2015, as compared to $133.1 million in the year endedDecember 31, 2014. The increase in net revenue was primarily attributable to an increase of $123.9 million in operator applications, contributed primarily byanalog channel-stacking and MoCA products related to our Entropic acquisition, as well as organic growth across each of our other operator sub-categories.Declines in infrastructure and other revenues of $2.1 million were primarily driven by hybrid-TV and consumer digital-to-analog terrestrial set-top boxapplications, which offset growth in retail MoCA products related to our Entropic acquisition and high-speed interconnect products related to our Physpeedacquisition. An increase of $45.5 million in our legacy video SoC products was attributable to our acquisition of Entropic.Cost of Net Revenue and Gross Profit Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Cost of net revenue$157,842 $144,937 $51,154 9% 183%% of net revenue41% 48% 38% Gross profit229,990 155,423 81,958 48% 90%% of net revenue59% 52% 62% Cost of net revenue increased $12.9 million to $157.8 million for the year ended December 31, 2016, as compared to $144.9 million for the year endedDecember 31, 2015. The increase was primarily driven by an increase in sales and a $4.3 million increase in amortization of purchased intangible assets costsrelated to our wireless infrastructure access and backhaul acquisitions during 2016, partially offset by a decrease in amortization of inventory step-up of $8.6million and reductions in our average manufacturing costs. The increase in gross profit percentage for the year ended December 31, 2016, as compared to theyear ended December 31, 2015, was due to an increase in sales of higher margin products and the previously mentioned reduction in amortization ofinventory step-up.Cost of net revenue increased $93.8 million to $144.9 million for the year ended December 31, 2015, as compared to $51.2 million for the year endedDecember 31, 2014. This increase was primarily driven by increased sales. The decrease in gross profit percentages for the year ended December 31, 2015, ascompared to the year ended December 31, 2014, was primarily due to amortization of inventory step-up costs of $14.2 million and amortization ofintellectual property costs of $4.2 million related to the Entropic acquisition, partially offset by reductions in our average manufacturing costs. The grossmargin decline was also driven by the significant increase in Entropic-related product revenue, which has historically generated lower gross margin than ourprevious corporate average.We currently expect that gross profit percentage will fluctuate in the future, from period-to-period, based on changes in product mix, average sellingprices, and average manufacturing costs.Research and Development Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Research and development$97,745 $85,405 $56,625 14% 51%% of net revenue25% 28% 43% Research and development expense increased $12.3 million to $97.7 million for the year ended December 31, 2016 from $85.4 million in the yearended December 31, 2015. The increase was primarily due to increases in headcount-related expense52Table of Contentsand occupancy expense of $9.4 million related to our acquisitions of the wireless infrastructure access business from Microsemi, and the wirelessinfrastructure backhaul business from Broadcom. Year-on-year increases in prototype expense, design tools expense, and depreciation expense of $3.2million were primarily due to a higher number of projects.Research and development expense increased $28.8 million to $85.4 million for the year ended December 31, 2015, as compared to $56.6 million forthe year ended December 31, 2014. The increase was primarily due to an increase in headcount-related items of $16.6 million, and the combined increases indesign tools, prototype, compensation to employees in relation to the Physpeed transaction, amortization, travel, and occupancy expenses of $11.9 million.In 2015, headcount-related items increased primarily due to increases in our average full-time-equivalent headcount compared to prior year. The non-headcount related increases are primarily due to increased project related design tools usage.We expect our research and development expenses to increase as we continue to focus on expanding our product portfolio and enhancing existingproducts.Selling, General and Administrative Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Selling, general and administrative$64,454 $77,981 $34,191 (17)% 128%% of net revenue17% 26% 26% Selling, general and administrative expense decreased $13.5 million to $64.5 million for the year ended December 31, 2016, as compared to $78.0million for the year ended December 31, 2015. The decrease was primarily due to a decrease of $18.0 million in intangible amortization expense related toacquired product backlog and a decrease in legal expense of $3.0 million related to the Entropic acquisition in the prior year. This decrease was partiallyoffset by an increase in headcount-related expense of $3.5 million due to higher average full-time-equivalent headcount compared to prior year as a result ofthe Entropic acquisition. Commission expense increased $1.0 million due to higher sales and outside services, accounting expense, travel expense, and otherexpenses increased by $2.9 million.Selling, general and administrative expense increased $43.8 million to $78.0 million for the year ended December 31, 2015, as compared to $34.2million for the year ended December 31, 2014. The increase was primarily due to the amortization of purchased intangible assets of $25.0 million andtransaction costs of $5.4 million associated with our Entropic acquisition, an increase in headcount-related items (including stock-based compensation) of$5.1 million, and an increase in commission, outside services, professional fees, occupancy, and other expenses of $10.0 million while legal fees decreased$1.7 million. In 2015, headcount-related items increased primarily due to increases in our average full-time-equivalent headcount compared to prior year.The non-headcount related increases are primarily due our facilities expansion efforts.We expect selling, general and administrative expenses to increase in the future as we expand our sales and marketing organization to enableexpansion into existing and new markets and continue to build our international administrative infrastructure.IPR&D Impairment Losses Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) IPR&D impairment losses$1,300 $21,600 $— (94)% N/A% of net revenue—% 7% —% IPR&D impairment losses decreased $20.3 million to $1.3 million for the year ended December 31, 2016, compared to $21.6 million for the year endedDecember 31, 2015. We did not incur impairment losses in the year ended December 31, 2014. IPR&D impairment losses in 2016 consisted of acquiredIPR&D technology of the wireless infrastructure access business. IPR&D impairment losses in 2015 consisted of acquired IPR&D technology of Physpeedand Entropic.53Table of ContentsRestructuring charges Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Restructuring charges$3,432 $14,086 $— (76)% N/A% of net revenue1% 5% —% Restructuring charges decreased $10.7 million to $3.4 million for the year ended December 31, 2016, compared to $14.1 million for the year endedDecember 31, 2015. We did not incur restructuring charges in the year ended December 31, 2014. Restructuring charges in 2016 consisted of employeeseverance and stock compensation expenses of $1.0 million, lease and leasehold impairment charges of $2.3 million and contract restructuring of $0.1million. Restructuring charges in 2015 consisted of employee severance and stock compensation expenses of $5.5 million, lease and leasehold impairmentcharges of $8.2 million and contract restructuring of $0.3 million.Interest and Other Income (Expense) Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Interest income$572 $275 $236 108 % 17 %Other income (expense), net59 468 (123) (87)% (480)%Interest income increased $0.3 million to $0.6 million for the year ended December 31, 2016, compared to $0.3 million for the year ended December31, 2015. The increase was due to higher average cash and investment balances held during the year. The decrease in other income (expense), net wasprimarily due to fluctuations in foreign currency transactions.Interest income increased $0.04 million to $0.3 million for the year ended December 31, 2015 from $0.2 million for the year ended December 31, 2014due to higher average cash and investment balances held during the period. The increase in other income (expense), net was primarily due to fluctuations inforeign currency transactions.Provision (Benefit) for Income Taxes Years Ended December 31, % Change 2016 2015 2014 2016 2015 (dollars in thousands) Provision (benefit) for income taxes$2,398 $(575) $(1,704) (517)% (66)%The provision for income taxes for the year ended December 31, 2016 was $2.4 million or approximately 4% of pre-tax income compared to a benefitfor income taxes of $0.6 million or approximately 1% of pre-tax loss for the year ended December 31, 2015. The benefit for income taxes in the year endedDecember 31, 2014 was $1.7 million or approximately 19% of pre-tax loss.The provision for income taxes for the year ended December 31, 2016 primarily relates to federal alternative minimum tax due to our limitation on useof net operating losses, credit carryforwards, state income taxes, and income taxes in certain foreign jurisdictions. Certain significant or unusual items areseparately recognized in the quarter during which they occur and can be a source of variability in the effective tax rates from quarter to quarter. During thequarter ended June 30, 2016, we adopted ASU No. 2016-09, Improvements to Share-Based Compensation, which resulted in the recognition of net excess taxbenefits on share-based awards within the provision for income taxes in the consolidated statement of operations. For the year ended December 31, 2016, theimpact of including net excess tax benefits was to reduce the provision for income taxes by $8.3 million in the consolidated statement of operations.The benefit for income taxes for the years ended December 31, 2015 and 2014 primarily relates to the release of valuation allowance in connectionwith the Entropic and Physpeed acquisitions in 2015 and 2014, respectively, partially offset by income taxes in foreign jurisdictions and accruals for taxcontingencies.We continue to maintain a valuation allowance to offset the federal, California and certain foreign deferred tax assets as realization of such assets doesnot meet the more-likely-than-not threshold required under accounting guidelines. In making such determination, we consider all available positive andnegative evidence quarterly, including scheduled reversals of54Table of Contentsdeferred tax liabilities, projected future taxable income, tax planning strategies, and recent financial performance. Based upon our review of all positive andnegative evidence, we concluded that a full valuation allowance should continue to be recorded against our U.S. and certain foreign net deferred tax assets atDecember 31, 2016. We are closely assessing the need for a valuation allowance on the deferred tax assets by evaluating positive and negative evidence thatmay exist. If we continue to generate taxable income, we could remove some or all of the valuation allowance against federal, California and certain foreigndeferred tax assets if we meet the more-likely-than-not threshold. The impact of releasing some or all of such valuation allowance will be material in theperiod in which such release occurs. Until such time that we remove the valuation allowance against our federal, California and certain foreign deferred taxassets, our provision for income taxes will primarily consist of federal and state current income taxes and income taxes in certain foreign jurisdictions.Furthermore, we do not incur expense or benefit in certain tax free jurisdictions in which we operate.Liquidity and Capital ResourcesAs of December 31, 2016, we had cash and cash equivalents of $82.9 million, short- and long-term investments of $53.9 million, and net accountsreceivable of $50.5 million. Additionally, as of December 31, 2016, our working capital was $159.5 million.Our primary uses of cash are to fund operating expenses, purchases of inventory and the acquisition of businesses, property and equipment andintangible assets, and is impacted by the timing of when we pay these expenses as reflected in the change in our outstanding accounts payable and accruedexpenses. Cash used to fund operating expenses excludes the impact of non-cash items such as stock-based compensation, depreciation and amortization ofacquired intangible assets and step-ups of acquired inventory to fair value.Our primary sources of cash are cash receipts on accounts receivable from our shipment of products to distributors and direct customers. Aside from thegrowth in amounts billed to our customers, net cash collections of accounts receivable are impacted by the efficiency of our cash collections process, whichcan vary from period to period depending on the payment cycles of our major distributor customers.Following is a summary of our working capital and cash and cash equivalents for the periods indicated: December 31, 2016 2015 (in thousands)Working capital$159,500 $134,170Cash and cash equivalents$82,896 $67,956Short-term investments47,918 43,300Long-term investments5,991 19,242Total cash and cash equivalents and investments$136,805 $130,498Following is a summary of our cash flows provided by (used in) operating activities, investing activities and financing activities for the periods indicated: Years Ended December 31, 2016 2015 2014 (in thousands)Net cash provided by operating activities$117,317 $55,041 $12,234Net cash used in investing activities(101,313) (11,059) (17,466)Net cash provided by (used in) by financing activities(670) 4,003 (506)Effect of exchange rates on cash and cash equivalents(394) (725) (16)Net increase (decrease) in cash and cash equivalents$14,940 $47,260 $(5,754)55Table of ContentsCash Flows from Operating ActivitiesNet cash provided by operating activities was $117.3 million for the year ended December 31, 2016. Net cash provided by operating activitiesconsisted of net income of $61.3 million, $48.2 million in non-cash expenses, and $7.8 million in changes in operating assets and liabilities. Non-cash itemsincluded in net income for the year ended December 31, 2016 primarily included depreciation and amortization expense of $26.7 million, stock-basedcompensation of $21.8 million, amortization of step-up to fair value of acquired inventory of $5.6 million, impairment charges on intangible assets of $1.3million, and impairment and restructuring on leases of $0.4 million, partially offset by excess tax benefits on stock-based awards of $8.3 million.Net cash provided by operating activities was $55.0 million for the year ended December 31, 2015. Net cash provided by operating activities consistedof $103.1 million in non-cash operating expenses, partially offset by a net loss of $42.3 million and $5.7 million in changes in operating assets andliabilities. Non-cash items included in net loss for the year ended December 31, 2015 primarily included depreciation and amortization expense of $40.6million, impairment charges on intangible assets of $21.6 million, stock-based compensation of $19.3 million, amortization of step-up to fair value ofacquired inventory of $14.2 million and impairment and restructuring on leases of $8.2 million, partially offset by deferred income taxes of $1.9 million.Net cash provided by operating activities was $12.2 million for the year ended December 31, 2014. Net cash provided by operating activitiesconsisted of $18.6 million in non-cash operating expenses, partially offset by a net loss of $7.0 million and changes in operating assets and liabilities of $0.7million. Non-cash items included in net loss for the year ended December 31, 2014 primarily included stock-based compensation of $15.0 million,depreciation and amortization expense of $5.1 million, partially offset by deferred income taxes of $2.3 million.Cash Flows from Investing ActivitiesNet cash used in investing activities was $101.3 million for the year ended December 31, 2016. Net cash used in investing activities primarilyconsisted of $101.0 million used in our acquisitions of the wireless infrastructure access and backhaul businesses, $90.3 million in purchases of securities,and $8.5 million in purchases of property and equipment, partially offset by $98.9 million in maturities of securities.Net cash used in investing activities was $11.1 million for the year ended December 31, 2015. Net cash used in investing activities primarily consistedof $73.4 million in purchases of securities, $3.6 million cash used in our acquisition of Entropic, and $3.0 million in purchases of property and equipment,partially offset by $69.0 million in maturities of securities.Net cash used in investing activities was $17.5 million for the year ended December 31, 2014. Net cash used in investing activities consisted of $56.7million in purchases of securities, $9.1 million used in our acquisition of Physpeed, and $8.8 million in purchases of property and equipment, partially offsetby $57.2 million in maturities of securities.Cash Flows from Financing ActivitiesNet cash used in financing activities was $0.7 million for the year ended December 31, 2016. Net cash used in financing activities primarily consistedof $7.3 million in minimum tax withholding paid on behalf of employees for restricted stock units, partially offset by $6.6 million in net proceeds fromissuance of common stock.Net cash provided by financing activities was $4.0 million for the year ended December 31, 2015. Net cash provided by financing activities primarilyconsisted primarily of $10.0 million in net proceeds from issuance of common stock, partially offset by $5.1 million in minimum tax withholding paid onbehalf of employees for restricted stock units.Net cash used in financing activities was $0.5 million for the year ended December 31, 2014. Net cash used in financing activities consisted of $3.8million in minimum tax withholding paid on behalf of employees for restricted stock units, partially offset by $3.3 million in net proceeds from issuance ofcommon stock.56Table of ContentsWe believe that our $82.9 million of cash and cash equivalents and $53.9 million in short- and long-term investments at December 31, 2016 will besufficient to fund our projected operating requirements for at least the next twelve months. In 2016, we used $101.0 million of cash to purchase the wirelessinfrastructure access and backhaul businesses of Microsemi and Broadcom, respectively. Our cash and cash equivalents in recent years have been favorablyaffected by our implementation of an equity-based bonus program for our employees, including executives. In connection with that bonus program, inAugust 2016, we issued 0.2 million freely-tradable shares of our Class A common stock in settlement of bonus awards for the January 1, 2016 to June 30,2016 performance period under our bonus plan. In May 2016, we issued 0.2 million shares of our Class A common stock in settlement of bonus awards for theJuly 1, 2015 to December 31, 2015 performance period. In August 2015, we issued 0.3 million freely-tradable shares of our Class A common stock insettlement of bonus awards for the January 1, 2015 to June 30, 2015 performance period under our bonus plan. In May 2015, we issued 0.2 million freely-tradable shares of our Class A common stock in settlement of bonus awards for the fiscal 2014 performance period under our bonus plan. In May 2014, weissued 0.6 million freely-tradable shares of our Class A common stock in settlement of bonus awards for the fiscal 2013 performance period under our bonusplan. We expect to implement a similar equity-based plan for the second half of fiscal 2016, but our compensation committee retains discretion to effectpayment in cash, stock, or a combination of cash and stock.Notwithstanding the foregoing, we may need to raise additional capital or incur additional indebtedness to continue to fund our operations in thefuture. Our future capital requirements will depend on many factors, including our rate of revenue growth, the expansion of our engineering, sales andmarketing activities, the timing and extent of our expansion into new territories, the timing of introductions of new products and enhancements to existingproducts, the continuing market acceptance of our products and potential material investments in, or acquisitions of, complementary businesses, services ortechnologies. 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 beable to sustain our operations.Warranties and IndemnificationsIn connection with the sale of products in the ordinary course of business, we often make representations affirming, among other things, that ourproducts do not infringe on the intellectual property rights of others, and agree to indemnify customers against third-party claims for such infringement.Further, our certificate of incorporation and bylaws require us to indemnify our officers and directors against any action that may arise out of their services inthat capacity, and we have also entered into indemnification agreements with respect to all of our directors and certain controlling persons.Off-Balance Sheet ArrangementsAs part of our ongoing business, we do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships,such as entities often referred to as structured finance or special purpose entities, or SPEs, which would have been established for the purpose of facilitatingoff-balance sheet arrangements or other contractually narrow or limited purposes. As of December 31, 2016, we were not involved in any unconsolidated SPEtransactions.Contractual ObligationsAs of December 31, 2016, future minimum payments under non-cancelable operating leases, other obligations and inventory purchase obligations areas follows: Payments due Total Less than 1 year 1-3 years 3-5 years More than 5 years (in thousands)Operating lease obligations$35,601 $8,123 $13,229 $12,657 $1,592Inventory purchase obligations30,464 30,464 — — —Other obligations5,863 4,939 924 — —Total$71,928 $43,526 $14,153 $12,657 $1,59257Table of ContentsITEM 7A.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKForeign Currency RiskTo date, our international customer and vendor agreements have been denominated mostly in United States dollars. Accordingly, we have limitedexposure to foreign currency exchange rates and do not enter into foreign currency hedging transactions. The functional currency of certain foreignsubsidiaries is the local currency. Accordingly, the effects of exchange rate fluctuations on the net assets of these foreign subsidiaries’ operations areaccounted for as translation gains or losses in accumulated other comprehensive income (loss) within stockholders’ equity. We do not believe that a changeof 10% in such foreign currency exchange rates would have a material impact on our consolidated financial position or results of operations.Interest Rate RiskWe had cash and cash equivalents of $82.9 million at December 31, 2016 which was held for working capital purposes. We also had short- and long-term investments of $53.9 million at December 31, 2016. We do not enter into investments for trading or speculative purposes. We do not believe that wehave any material exposure to changes in the fair value of these investments as a result of changes in interest rates due to their short-term nature.Investments in fixed rate interest earning instruments carry a degree of interest rate risk. Fixed rate securities may have their market value adverselyimpacted due to rising interest rates. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates.Investments RiskWe had short- and long-term investments of $53.9 million at December 31, 2016. Our investments, consisting of U.S. Treasury and agency obligationsand corporate notes and bonds, are stated at cost, adjusted for amortization of premiums and discounts to maturity. In the event that there are differencesbetween fair value and cost in any of our available-for-sale securities, unrealized gains and losses on these investments are reported as a separate componentof accumulated other comprehensive income (loss).58Table of ContentsITEM 8.FINANCIAL STATEMENTS AND SUPPLEMENTARY DATAThe financial statements and supplementary data required by this item are included in Part IV, Item 15 of this Report.ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURENone.ITEM 9A.CONTROLS AND PROCEDURESEvaluation of Disclosure and ProceduresWe maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our periodic reports filed withthe SEC is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information isaccumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow fortimely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controlsand procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and noevaluation of controls and procedures can provide absolute assurance that all control issues and instances of fraud, if any, within a company have beendetected. Management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.As required by Rule 13a-15(b) of the Securities Exchange Act of 1934, as amended, or the Exchange Act, prior to filing this Form 10-K, we carried outan evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer,of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act)as of the end of the period covered by this Form 10-K. Based on their evaluation, our principal executive officer and principal financial officer concluded thatour disclosure controls and procedures were effective as of the end of the period covered by this Form 10-K.Management’s Annual Report on Internal Controls over Financial ReportingOur management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequateinternal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management, including our principalexecutive officer and principal financial officer, evaluated the effectiveness of our internal control over financial reporting based on criteria established in theInternal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based uponthat evaluation, management concluded that our internal control over financial reporting was effective as of December 31, 2016. The effectiveness of ourinternal control over financial reporting as of December 31, 2016 has been audited by Grant Thornton LLP, an independent registered public accountingfirm, and Grant Thornton LLP has issued a report on our internal control over financial reporting, as stated within their report which is included herein.Changes in Internal Control over Financial ReportingAn evaluation was performed under the supervision and with the participation of our management, including our principal executive officer andprincipal financial officer, to determine whether any change in our internal control over financial reporting occurred during the fiscal quarter endedDecember 31, 2016 that materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. There were no changes inour internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Rule 13a-15 or Rule 15d-15 of theSecurities Exchange Act of 1934, as amended, that has materially affected, or is reasonably likely to materially affect, our internal control over financialreporting.59Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersMaxLinear, Inc.We have audited the internal control over financial reporting of MaxLinear, Inc. (the "Company") as of December 31, 2016, based on criteriaestablished in the 2013 Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).The Company's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness ofinternal control over financial reporting included in the accompanying Management’s Report on Internal Control over Financial Reporting. Ourresponsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards requirethat we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in allmaterial respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weaknessexists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures aswe considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’sinternal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded asnecessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of thecompany are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assuranceregarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on thefinancial statements.Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of anyevaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based oncriteria established in the 2013 Internal Control-Integrated Framework issued by COSO. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the financial statementsand financial statement schedule of the Company as of and for the year ended December 31, 2016 and our report dated February 8, 2017 expressed anunqualified opinion thereon./s/ Grant Thornton LLPIrvine, CaliforniaFebruary 8, 201760Table of ContentsITEM 9B.OTHER INFORMATIONNone.61Table of ContentsPART IIIITEM 10.DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCEThe information required by Item 10 with respect to our directors and executive officers will be either (i) included in an amendment to this AnnualReport on Form 10-K or (ii) incorporated by reference to our Definitive Proxy Statement to be filed in connection with our 2017 Annual Meeting ofStockholders, or the 2017 Proxy Statement. Such amendment in the 2017 Proxy Statement will be filed with the Securities and Exchange Commission nolater than 120 days after December 31, 2016.Item 405 of Regulation S-K calls for disclosure of any known late filing or failure by an insider to file a report required by Section 16(a) of theExchange Act. This information will be contained under the caption “Related Person Transactions and Section 16(a) Beneficial Ownership ReportingCompliance” in either an amendment to this Annual Report on Form 10-K or the 2017 Proxy Statement and is incorporated herein by reference.Code of ConductWe have adopted a code of ethics and employee conduct that applies to our board of directors and all of our employees, including our chief executiveofficer and principal financial officer.Our code of conduct is available at our website by visiting www.maxlinear.com and clicking through “Investors,” “Corporate Governance,” and “Codeof Conduct.” When required by the rules of the New York Stock Exchange, or NYSE, or the Securities and Exchange Commission, or SEC, we will discloseany future amendment to, or waiver of, any provision of the code of conduct for our chief executive officer and principal financial officer or any member ormembers of our board of directors on our website within four business days following the date of such amendment or waiver.The information required by Item 10 with respect to our audit committee is incorporated by reference from the information set forth under the caption“Corporate Governance and Board of Directors — Board Committees” in either an amendment to this Annual Report on Form 10-K or the 2017 ProxyStatement.ITEM 11.EXECUTIVE COMPENSATIONThe information required by Item 11 is incorporated by reference from the information set forth under the captions “Compensation of Non-EmployeeDirectors” and “Executive Compensation" in either an amendment to this Annual Report on Form 10-K or our 2017 Proxy Statement.ITEM 12.SECURITY OWNERSHIP OF CERTAIN BENEFICAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDERMATTERSThe information required by Item 12 is incorporated by reference from the information set forth under the captions “Executive Compensation —Equity Compensation Plan Information” and “Security Ownership” in either an amendment to this Annual Report on Form 10-K or our 2017 ProxyStatement.ITEM 13.CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCEThe information required by Item 13 is incorporated by reference from the information set forth under the captions “Corporate Governance and Boardof Directors — Director Independence” and “Related Person Transactions and Section 16(a) Beneficial Ownership Reporting Compliance” in either anamendment to this Annual Report on Form 10-K or our 2017 Proxy Statement.ITEM 14.PRINCIPAL ACCOUNTING FEES AND SERVICESThe information required by Item 14 is incorporated by reference from the information set forth under the caption “Proposal Number 4 — Ratificationof Appointment of Independent Registered Public Accounting Firm” in either an amendment to this Annual Report on Form 10-K or our 2017 ProxyStatement.62Table of ContentsPART IV — FINANCIAL INFORMATIONITEM 15.EXHIBITS, FINANCIAL STATEMENT SCHEDULESa) Documents filed as part of the report1. Financial StatementsOur consolidated financial statements are attached hereto and listed on the Index to Consolidated Financial Statements set forth on page F-1 of thisAnnual Report on Form 10-K.2. Financial Statement SchedulesSchedule II. Valuation and Qualifying Accounts—Years ended December 31, 2016, 2015 and 2014All other schedules are omitted as the required information is inapplicable, or the information is presented in the financial statements or related notes.SCHEDULE II – VALUATION AND QUALIFYING ACCOUNTS (in thousands):Classification Balance atbeginning of year Additions chargedto expenses Other Additions (Deductions) Balance at end ofyearAllowance for doubtful accounts2016 $236 $87 $— $(236) $872015 57 179 — — 2362014 57 — — — 57Warranty reserves2016 $157 $335 $489 $(121) $8602015 60 193 37 (133) 1572014 15 56 — (11) 60Valuation allowance for deferred tax assets2016 $98,535 $— $8,410 $(6,661) $100,2842015 29,399 69,136 — — 98,5352014 28,628 3,106 — (2,335) 29,39963Table of Contents3. ExhibitsExhibit Number Exhibit Title2.1 Agreement and Plan of Merger and Reorganization, dated as of February 3, 2015, by and among MaxLinear, Inc., a Delawarecorporation, Entropic Communications, Inc., a Delaware corporation, Excalibur Acquisition Corporation, a Delaware corporation and awholly-owned subsidiary of MaxLinear, and Excalibur Subsidiary, LLC, a Delaware limited liability company and wholly-ownedsubsidiary of MaxLinear (incorporated by reference to Exhibit 2.1 to the Registrant’s Current Report on Form 8-K filed on February 4,2015 (File No. 001-34666)).3.1 Registrant’s Amended and Restated Certificate of Incorporation, as filed with the Secretary of State of the State of Delaware on March29, 2010 (incorporated by reference to Exhibit 3.5 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto(File No. 333-162947)).3.2 Registrant’s Amended and Restated Bylaws, as amended to date (incorporated by reference to Exhibit 3.1 to the Registrant’s CurrentReport on Form 8-K filed on November 10, 2015 (File No. 001-34666)).+4.1 Specimen common stock certificate of Registrant (incorporated by reference to Exhibit 4.1 of the Registrant’s Registration Statementon Form S-1 and all amendments thereto (File No. 333-162947)).+10.1 Form of Director and Executive Officer Indemnification Agreement (incorporated by reference to Exhibit 10.1 of the Registrant’sRegistration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.2 Form of Director and Controlling Person Indemnification Agreement (incorporated by reference to Exhibit 10.2 of the Registrant’sRegistration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.3 2004 Stock Plan, as amended (incorporated by reference to Exhibit 10.3 of the Registrant’s Annual Report on Form 10-K filed onFebruary 6, 2013 (File No. 001-34666)).+10.4 Form of Stock Option Agreement under the 2004 Stock Plan (incorporated by reference to Exhibit 10.4 of the Registrant’s RegistrationStatement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.5 Amendment No. 1 to the form of Stock Option Agreement under the 2004 Stock Plan (incorporated by reference to Exhibit 10.5 of theRegistrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.6 2010 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.6 of the Registrant’s Current Report on Form 8-K filedon August 15, 2016 (File No. 001-34666)).+10.7 Form of Agreement under the 2010 Equity Incentive (incorporated by reference to Exhibit 10.10 of the Registrant’s Quarterly Report onForm 10-Q filed on July 28, 2011 (File No. 001-34666)).+10.8 2010 Employee Stock Purchase Plan, as amended (incorporated by reference to Exhibit 10.8 of the Registrant’s Annual Report on Form10-K filed on August 15, 2016 (File No. 001-34666)).+10.9 Employment Offer Letter, dated December 20, 2010, between the Registrant and Adam C. Spice (incorporated by reference to Exhibit99.2 to the Registrant’s Current Report on Form 8-K filed on December 28, 2010).+10.10 Employment Offer Letter, dated June 24, 2011, between the Registrant and Brian Sprague (incorporated by reference to Exhibit 10.10of the Registrant’s Quarterly Report on Form 10-Q filed on July 28, 2011 (File No. 001-34666)).+10.11 Employment Offer Letter, dated September 12, 2011, by and between the Registrant and Justin Scarpulla (incorporated by reference toExhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on March 15, 2012 (File No. 001-34666)).+10.12 Form of Change in Control Agreement for Chief Executive Officer and Chief Financial Officer (incorporated herein by reference toExhibit 10.12 of the Registrant's Annual Report on Form 10-K filed on February 17, 2016).+10.13 Form of Change in Control Agreement for Executive Officers (incorporated herein by reference to Exhibit 10.13 of the Registrant'sAnnual Report on Form 10-K filed on February 17, 2016).10.14 Lease Agreement, dated May 18, 2009, between the Registrant and JCCE - Palomar, LLC (incorporated by reference to Exhibit 10.14 ofthe Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.15 Sublease Agreement, dated May 9, 2009, between the Registrant and CVI Laser, LLC (incorporated by reference to Exhibit 10.15 of theRegistrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).64Table of Contents†10.16 Intellectual Property License Agreement, dated June 18, 2009, between the Registrant and Intel Corporation, (incorporated by referenceto Exhibit 10.16 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.17 Employment Offer Letter, dated November 9, 2012, between the Registrant and Will Torgerson (incorporated by reference to Exhibit10.17 of the Registrant’s Annual Report on Form 10-K filed on February 6, 2013 (File No. 001-34666)).†10.18 Distributor Agreement, dated June 5, 2009, between the Registrant and Moly Tech Limited (incorporated by reference to Exhibit 10.18of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.19 Distributor Agreement, dated October 3, 2005, between the Registrant and Tomen Electronics Corporation (incorporated by reference toExhibit 10.19 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).†10.20 Distributor Agreement, dated August 19, 2009, between the Registrant and Lestina International Ltd. (incorporated by reference toExhibit 10.20 of the Registrant’s Registration Statement on Form S-1 and all amendments thereto (File No. 333-162947)).+10.21 MaxLinear, Inc. Executive Bonus Plan, as amended (incorporated herein by reference to Exhibit 10.21 of the Registrant’s AnnualReport on Form 10-K filed on February 17, 2016).10.22 Employment Offer Letter, dated April 22, 2011, between the Registrant and Michael LaChance (incorporated by reference to Exhibit10.22 of the Registrant’s Annual Report on Form 10-K filed on March 14, 2012 (File No. 001-34666)).10.23 Stock Repurchase Agreement, dated August 21, 2012, by and among the Registrant, Mission Ventures III, L.P., Mission VenturesAffiliates III, L.P., and U.S. Venture Partners VIII, L.P. (incorporated by reference to Exhibit 10.23 of the Registrant’s Current Report onForm 8-K filed on August 22, 2012 (File No. 001-34666)).+10.24 Stock Repurchase Agreement, dated October 31, 2012, by and among the Registrant, U.S. Venture Partners VIII, L.P, USVP VIIIAffiliates Fund, L.P., USVP Entrepreneur Partners VIII-A, L.P. and USVP Entrepreneur Partners VIII-B, L.P. (incorporated by reference toExhibit 10.24 of the Registrant’s Current Report on Form 8-K filed on October 31, 2012 (File No. 001-34666)).10.25 Separation Agreement, dated March 15, 2012, by and between the Registrant and Patrick E. McCready (incorporated by reference toExhibit 10.2 of the Registrant’s Current Report on Form 8-K filed on March 15, 2012 (File No. 001-34666)).+10.26 Lease Agreement, dated December 17, 2013, between Registrant and The Campus Carlsbad, LLC (incorporated by reference to Exhibit10.26 of the Registrant’s Annual Report on Form 10-K filed on February 7, 2014 (File No. 001-34666)).+10.27 Separation Agreement and Release, dated December 15, 2014, by and between the Registrant and Brian J. Sprague (incorporated byreference to Exhibit 10.27 of the Registrant’s Current Report on Form 8-K filed on December 16, 2014 (File No. 001-34666)).10.28 Form of MaxLinear Voting Agreement (incorporated by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filedon February 4, 2015 (File No. 001-34666)).10.29 Form of Entropic Voting Agreement (incorporated by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K filed onFebruary 4, 2015 (File No. 001-34666)).10.30 First Amendment to Lease, dated May 6, 2015, between Registrant, on the one hand, and Brookwood CB I, LLC and Brookwood CB II,LLC, as tenants in common and successors-in-interest to The Campus Carlsbad, LLC, on the other hand (incorporated by reference toExhibit 10.1 of Registrant’s Quarterly Report on Form 10-Q filed on August 10, 2015 (File No. 333-34666)).+10.31 Entropic Communications, Inc. 2007 Equity Incentive Plan and Form of Option Agreement, Form of Option Grant Notice thereunderand Notice of Exercise (incorporated herein by reference to Entropic Communication, Inc.’s Annual Report on Form 10-K filed onMarch 3, 2008 (File No. 001-33844)).+10.32 Entropic Communications, Inc. 2007 Non-Employee Directors’ Stock Option Plan and Form of Option Agreement, Forms of GrantNotice, and Notice of Exercise thereunder (incorporated herein by reference to Entropic Communications, Inc.’s Registration Statementon Form S-1 filed on July 27, 2007 (No. 333-144899)).10.33 Lease Agreement, dated November 11, 2015, between Registrant and The Northwestern Mutual Life Insurance Company (incorporatedherein by reference to Exhibit 10.33 of the Registrant’s Annual Report on Form 10-K filed on February 17, 2016).10.34 Asset Purchase Agreement, by and between the Company and Microsemi, dated as of April 28, 2016 (incorporated herein by referenceto Exhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on April 28, 2016).65Table of Contents10.35 Asset Purchase Agreement, dated as of May 9, 2016, by and between the Registrant and Broadcom (incorporated herein by reference toExhibit 10.1 of the Registrant’s Current Report on Form 8-K filed on May 9, 2016).10.36 Employment Offer Letter, dated December 21, 2015, between the Registrant and Dana McCarty (incorporated herein by reference toExhibit 10.1 of the Registrant’s Current Report on Form 10-Q filed on May 9, 2016).+10.37 Employment Promotion Letter, dated February 11, 2016, between the Registrant and Connie Kwong (incorporated herein by referenceto Exhibit 10.1 of the Registrant’s Current Report on Form 10-Q filed on May 9, 2016).*11.1 Statement re computation of income (loss) per share (included on pages F-14 through F-15 of this Form 10-K).*21.1 Subsidiaries of the Registrant.*23.1 Consent of Grant Thornton LLP, Independent Registered Public Accounting Firm.*23.2 Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.*24.1 Power of Attorney (included on the signature page of this Form 10-K).*31.1 Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.*31.2 Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.#*32.1 Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.101.INS XBRL Instance Document101.SCH XBRL Taxonomy Extension Schema Document101.CAL XBRL Taxonomy Extension Calculation Linkbase Document101.DEF XBRL Taxonomy Extension Definition Linkbase Document101.LAB XBRL Taxonomy Extension Label Linkbase Document101.PRE XBRL Taxonomy Extension Presentation Linkbase Document*Filed herewith.#In accordance with Item 601(b)(32)(ii) of Regulation S-K and SEC Release No. 33-8238 and 34-47986, Final Rule: Management’s Reports on InternalControl Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports, the certifications furnished pursuant to this itemwill not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Suchcertification will not be deemed to be incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent thatthe registrant specifically incorporates it by reference.+Indicates a management contract or compensatory plan.†Confidential treatment has been requested and received for certain portions of these exhibits.(b) ExhibitsThe exhibits filed as part of this report are listed in Item 15(a)(3) of this Form 10-K.(c) SchedulesThe financial statement schedules required by Regulation S-X and Item 8 of this form are listed in Item 15(a)(2) of this Form 10-K.66Table of ContentsSIGNATURESPursuant to the requirements of Section 13 or 15 (d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on itsbehalf by the undersigned, thereunto duly authorized. MAXLINEAR, INC. (Registrant) By: /s/ KISHORE SEENDRIPU, PH.D Kishore Seendripu, Ph.D President and Chief Executive OfficerDate:February 8, 2017 (Principal Executive Officer)67Table of ContentsPOWER OF ATTORNEYKNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kishore Seendripu, Ph.D.and Adam C. Spice, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution, to sign any and allamendments (including post-effective amendments) to this Annual Report on Form 10-K and to file the same, with all exhibits thereto and other documentsin connection therewith, with the Securities and Exchange Commission, granting unto each of said attorneys-in-fact and agents, full power and authority todo and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as he or shemight or could do in person, hereby ratifying and confirming all that each of said attorneys-in-facts and agents, or his substitute or substitutes, or any of them,shall do or cause to be done by virtue hereof.Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of theregistrant and in the capacities and on the dates indicated:Signature Title Date/s/ KISHORE SEENDRIPU, PH.D President and Chief Executive Officer February 8, 2017Kishore Seendripu, Ph.D (Principal Executive Officer) /s/ ADAM C. SPICE Chief Financial Officer February 8, 2017Adam C. Spice (Principal Financial Officer) /s/ CONNIE KWONG Corporate Controller February 8, 2017Connie Kwong (Principal Accounting Officer) /s/ THOMAS E. PARDUN Lead Director February 8, 2017Thomas E. Pardun /s/ STEVEN C. CRADDOCK Director February 8, 2017Steven C. Craddock /s/ CURTIS LING, PH.D Director February 8, 2017Curtis Ling, Ph.D /s/ ALBERT J. MOYER Director February 8, 2017Albert J. Moyer /s/ DONALD E. SCHROCK Director February 8, 2017Donald E. Schrock /s/ THEODORE TEWSBURY Director February 8, 2017Theodore Tewksbury 68Table of ContentsMaxLinear, Inc.Index to Consolidated Financial StatementsReport of Independent Registered Public Accounting Firm - Grant Thornton LLPF-2Report of Independent Registered Public Accounting Firm - Ernst & Young LLPF-3Consolidated Balance SheetsF-4Consolidated Statements of OperationsF-5Consolidated Statements of Comprehensive Income (Loss)F-6Consolidated Statements of Stockholders’ EquityF-7Consolidated Statements of Cash FlowsF-8Notes to Consolidated Financial StatementsF-9F-1Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and StockholdersMaxLinear, Inc.We have audited the accompanying consolidated balance sheets of MaxLinear, Inc. (the “Company”) as of December 31, 2016, and the related consolidatedstatements of operations, comprehensive income, stockholders' equity and cash flows for the year then ended. Our audit also included the financial statementschedule listed in the index appearing under Item 15(a)(2). These financial statements and financial statement schedule are the responsibility of theCompany's management. Our responsibility is to express an opinion on these financial statements and financial statement schedule based on our audit.We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditprovides a reasonable basis for our opinion.In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MaxLinear, Inc. as ofDecember 31, 2016, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally acceptedin the United States of America. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic consolidated financialstatements taken as a whole, presents fairly in all material respects the information set forth therein.As discussed in Note 1 to the consolidated financial statements under Recent Accounting Pronouncements, effective January 1, 2016, the Company adoptedthe provisions of Accounting Standards Update No. 2016-09, Improvements to Share-Based Compensation related to the accounting for stock-basedcompensation.We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's internal controlover financial reporting as of December 31, 2016, based on criteria established in the 2013 Internal Control-Integrated Framework issued by the Committeeof Sponsoring Organizations of the Treadway Commission (COSO) and our report dated February 8, 2017 expressed an unqualified opinion thereon./s/ Grant Thornton LLPIrvine, CaliforniaFebruary 8, 2017F-2Table of ContentsREPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRMThe Board of Directors and Stockholders of MaxLinear, Inc.We have audited the accompanying consolidated balance sheet of MaxLinear, Inc. as of December 31, 2015, and the related consolidated statements ofoperations, comprehensive loss, stockholders' equity and cash flows for each of the two years in the period ended December 31, 2015. Our audits alsoincluded the financial statement schedule for the two years in the period ended December 31, 2015 listed in the Index at Item 15(a)(2). These financialstatements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements andschedule based on our audits.We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require thatwe plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includesexamining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accountingprinciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our auditsprovide a reasonable basis for our opinion.In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of MaxLinear, Inc. atDecember 31, 2015, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2015, inconformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule for the two years in the periodended December 31, 2015, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects theinformation set forth therein./s/ Ernst & Young LLPIrvine, CaliforniaFebruary 17, 2016F-3Table of ContentsMAXLINEAR, INC.CONSOLIDATED BALANCE SHEETS(in thousands, except par value amounts) December 31, December 31, 2016 2015 Assets Current assets: Cash and cash equivalents$82,896 $67,956Short-term investments, available-for-sale47,918 43,300Accounts receivable, net50,487 42,399Inventory26,583 32,443Prepaid expenses and other current assets6,159 3,904Total current assets214,043 190,002Property and equipment, net20,549 21,858Long-term investments, available-for-sale5,991 19,242Intangible assets, net104,261 51,355Goodwill76,015 49,779Other long-term assets1,793 2,269Total assets$422,652 $334,505Liabilities and stockholders’ equity Current liabilities: Accounts payable$6,757 $6,389Deferred revenue and deferred profit5,991 4,066Accrued price protection liability15,176 20,026Accrued expenses and other current liabilities16,358 15,368Accrued compensation10,261 9,983Total current liabilities54,543 55,832Deferred rent9,656 11,427Other long-term liabilities6,029 4,322Total liabilities70,228 71,581 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, no shares issued or outstanding— —Class A common stock, $0.0001 par value; 500,000 shares authorized, 58,363 and 55,737 shares issued andoutstanding at December 31, 2016 and 2015, respectively6 5Class B common stock, $0.0001 par value; 500,000 shares authorized, 6,668 and 6,665 shares issued andoutstanding at December 31, 2016 and 2015, respectively1 1Additional paid-in capital413,909 384,961Accumulated other comprehensive loss(1,560) (822)Accumulated deficit(59,932) (121,221)Total stockholders’ equity352,424 262,924Total liabilities and stockholders’ equity$422,652 $334,505See accompanying notes.F-4Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF OPERATIONS(in thousands, except per share data) Years Ended December 31, 2016 2015 2014Net revenue$387,832 $300,360 $133,112Cost of net revenue157,842 144,937 51,154Gross profit229,990 155,423 81,958Operating expenses: Research and development97,745 85,405 56,625Selling, general and administrative64,454 77,981 34,191IPR&D impairment losses1,300 21,600 —Restructuring charges3,432 14,086 —Total operating expenses166,931 199,072 90,816Income (loss) from operations63,059 (43,649) (8,858)Interest income572 275 236Other income (expense), net59 468 (123)Income (loss) before income taxes63,690 (42,906) (8,745)Provision (benefit) for income taxes2,398 (575) (1,704)Net income (loss)$61,292 $(42,331) $(7,041)Net income (loss) per share: Basic$0.96 $(0.79) $(0.19)Diluted$0.91 $(0.79) $(0.19)Shares used to compute net income (loss) per share: Basic63,781 53,378 36,472Diluted67,653 53,378 36,472See accompanying notes.F-5Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)(in thousands) Years Ended December 31, 2016 2015 2014Net income (loss)$61,292 $(42,331) $(7,041)Other comprehensive income (loss), net of tax: Unrealized gain (loss) on investments, net of tax $27 in 2016, and $0 in 2015and 201411 (93) (60)Less: Reclassification adjustments of unrealized gain, net of tax $0 in2016, 2015 and 2014— 21 —Unrealized gain (loss) on investments, net of tax11 (72) (60)Foreign currency translation adjustments, net of tax benefit of $39 in 2016,$184 in 2015, and $0 in 2014 (1)(749) (725) (23)Foreign currency translation adjustments, net of tax(749) (725) (23)Other comprehensive loss(738) (797) (83)Total comprehensive income (loss)$60,554 $(43,128) $(7,124)___________________________(1) Tax amount recognized in Other Long-Term Liabilities of the Consolidated Balance Sheets as part of long-term deferred tax liabilities.See accompanying notes.F-6Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY(in thousands, except share amounts) Class ACommon Stock Class BCommon Stock AdditionalPaid-InCapital AccumulatedOtherComprehensiveIncome (Loss) AccumulatedDeficit Total Stockholders’Equity Shares Amount Shares Amount Balance at December 31, 2013 27,002 $3 8,338 $1 $158,360 $58 $(71,748) $86,674Conversion of Class B common stock to Class Acommon stock 1,405 — (1,405) — — — — —Common stock issued pursuant to equity awards, net 2,043 — 51 — 1,486 — — 1,486Employee stock purchase plan 477 — — — 3,058 — — 3,058Stock-based compensation — — — — 15,008 — — 15,008Other comprehensive loss — — — — — (83) — (83)Net loss — — — — — — (7,041) (7,041)Balance at December 31, 2014 30,927 3 6,984 1 177,912 (25) (78,789) 99,102Shares repurchased — — — — — — (101) (101)Conversion of Class B common stock to Class Acommon stock 500 — (500) — — — — —Common stock issued pursuant to equity awards, net 3,420 — 181 — 6,603 — — 6,603Issuance of common stock for merger with EntropicCommunications, Inc. 20,373 2 — — 177,559 — — 177,561Employee stock purchase plan 517 — — — 3,619 — — 3,619Stock-based compensation — — — — 19,268 — — 19,268Other comprehensive loss — — — — — (797) — (797)Net loss — — — — — — (42,331) (42,331)Balance at December 31, 2015 55,737 5 6,665 1 384,961 (822) (121,221) 262,924Shares repurchased — — — — — — (3) (3)Conversion of Class B common stock to Class Acommon stock 3 — (3) — — — — —Common stock issued pursuant to equity awards, net 2,344 1 6 — 2,839 — — 2,840Employee stock purchase plan 279 — — — 4,134 — — 4,134Stock-based compensation — — — — 21,975 — — 21,975Other comprehensive loss — — — — — (738) — (738)Net income — — — — — — 61,292 61,292Balance at December 31, 2016 58,363 $6 6,668 $1 $413,909 $(1,560) $(59,932) $352,424See accompanying notes.F-7Table of ContentsMAXLINEAR, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS(in thousands) Years Ended December 31,2016 2015 2014Operating Activities Net income (loss)$61,292 $(42,331) $(7,041)Adjustments to reconcile net income (loss) to cash provided by operating activities: Amortization and depreciation26,703 40,641 5,107Impairment of IPR&D assets1,300 21,600 —Provision for losses on accounts receivable87 178 —Amortization of investment premiums, net169 554 724Amortization of inventory step-up5,641 14,244 —Stock-based compensation21,765 19,268 15,008Deferred income taxes101 (1,906) (2,281)Loss on disposal of property and equipment366 74 —Gain on sale of available-for-sale securities(50) (21) (3)Change in fair value of contingent consideration220 130 —Impairment of long-lived assets— 153 29Impairment of lease388 8,163 —Gain on foreign currency(216) — —Excess tax benefits on stock-based awards(8,291) — —Changes in operating assets and liabilities, net of acquisitions: Accounts receivable(8,175) 5,160 1,982Inventory9,846 (6,247) (757)Prepaid expenses and other assets402 4,495 (752)Accounts payable, accrued expenses and other current liabilities3,249 (22,033) 83Accrued compensation5,609 5,320 3,911Deferred revenue and deferred profit1,925 454 961Accrued price protection liability(4,850) 6,522 (4,999)Other long-term liabilities(164) 623 262Net cash provided by operating activities117,317 55,041 12,234Investing Activities Purchases of property and equipment(8,512) (2,996) (8,800)Purchases of intangible assets(390) (100) —Cash used in acquisition, net of cash acquired(101,000) (3,615) (9,136)Purchases of available-for-sale securities(90,307) (73,377) (56,702)Maturities of available-for-sale securities98,896 69,029 57,172Net cash used in investing activities(101,313) (11,059) (17,466)Financing Activities Repurchases of common stock(3) (101) —Net proceeds from issuance of common stock6,649 9,950 3,304Minimum tax withholding paid on behalf of employees for restricted stock units(7,316) (5,141) (3,810)Equity issuance costs— (705) —Net cash provided by (used in) financing activities(670) 4,003 (506)Effect of exchange rate changes on cash and cash equivalents(394) (725) (16)Increase (decrease) in cash and cash equivalents14,940 47,260 (5,754)Cash and cash equivalents at beginning of period67,956 20,696 26,450Cash and cash equivalents at end of period$82,896 $67,956 $20,696Supplemental disclosures of cash flow information: Cash paid for income taxes$1,583 $41 $187Supplemental disclosures of non-cash investing and financing activities: Issuance of accrued share-based bonus plan$7,649 $5,459 $5,050Lease incentive for leasehold improvements$61 $4,255 $2,008Issuance of restricted stock units to Physpeed continuing employees$1,061 $— $—See accompanying notes.F-8Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) 1. Organization and Summary of Significant Accounting PoliciesDescription of BusinessMaxLinear, Inc. was incorporated in Delaware in September 2003. MaxLinear, Inc., together with its wholly owned subsidiaries, collectively referredto as MaxLinear, or the Company, is a provider of radio-frequency and mixed-signal integrated circuits for cable and satellite broadband communicationsand the connected home, and wired and wireless infrastructure markets. MaxLinear's customers include module makers, original equipment manufacturers, orOEMs, and original design manufacturers, or ODMs, who incorporate the Company’s products in a wide range of electronic devices including Pay-TVoperator set-top boxes, DOCSIS data and voice gateways, hybrid analog and digital televisions and consumer terrestrial set-top boxes, Direct BroadcastSatellite outdoor units, optical modules for data center, metro, and long-haul transport network applications, and RF transceivers and modem solutions forwireless carrier infrastructure applications. The Company is a fabless semiconductor company focusing its resources on the design, sales and marketing of itsproducts.Basis of Presentation and Principles of ConsolidationThe consolidated financial statements include the accounts of MaxLinear, Inc. and its wholly owned subsidiaries and have been prepared inaccordance with accounting principles generally accepted in the United States of America, or GAAP. All intercompany transactions and investments havebeen eliminated in consolidation. Certain prior period amounts have been reclassified to conform with the current period presentation.The functional currency of certain foreign subsidiaries is the local currency. Accordingly, assets and liabilities of these foreign subsidiaries aretranslated at the current exchange rate at the balance sheet date and historical rates for equity. Revenue and expense components are translated at weightedaverage exchange rates in effect during the period. Gains and losses resulting from foreign currency translation are included as a component of stockholders’equity. Foreign currency transaction gains and losses are included in the results of operations and, to date, have not been significant.Use of EstimatesThe preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect theamounts reported in the consolidated financial statements and accompanying notes of the consolidated financial statements. Actual results could differ fromthose estimates.Business CombinationsThe Company applies the provisions of ASC 805, Business Combinations, in accounting for its acquisitions. It requires the Company to recognizeseparately from goodwill the assets acquired and the liabilities assumed, at the acquisition date fair values. Goodwill as of the acquisition date is measured asthe excess of consideration transferred over the net of the acquisition date fair values of the assets acquired and the liabilities assumed. While the Companyuses its best estimates and assumptions to accurately value assets acquired and liabilities assumed at the acquisition date as well as contingent consideration,where applicable, its estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one yearfrom the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed with the corresponding offset to goodwill. Uponthe conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequentadjustments are recorded to the consolidated statements of operations.Costs to exit or restructure certain activities of an acquired company or the Company's internal operations are accounted for as termination and exitcosts pursuant to ASC 420, Exit or Disposal Cost Obligations, and are accounted for separately from the business combination. A liability for costsassociated with an exit or disposal activity is recognized and measured at its fair value in the consolidated statement of operations in the period in which theliability is incurred. When estimating the fair value of facility restructuring activities, assumptions are applied regarding estimated sub-lease payments to bereceived, which can differ materially from actual results. This may require the Company to revise its initial estimates which may materially affect the resultsof operations and financial position in the period the revision is made.F-9Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) For a given acquisition, the Company may identify certain pre-acquisition contingencies as of the acquisition date and may extend its review andevaluation of these pre-acquisition contingencies throughout the measurement period in order to obtain sufficient information to assess whether theCompany includes these contingencies as a part of the fair value estimates of assets acquired and liabilities assumed and, if so, to determine their estimatedamounts.If the Company cannot reasonably determine the fair value of a pre-acquisition contingency (non-income tax related) by the end of the measurementperiod, which is generally the case given the nature of such matters, the Company will recognize an asset or a liability for such pre-acquisition contingencyif: (i) it is probable that an asset existed or a liability had been incurred at the acquisition date and (ii) the amount of the asset or liability can be reasonablyestimated. Subsequent to the measurement period, changes in estimates of such contingencies will affect earnings and could have a material effect on resultsof operations and financial position.In addition, uncertain tax positions and tax related valuation allowances assumed in connection with a business combination are initially estimated asof the acquisition date. The Company reevaluates these items quarterly based upon facts and circumstances that existed as of the acquisition date with anyadjustments to the preliminary estimates being recorded to goodwill if identified within the measurement period. Subsequent to the measurement period orfinal determination of the tax allowance’s or contingency’s estimated value, whichever comes first, changes to these uncertain tax positions and tax relatedvaluation allowances will affect the provision for income taxes in the consolidated statement of operations and could have a material impact on the results ofoperations and financial position.Cash and Cash EquivalentsThe Company considers all liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash equivalents arerecorded at cost, which approximates market value.As of December 31, 2016 and 2015, the Company has restricted cash of $1.8 million and $1.2 million, respectively. The cash is on deposit inconnection with a guarantee for certain office leases.Accounts ReceivableThe Company performs ongoing credit evaluations of its customers and assesses each customer's credit worthiness. The Company monitors collectionsand payments from its customers and maintains an allowance for doubtful accounts based upon its historical experience, its anticipation of uncollectibleaccounts receivable and any specific customer collection issues that the Company has identified. As of December 31, 2016 and 2015, the Company has anallowance for doubtful accounts of $0.1 million and $0.2 million, respectively.InventoryThe Company assesses the recoverability of its inventory based on assumptions about demand and market conditions. Forecasted demand isdetermined based on historical sales and expected future sales. Inventory is stated at the lower of cost or market. Cost approximates actual cost on a first-in,first-out basis and market reflects current replacement cost (e.g. net replacement value) which cannot exceed net realizable value or fall below net realizablevalue less an allowance for an approximately normal profit margin. The Company reduces its inventory to its lower of cost or market on a part-by-part basis toaccount for its obsolescence or lack of marketability. Reductions are calculated as the difference between the cost of inventory and its market value basedupon assumptions about future demand and market conditions. Once established, these adjustments are considered permanent and are not revised until therelated inventory is sold or disposed of.Investments, Available-for-SaleThe Company classifies all investments as available-for-sale, as the sale of such investments may be required prior to maturity to implementmanagement strategies. These investments are carried at fair value, with unrealized gains and losses reported as accumulated other comprehensive incomeuntil realized. The cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization and accretion, aswell as interest and dividends, are included in interest income. Realized gains and losses from the sale of available-for-sale investments, if any, aredetermined on a specific identification basis and are also included in interest income.F-10Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Fair Value of Financial InstrumentsThe carrying amount of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses and compensation are considered tobe representative of their respective fair value because of the short-term nature of these accounts. Investment securities, available-for-sale, are carried at fairvalue.Property and EquipmentProperty and equipment is carried at cost and depreciated over the estimated useful lives of the assets, ranging from two to five years, using thestraight-line method. Leasehold improvements are stated at cost and amortized over the shorter of the estimated useful lives of the assets or the lease term.Depreciation expense for the years ended December 31, 2016, 2015 and 2014 was $10.6 million, $10.8 million and $4.6 million, respectively.Production MasksProduction masks with alternative future uses or discernible future benefits are capitalized and amortized over their estimated useful life of two years.To determine if the production mask has alternative future uses or benefits, the Company evaluates risks associated with developing new technologies andcapabilities, and the related risks associated with entering new markets. Production masks that do not meet the criteria for capitalization are expensed asresearch and development costs.Goodwill and Intangible AssetsGoodwill is recorded as the difference, if any, between the aggregate consideration paid for an acquisition and the fair value of the acquired nettangible and intangible assets. Intangible assets represent purchased intangible assets including developed technology, in-process research and development,or IPR&D, technologies acquired or licensed from other companies, customer relationships, backlog and tradenames. Purchased intangible assets withdefinitive lives are capitalized and amortized over their estimated useful lives. Technologies acquired or licensed from other companies, customerrelationships, backlog and tradenames are capitalized and amortized over the lesser of the terms of the agreement, or estimated useful life. The Companycapitalizes IPR&D projects acquired as part of a business combination. On completion of each project, IPR&D assets are reclassified to developed technologyand amortized over their estimated useful lives.Impairment of Goodwill and Long-Lived AssetsGoodwill is the excess of the purchase price over the fair value of identifiable net assets acquired in business combinations accounted for under theacquisition method. Goodwill is not amortized but is tested for impairment using a qualitative assessment, and subsequently the two-step method as needed.Step one is the identification of potential impairment. This involves comparing the fair value of each reporting unit, which the Company has determined tobe the entity itself, with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds the carrying amount, the goodwill of thereporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of a reporting unit exceeds its fairvalue, the second step of the impairment test is performed to measure the amount of impairment loss, if any. The Company tests by reporting unit, goodwilland other indefinite-lived intangible assets for impairment as of October 31 each year or more frequently if it believes indicators of impairment exist.During development, IPR&D is not subject to amortization and is tested for impairment annually or more frequently if events or changes incircumstances indicate that the asset might be impaired. The Company reviews indefinite-lived intangible assets for impairment using a qualitativeassessment, followed by a quantitative assessment, as needed, each year as of October 31, the date of its annual goodwill impairment review, or wheneverevents or changes in circumstances indicate the carrying value may not be recoverable. Recoverability of indefinite-lived intangible assets is measured bycomparing the carrying amount of the asset to its fair value. In certain cases, the Company utilizes the relief-from-royalty method when appropriate, and a fairvalue will be obtained based on analysis over the costs saved by owning the right instead of leasing it. Once an IPR&D project is complete, it becomes a finite-lived intangible asset and is evaluated for impairment both immediately prior to its change inclassification and thereafter in accordance with the Company's policy for long-lived assets.The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the useful lives, todetermine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss would berecognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, theimpairment loss would be measured based on the excess of the carrying amount of the asset over the asset’s fair value.F-11Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) During 2016 and 2015, the Company identified impairment of IPR&D of $1.3 million and $21.6 million, respectively. Refer to Goodwill andIntangible Assets, Note 5 for more information.Revenue RecognitionRevenue is generated from sales of the Company’s integrated circuits. The Company recognizes revenue when all of the following criteria are met:1) there is persuasive evidence that an arrangement exists, 2) delivery of goods has occurred, 3) the sales price is fixed or determinable and 4) collectability isreasonably assured. Title to product transfers to customers either when it is shipped to or received by the customer, based on the terms of the specificagreement with the customer.Revenue is recorded based on the facts at the time of sale. Transactions for which the Company cannot reliably estimate the amount that willultimately be collected at the time the product has shipped and title has transferred to the customer are deferred until the amount that is probable of collectioncan be determined. Items that are considered when determining the amounts that will be ultimately collected are: a customer’s overall creditworthiness andpayment history; customer rights to return unsold product; customer rights to price protection; customer payment terms conditioned on sale or use of productby the customer; or extended payment terms granted to a customer.A portion of the Company’s revenues are generated from sales made through distributors under agreements allowing for pricing credits and/or stockrotation rights of return. Revenues from sales through the Company’s distributors accounted for 19%, 13% and 28% of net revenue for the years endedDecember 31, 2016, 2015 and 2014, respectively. Pricing credits to the Company’s distributors may result from its price protection and unit rebateprovisions, among other factors. These pricing credits and/or stock rotation rights prevent the Company from being able to reliably estimate the final salesprice of the inventory sold and the amount of inventory that could be returned pursuant to these agreements. As a result, for sales through distributors, theCompany has determined that it does not meet all of the required revenue recognition criteria at the time it delivers its products to distributors as the finalsales price is not fixed or determinable.For these distributor transactions, revenue is not recognized until product is shipped to the end customer and the amount that will ultimately becollected is fixed or determinable. Upon shipment of product to these distributors, title to the inventory transfers to the distributor and the distributor isinvoiced, generally with 30 to 60 day terms. On shipments to the Company’s distributors where revenue is not recognized, the Company records a tradereceivable for the selling price as there is a legally enforceable right to payment, relieving the inventory for the carrying value of goods shipped since legaltitle has passed to the distributor, and records the corresponding gross profit in the consolidated balance sheet as a component of deferred revenue anddeferred profit, representing the difference between the receivable recorded and the cost of inventory shipped. Future pricing credits and/or stock rotationrights from the Company’s distributors may result in the realization of a different amount of profit included in the Company’s future consolidated statementsof operations than the amount recorded as deferred profit in the Company’s consolidated balance sheets.The Company records reductions in revenue for estimated pricing adjustments related to price protection agreements with the Company’s endcustomers in the same period that the related revenue is recorded. Price protection pricing adjustments are recorded at the time of sale as a reduction torevenue and an increase in the Company’s accrued liabilities. The amount of these reductions is based on specific criteria included in the agreements andother factors known at the time. The Company accrues 100% of potential price protection adjustments at the time of sale and does not apply a breakagefactor. The Company de-recognizes the accrual for unclaimed price protection amounts as specific programs contractually end and when the Companybelieves unclaimed amounts are no longer subject to payment and will not be paid. See Note 7 for a summary of the Company's price protection activity.F-12Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) WarrantyThe Company generally provides a warranty on its products for a period of one to three years. The Company makes estimates of product return ratesand expected costs to replace the products under warranty at the time revenue is recognized based on historical warranty experience and any known productwarranty issues. If actual return rates and/or replacement costs differ significantly from these estimates, adjustments to recognize additional cost of netrevenue may be required in future periods. As of December 31, 2016 and 2015, the Company has $0.9 million and $0.2 million of warranty reserves based onthe Company’s analysis.Segment InformationThe Company operates in one segment as it has developed, marketed and sold primarily only one class of similar products, radio frequency and mixed-signal integrated circuits for cable and satellite broadband communications and the connected home, and wired and wireless infrastructure markets.Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly bythe chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s chiefoperating decision maker is its Chief Executive Officer. The Company’s Chief Executive Officer reviews financial information presented on a consolidatedbasis for purposes of allocating resources and evaluating financial performance. The Company has one business activity and there are no segment managerswho are held accountable for operations, operating results and plans for products or components below the consolidated unit level. Accordingly, theCompany reports as a single operating segment.Stock-based CompensationThe Company measures the cost of employee services received in exchange for equity incentive awards, including stock options, employee stockpurchase rights, restricted stock units and restricted stock awards based on the grant date fair value of the award. The Company uses the Black-Scholesvaluation model to calculate the fair value of stock options and employee stock purchase rights granted to employees. The Company calculates the fair valueof restricted stock units and restricted stock awards based on the fair market value of its Class A common stock on the grant date. Stock-based compensationexpense is recognized over the period during which the employee is required to provide services in exchange for the award, which is usually the vestingperiod. The Company recognizes compensation expense over the vesting period using the straight-line method and classifies these amounts in the statementsof operations based on the department to which the related employee reports.Research and DevelopmentCosts incurred in connection with the development of the Company’s technology and future products are charged to research and developmentexpense as incurred.Income TaxesThe Company provides for income taxes utilizing the asset and liability approach of accounting for income taxes. Under this approach, deferred taxesrepresent the future tax consequences expected to occur when the reported amounts of assets and liabilities are recovered or paid. Deferred taxes are presentednet as noncurrent. The provision for income taxes generally represents income taxes paid or payable for the current year plus the change in deferred taxesduring the year. Deferred taxes result from the differences between the financial and tax bases of the Company’s assets and liabilities and are adjusted forchanges in tax rates and tax laws when changes are enacted. Valuation allowances are recorded to reduce deferred tax assets when a judgment is made that isconsidered more likely than not that a tax benefit will not be realized. A decision to record a valuation allowance results in an increase in income tax expenseor a decrease in income tax benefit. If the valuation allowance is released in a future period, income tax expense will be reduced accordingly.The calculation of tax liabilities involves dealing with uncertainties in the application of complex global tax regulations. The impact of an uncertainincome tax position is recognized at the largest amount that is “more likely than not” to be sustained upon audit by the relevant taxing authority. Anuncertain income tax position will not be recognized if it has less than a 50% likelihood of being sustained. If the estimate of tax liabilities proves to be lessthan the ultimate assessment, a further charge to expense would result.F-13Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred taxassets will be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in whichthose temporary differences become deductible. The Company continually assesses the need for a valuation allowance on the deferred tax asset by evaluatingboth positive and negative evidence that may exist. Any adjustment to the net deferred tax asset valuation allowance would be recorded in the incomestatement for the period that the adjustment is determined to be required.Comprehensive Income (Loss)Comprehensive income (loss) is defined as the change in equity (net assets) of a business entity during a period from transactions and other events andcircumstances from non-owner sources. Other comprehensive income (loss) includes certain changes in equity that are excluded from net income (loss), suchas unrealized holding gains and losses on available-for-sale investments, net of tax, and translation gains and losses.The following table summarizes the balances in accumulated other comprehensive income (loss) by component: Available for SaleInvestments Cumulative TranslationAdjustments Total (in thousands)Balance at December 31, 2015$45 $(867) $(822)Balance at December 31, 2016$55 $(1,615) $(1,560)Net Income (Loss) per ShareBasic net income (loss) per share is computed by dividing net income (loss) attributable to the Company by the weighted average number of shares ofClass A and Class B common stock outstanding during the period. For diluted net income (loss) per share, net income attributable to the Company is dividedby the sum of the weighted average number of shares of Class A and Class B common stock outstanding and the potential number of shares of dilutive ClassA and Class B common stock outstanding during the period.Litigation and Settlement CostsLegal costs are expensed as incurred. The Company is involved in disputes, litigation and other legal actions in the ordinary course of business. TheCompany continually evaluates uncertainties associated with litigation and records a charge equal to at least the minimum estimated liability for a losscontingency when both of the following conditions are met: (i) information available prior to issuance of the financial statements indicates that it is probablethat an asset had been impaired or a liability had been incurred at the date of the financial statements and (ii) the loss or range of loss can be reasonablyestimated.Recent Accounting PronouncementsIn May 2014, the Financial Accounting Standards Board, or FASB, issued new accounting guidance related to revenue recognition. This new standardwill replace all current U.S. GAAP guidance on this topic and eliminate all industry-specific guidance. The new revenue recognition standard provides aunified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer ofpromised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goodsor services. This guidance will be effective for the Company beginning in the first quarter of fiscal year 2018 and can be applied either retrospectively to eachperiod presented or as a cumulative-effect adjustment as of the date of adoption. Adoption of the amendments in this guidance is expected to accelerate thetiming of the Company’s revenue recognition on products sold via distributors which will change from the sell-through method to the sell-in method. TheCompany currently has no plans to alter its selling practices or terms of sales through distributors in anticipation of adoption of the amendments in thisguidance. The Company has performed a preliminary assessment of the impact of adopting this new accounting standard on its consolidated financialposition and results of operations and believes the change would not have a material impact on the Company's revenues for the year ending December 31,2018 and comparative periods expected to be presented, based on the current volume and amount of distributor transactions. The Company plans to applythe guidance prospectively with an adjustment to retained earnings for the cumulative effect of adoption.F-14Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) In July 2015, the FASB issued ASU No. 2015-11, Simplifying the Measurement of Inventory, which requires inventory to be subsequently measuredusing the lower of cost and net realizable value, and thereby eliminating the market value approach. The FASB has defined net realizable value to be the“estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.” ASU 2015-11 iseffective for the Company beginning in the first quarter of fiscal year 2017 and is applied prospectively. The adoption of the amendments in this update arenot expected to have a material impact on the Company's consolidated financial position and results of operations.In September 2015, the FASB issued ASU No. 2015-16, Business Combinations: Simplifying the Accounting for Measurement-Period Adjustments. Tosimplify the accounting for adjustments made to provisional amounts recognized in a business combination, the amendments in this update eliminate therequirement to retrospectively account for those adjustments and to revise comparative information for prior periods presented as a result of changes made toprovisional amounts. Instead, those adjustments are recognized in the reporting period that the adjustments are determined. Those adjustments are requiredwhen new information is obtained about facts and circumstances that existed as of the acquisition date that, if known, would have affected the measurementof the amounts initially recognized or would have resulted in the recognition of additional assets or liabilities. The amendments in this update also require anentity to present separately on the face of the income statement or disclose in the notes the portion of the amount recorded in current-period earnings by lineitem that would have been recorded in previous reporting periods if the adjustment to the provisional amounts had been recognized as of the acquisitiondate. The amendments in this update were effective for the Company beginning in the first quarter of fiscal year 2016, and were applied prospectively. Theadoption of ASU No. 2015-16 by the Company in 2016 did not have a material impact on the Company’s consolidated financial position and results ofoperations.In January 2016, the FASB issued ASU No. 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities. The amendments inthis update include a requirement to measure equity investments (except equity method investments) at fair value with changes in fair value recognized innet income; previously changes in fair value were recognized in other comprehensive income. The amendments in this update are effective for the Companybeginning in the first quarter of fiscal year 2018. The adoption of the amendments in this update are not expected to have a material impact on the Company'sconsolidated financial position and results of operations.In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842). The amendments in this update require a lessee to recognize in the statementof financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for thelease term for all leases with terms greater than twelve months. For leases less than twelve months, an entity is permitted to make an accounting policyelection by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes this election, it should recognize lease expense forsuch leases generally on a straight-line basis over the lease term. The amendments in this update are effective for the Company for fiscal years beginning withfiscal year 2019, including interim periods within those years, with early adoption permitted. The Company is currently in the process of evaluating theimpact of adoption of the amendments in this update on the Company’s consolidated financial position and results of operations; however, adoption of theamendments in this update is expected to have a material impact on the Company's consolidated financial position.In March 2016, the FASB issued ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) to clarify therevenue recognition implementation guidance on principal versus agent considerations. The amendments in this update clarify that when another party isinvolved in providing goods or services to a customer, an entity that is the principal has obtained control of a good or service before it is transferred to acustomer, and provides indicators to assist an entity in determining whether it controls a specified good or service prior to the transfer to the customer. Anentity that is the principal recognizes revenue in the gross amount of consideration to which it expects to be entitled in exchange for the specified good orservice transferred to the customer, whereas an agent recognizes revenue in the amount of any fee or commission to which it expects to be entitled inexchange for arranging for the specified good or service to be provided by the other party. The amendments in this update are effective for the Companybeginning in the first quarter of fiscal year 2018, concurrent with the new revenue recognition standard. The adoption of the amendments in this update arenot expected to have a material impact on the Company's consolidated financial position and results of operations.In March 2016, the FASB issued ASU No. 2016-09, Improvements to Share-Based Compensation to simplify certain aspects of accounting for share-based payment transactions associated with income taxes, classification as equity or liabilities, and classification on the statement of cash flows. Theamendments in this update are effective for the Company for fiscal years beginning with fiscal year 2017, including interim periods within those years, withearly adoption permitted. Early adoption, if elected, must be completed for all of the amendments in the same period. The new guidance requires, amongother things,F-15Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) excess tax benefits and tax deficiencies to be recorded in the income statement in the provision for income taxes when awards vest or are settled. Also,because excess tax benefits are no longer recognized in additional paid-in capital, the assumed proceeds from applying the treasury stock method whencomputing earnings per share is amended to exclude the amount of excess tax benefits that would be recognized in additional paid-in capital. The Companyadopted ASU No. 2016-09 during the quarter ended June 30, 2016, as previously described in the Company's Report on Form 10-Q for the period ended June30, 2016 filed with the Securities Exchange Commission on August 8, 2016. For the year ended December 31, 2016, the impact of adoption on theCompany's results of operations was to reduce the provision for income taxes and increase net income by $8.3 million and increase basic net income per shareby $0.13, and increase diluted net income per share by $0.12. The increase to diluted net income per share includes the effect of the reduction of the taxprovision and an increase in the number of incremental shares used in computing diluted EPS by 846,000 shares for the year ended December 31, 2016 (Note2). Also, excess tax benefits have been included on a prospective basis as a non-cash reconciling item in the consolidated statement of operations for the yearended December 31, 2016; prior periods have not been adjusted.There was no cumulative effect on retained earnings in the consolidated balance sheet since the Company has a full valuation allowance against U.S.deferred tax assets. The Company elected to continue to estimate forfeitures of share-based awards resulting in no impact to stock-based compensationexpense, and is also continuing to classify cash paid by the Company when directly withholding shares for tax withholding purposes in cash flows fromfinancing activities.In August 2016, the FASB issued ASU No. 2016-15, Classification of Certain Cash Receipts and Cash Payments to eliminate the diversity in practiceregarding the presentation and classification of certain cash receipts and cash payments, including, among other things, contingent consideration paymentsmade following a business combination and proceeds from the settlement of insurance claims in the statement of cash flows. Cash payments not made soonafter the acquisition date up to the amount of the contingent consideration liability recognized at the acquisition date should be classified as financingactivities, with any excess payments classified as operating activities, whereas cash payments made soon after the acquisition date to settle the contingentconsideration should be classified as investing activities. Cash proceeds received from settlement of insurance claims should be classified on the basis of thenature of the related losses. The amendments in this update are effective for the Company in fiscal years beginning with fiscal year 2017, including interimperiods within those years, with early adoption permitted. The Company does not expect the adoption of the amendments in this update to have a materialimpact on its consolidated statement of cash flows.In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740) to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transferuntil the asset has been sold to an outside party. The Board decided that an entity should recognize the income tax consequences of an intra-entity transfer ofan asset other than inventory when the transfer occurs. The amendments in this update are effective for the Company beginning in the first quarter of fiscal2018. The impact of adoption of the amendments in this update could be material depending on the size of any intra-entity transfers the Company mayimplement in 2018 and future periods.2. Net Income (Loss) Per ShareNet income (loss) per share is computed as required by the accounting standard for earnings per share, or EPS. Basic EPS is calculated by dividing netincome (loss) by the weighted-average number of common shares outstanding for the period, without consideration for common stock equivalents. DilutedEPS is computed by dividing net income (loss) by the weighted-average number of common shares outstanding for the period and the weighted-averagenumber 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 thecalculation of diluted EPS when their effect is dilutive.As a result of the Company's adoption of ASU No. 2016-09 in the second quarter 2016, excess tax benefits and tax deficiencies are no longerrecognized in additional paid-in capital. As a result, when computing diluted EPS using the treasury stock method, fewer hypothetical shares can berepurchased resulting in a greater number of incremental shares being issued upon the exercise of share-based payment awards. The impact of adoption ofASU No. 2016-09 for the year ended December 31, 2016 on diluted income (loss) per share (Note 1) is to increase net income by $8.3 million due to theinclusion of excess tax benefits in the provision for income taxes, and to increase the number of incremental shares used in computing diluted EPSby 846,000 shares, or an increase to diluted net income per share of $0.12 per share.F-16Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The Company has two classes of stock outstanding, Class A common stock and Class B common stock. The economic rights of the Class A commonstock and Class B common stock, including rights in connection with dividends and payments upon a liquidation or merger are identical, and the Class Acommon stock and Class B common stock will be treated equally, identically and ratably, unless differential treatment is approved by the Class A commonstock and Class B common stock, each voting separately as a class. The Company computes basic earnings per share by dividing net income (loss) by theweighted average number of shares of Class A and Class B common stock outstanding during the period. For diluted earnings per share, the Company dividesnet income (loss) by the sum of the weighted average number of shares of Class A and Class B common stock outstanding and the potential number of sharesof dilutive Class A and Class B common stock outstanding during the period. Years Ended December 31, 2016 2015 2014 (in thousands, except per share amounts)Numerator: Net income (loss)$61,292 $(42,331) $(7,041)Denominator: Weighted average common shares outstanding—basic63,781 53,378 36,472Dilutive common stock equivalents3,872 — —Weighted average common shares outstanding—diluted67,653 53,378 36,472Net income (loss) per share: Basic$0.96 $(0.79) $(0.19)Diluted$0.91 $(0.79) $(0.19)The Company excluded 0.8 million, 3.0 million and 3.1 million common stock equivalents resulting from outstanding equity awards for the yearended December 31, 2016, 2015 and 2014, respectively, from the calculation of diluted net income (loss) per share due to their anti-dilutive nature.3. Business CombinationsAcquisition of Certain Assets and Assumption of Certain Liabilities of the Wireless Infrastructure Backhaul Business of Broadcom CorporationOn July 1, 2016, the Company consummated the transactions contemplated by an asset purchase agreement entered into with Broadcom Corporation.The Company paid cash consideration of $80.0 million for the purchase of certain assets of Broadcom's wireless infrastructure backhaul business, and theassumption of certain liabilities. The assets acquired include, among other things, digital baseband, radio frequency, or RF, and analog/mixed signal patentsand other intellectual property, in-production and next-generation digital baseband and RF transceiver integrated circuit and reference platform designs, aworkforce-in-place, and other intangible assets, as well as tangible assets that include but are not limited to production masks and other production relatedassets, inventory, and other property and equipment. The liabilities assumed include, among other things, product warranty obligations, liabilities related totechnologies acquired, and a payable to Broadcom as reimbursement of costs associated with the termination of those employees of the wireless infrastructurebackhaul business who were not hired by MaxLinear upon the closing of the acquisition. The acquired assets and assumed liabilities, together with therehired employees, represent a business as defined in ASC 805, Business Combinations. The Company has integrated the acquired assets and rehiredemployees into the Company's existing business. The asset purchase agreement also contains customary representations, warranties and covenants, includingnon-competition, non-solicitation, and indemnification provisions.F-17Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The following is a preliminary allocation of purchase price as of the July 1, 2016 closing date based upon an estimate of the fair value of the assetsacquired and the liabilities assumed by the Company in the acquisition:DescriptionAmount (in thousands)Fair value of consideration transferred: Cash$80,000 Preliminary purchase price allocation: Inventory$8,715Other current assets2,181Property and equipment, net1,616Identifiable intangible assets56,300Accrued expenses and other current liabilities(5,911) Accrued compensation(2,202)Identifiable net assets acquired60,699Goodwill19,301Total purchase price$80,000The estimated fair value of assets acquired and liabilities assumed performed for the purposes of these consolidated financial statements was primarilylimited to the preliminary identification and valuation of intangible assets and inventory by independent valuation specialists. Estimates of fair value requiremanagement to make significant estimates and assumptions that are preliminary and subject to change upon finalization of the valuation analysis. Althoughfinal determination may result in different asset and liability fair values, it is not expected that such differences will be material to understanding the impactof the transaction on the financial results of MaxLinear. The goodwill recognized is attributable primarily to the acquired workforce, expected synergies, andother benefits that MaxLinear believes will result from integrating the operations of the wireless infrastructure backhaul business with the operations ofMaxLinear.The fair value of inventories acquired included an acquisition accounting fair market value step-up of $5.3 million, which was fully amortized as ofDecember 31, 2016. The Company recognized the $5.3 million amortization of inventory step-up in cost of sales in the consolidated statement of operationsfor the year ended December 31, 2016.The following table presents details of the identified intangible assets acquired of the wireless infrastructure backhaul business: Estimated Useful Life(in years) Fair Value(in thousands)Developed technology7 $19,100Customer relationships2.5 12,200Backlog0.5 1,900Covenants not-to-compete3 800Total finite-lived intangible assets4.9 34,000In-process research and developmentn/a 22,300Total intangible assets $56,300The Company used cash and cash equivalents on hand of $80.0 million to fund the acquisition.F-18Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Acquisition of Certain Assets and Assumption of Certain Liabilities of the Wireless Infrastructure Access Business of Microsemi Storage Solutions, Inc.(formerly known as PMC-Sierra, Inc.)On April 28, 2016, the Company entered into an asset purchase agreement with Microsemi Storage Solutions, Inc., formerly known as PMC-Sierra, Inc.,or Microsemi, and consummated the transactions contemplated by the asset purchase agreement. The Company paid cash consideration of $21.0 million forthe purchase of certain wireless access assets of Microsemi's wireless infrastructure access business, and assumed certain liabilities. The assets acquiredinclude, among other things, radio frequency and analog/mixed signal patents and other intellectual property, in-production and next-generation RFtransceiver designs, a workforce-in-place, and other intangible assets, as well as tangible assets that include but are not limited to production masks and otherproduction related assets, inventory, and other property, plant, and equipment. The liabilities assumed include, product warranty obligations, accruedvacation and severance obligations for employees of the wireless infrastructure access business that were hired by the Company upon close of the acquisition.The acquired assets and assumed liabilities, together with the rehired employees, represent a business as defined in ASC 805, Business Combinations. TheCompany has integrated the acquired assets and rehired employees into the Company's existing business. The asset purchase agreement also containscustomary representations, warranties and covenants, including non-competition, non-solicitation, and indemnification provisions.The following allocation of purchase price as of the April 28, 2016 closing date was based upon an estimate of the fair value of the assets acquired andthe liabilities assumed by the Company in the acquisition:DescriptionAmount (in thousands)Fair value of consideration transferred: Cash$21,000 Purchase price allocation: Inventory$912Property and equipment21Identifiable intangible assets13,600Warranty obligations(12) Accrued expenses(456)Identifiable net assets acquired14,065Goodwill6,935Total purchase price$21,000The fair value of assets acquired and liabilities assumed performed for the purposes of these consolidated financial statements was primarily limited tothe identification and valuation of intangible assets and inventory by independent valuation specialists. The valuation analysis performed by independentvaluation specialists was finalized during the period ended September 30, 2016. The goodwill recognized is attributable primarily to the acquired workforce,expected synergies, and other benefits that MaxLinear believes will result from integrating the operations of the wireless infrastructure access business withthe operations of MaxLinear.The fair value of inventories acquired included an acquisition accounting fair market value step-up of $0.3 million, which was fully amortized as ofDecember 31, 2016. The Company recognized the $0.3 million amortization of inventory step-up in cost of sales in the consolidated statement of operationsfor the year ended December 31, 2016.F-19Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The following table presents details of the identified intangible assets acquired of the wireless infrastructure access business: Estimated Useful Life(in years) Fair Value(in thousands)Developed technology7 $8,600Customer relationships2.7 3,100Backlog0.5 500Covenants not-to-compete3 100Total finite-lived intangible assets5.6 12,300In-process research and developmentn/a 1,300Total intangible assets $13,600The Company used cash and cash equivalents on hand of $21.0 million to fund the acquisition.The fair value of the identified intangible assets acquired from the wireless infrastructure access and backhaul businesses was estimated using anincome approach. Under the income approach, an intangible asset's fair value is equal to the present value of future economic benefits to be derived fromownership of the asset. Indications of value are developed by discounting future net cash flows to their present value at market-based rates of return. Morespecifically, the fair value of the developed technology, IPR&D and backlog assets was determined using the multi-period excess earnings method, orMPEEM. MPEEM is an income approach to fair value measurement attributable to a specific intangible asset being valued from the asset grouping’s overallcash-flow stream. MPEEM isolates the expected future discounted cash-flow stream to its net present value. Significant factors considered in the calculationof the developed technology and IPR&D intangible assets were the risks inherent in the development process, including the likelihood of achievingtechnological success and market acceptance. Each project was analyzed to determine the unique technological innovations, the existence and reliance oncore technology, the existence of any alternative future use or current technological feasibility and the complexity, cost, and time to complete the remainingdevelopment. Future cash flows for each project were estimated based on forecasted revenue and costs, taking into account the expected product life cycles,market penetration, and growth rates. Developed technology will begin amortization immediately and IPR&D will begin amortization upon the completionof each project. If any of the projects are abandoned, the Company will be required to impair the related IPR&D asset.In connection with the acquisition of the wireless infrastructure access and backhaul businesses, the Company has assumed liabilities related toproduct quality issues, warranty claims and contract obligations which are included in accrued expenses and other current liabilities in the purchase priceallocations above.The total goodwill recorded in connection with the acquisitions of the wireless infrastructure access and backhaul businesses was $6.9 million and$19.3 million, respectively. The Company does not expect to deduct any of the acquired goodwill for tax purposes.The following table presents unaudited pro forma combined financial information for each of the periods presented, as if the acquisitions had occurredat the beginning of fiscal year 2015: Years Ended December 31, 2016 2015 (in thousands)Net revenue – proforma combined$398,845 $333,885Net income (loss) – proforma combined$58,189 $(85,908)F-20Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The following adjustments were included in the unaudited pro forma combined net revenues: Years Ended December 31, 2016 2015 (in thousands)Net revenue$387,832 $300,360Add: Net revenue – acquired businesses11,013 33,525Net revenues – proforma combined$398,845 $333,885The following adjustments were included in the unaudited pro forma combined net income (loss): Years Ended December 31, 2016 2015 (in thousands)Net income (loss)$61,292 $(42,331)Add: Results of operations – acquired businesses(8,822) (22,227)Less: Proforma adjustments Depreciation of property and equipment(397) (797)Amortization of intangible assets(2,346) (12,701)Amortization of inventory step-up5,641 (5,641)Impairment of intangible assets1,300 (1,300)Acquisition and integration expenses2,141 —Income taxes(620) (911)Net income (loss) – proforma combined$58,189 $(85,908) Net income (loss) per share – proforma combined: Basic$0.91 $(1.61)Diluted$0.86 $(1.61)Shares used to compute net income (loss) per share – proforma combined: Basic63,781 53,378Diluted67,653 53,378The pro forma combined financial information for the year ended December 31, 2015 includes aggregate non-recurring adjustments of $8.0 millionconsisting of amortization of inventory step-up and intangible assets of $5.6 million and $2.4 million, respectively, for which the related assets have usefullives of less than one year, and impairment of intangible assets of $1.3 million. The pro forma combined financial information is presented for illustrativepurposes only and is not necessarily indicative of the consolidated results of operations of the consolidated business had the acquisitions actually occurred atthe beginning of fiscal year 2015 or of the results of future operations of the consolidated business. The unaudited pro forma financial information does notreflect any operating efficiencies and cost saving that may be realized from the integration of the acquisitions in the Company's unaudited consolidatedstatements of operations.For the year ended December 31, 2016, $15.4 million of revenue and $11.2 million of gross profit, excluding $7.8 million of amortization of acquiredintangible assets and the inventory fair-value step-up of the wireless infrastructure access and backhaul businesses since the acquisition dates are included inthe Company's consolidated statements of operations.Acquisition and integration-related costs of $2.1 million related to the acquisitions of the wireless infrastructure access and backhaul businesses wereincluded in selling, general, and administrative expenses in the Company's statement of operations for the year ended December 31, 2016.F-21Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Acquisition of Entropic Communications, Inc.On April 30, 2015, the Company completed its acquisition of Entropic Communications, Inc., or Entropic, for aggregate consideration of $289.4million, which was comprised of the equity value of shares of the Company's common stock that were issued in the transaction of $173.8 million, the portionof outstanding equity awards deemed to have been earned as of April 30, 2015 of $4.5 million and cash of $111.1 million.In connection with the Company’s acquisition of Entropic and to address issues primarily relating to the integration of the Company and Entropicbusinesses, the Company entered into a restructuring plan. See Note 4.Acquisition of Physpeed, Co., Ltd.On October 31, 2014, the Company acquired 100% of the outstanding common shares of Physpeed Co., Ltd., or Physpeed, a privately held developerof high-speed physical layer interconnect products addressing enterprise and telecommunications infrastructure market applications. The Company paid $9.3million in cash in exchange for all outstanding shares of capital stock and equity of Physpeed. Consideration payable of $1.1 million to the formershareholders of Physpeed was placed into escrow pursuant to the terms of the definitive merger agreement and was paid out as of December 31, 2015.The following disclosures regarding this acquisition are for the years ended December 31, 2016 and 2015.Compensation ArrangementsIn connection with the acquisition of Physpeed, the Company has agreed to pay additional consideration in future periods. The definitive mergeragreement provided for potential consideration of $1.7 million of held back merger proceeds for the former principal shareholders of Physpeed, which werepaid over a two year period which ended October 2016 contingent upon continued employment. Certain employees of Physpeed were paid a total of $0.1million of which $0.07 million was paid in 2015 and $0.05 million was paid in 2016. These payments were accounted for as transactions separate from thebusiness combination as the payments are contingent upon continued employment and were recorded as post-combination compensation expense in theCompany's financial statements during the service period.Earn-OutThe definitive merger agreement also provides for potential earn-out consideration of up to $0.75 million to the former shareholders of Physpeed forthe achievement of certain 2015 and 2016 revenue milestones. The contingent earn-out consideration had an estimated fair value of $0.3 million at the dateof acquisition. The 2015 earn-out is determined by multiplying $0.375 million by a 2015 revenue percentage that is defined in the definitive mergeragreement. The 2016 earn-out is determined by multiplying $0.375 million by a 2016 revenue percentage that is defined in the definitive merger agreementand was fully earned as of December 31, 2016. The fair value of the earn-out was $0.4 million and $0.4 million at December 31, 2016 and 2015, respectively.During the year ended December 31, 2016, the Company paid $0.2 million for the 2015 earn out (Note 6).RSU AwardsThe Company agreed to grant restricted stock units, or RSUs, under its equity incentive plan to Physpeed continuing employees if certain 2015 and2016 revenue targets were met contingent upon continued employment. Qualifying revenues are the net revenues directly attributable to sales of Physpeedproducts or the Company’s provision of non-recurring engineering services exclusively with respect to the Physpeed products.4. Restructuring ActivityDuring 2016, the Company approved and implemented a plan to restructure its internal operations including exiting certain leases and terminating 24employees. Pursuant to the restructuring plan, the Company ceased use of certain offices. Accordingly, the Company recognized lease impairment charges of$0.2 million based on the adjustment to the net present value of the remaining lease obligations on the cease use date. The Company also recorded leaseholdimprovements and other property write offs of $0.1 million in connection with the office closures. The Company recognized associated employee separationcharges of approximately $1.0 million in the year ended December 31, 2016 related to these terminations.F-22Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) In connection with the Company's acquisition of Entropic, the Company approved and implemented a restructuring plan to address matters primarilyrelating to the integration of the Company and Entropic businesses. In connection with this plan, the Company terminated the employment of 87 Entropicemployees during the year ended December 31, 2015. The Company recognized associated employee separation charges of approximately $5.5 million inthe year ended December 31, 2015 related to these terminations. Included in these employee separation charges is $1.5 million of stock compensation foraccelerated stock options and RSUs vesting due to double trigger change of control agreements and other special agreements in effect with certain Entropicemployees.Additionally, in connection with the restructuring plan, the Company ceased use of the majority of Entropic's former headquarters. Accordingly, theCompany recognized lease impairment charges of $2.7 million in the year ended December 31, 2015 based on the net present value of the remaining leaseobligation on the cease use date. The Company also recorded impairment charges of $5.2 million in the year ended December 31, 2015 related to leaseholdimprovements on the unused premises. During the year ended December 31, 2016, the Company recorded additional lease impairment charges of $2.0million. This included adjustments to the estimates of net present value of the remaining lease obligation for actual sublease income and period costsassociated with the Entropic lease, including commissions to brokers involved in subleasing property. Total sublease income for the year ended December31, 2016 was approximately $1.3 million and related to leased facilities the Company ceased using as part of the Entropic restructuring plan.The following table presents the activity related to the plans, which is included in restructuring charges in the consolidated statements of operations: Year Ended December 31, 2016 Year Ended December 31, 2015 (in thousands)Employee separation expenses$1,038 $5,533Lease related impairment2,264 8,163Other130 390 $3,432 $14,086The Company does not expect to incur additional material costs related to these restructuring plans.The following table presents a roll-forward of the Company's restructuring liability for the years ended December 31, 2016 and 2015, which isincluded in accrued expenses and other current liabilities in the consolidated balance sheets: Employee SeparationExpenses Lease RelatedImpairment Other Total (in thousands)Liability as of December 31, 2014$— $— $— $—Acquisition— 984 1,479 2,463Restructuring charges5,533 8,163 390 14,086Cash payments(3,913) (1,645) (284) (5,842)Non-cash charges(1,545) (5,472) (274) (7,291)Liability as of December 31, 201575 2,030 1,311 3,416Restructuring charges1,038 2,264 130 3,432Cash payments(1,047) (4,039) (1,338) (6,424)Non-cash charges(66) 244 (66) 112Liability as of December 31, 2016$— $499 $37 $536F-23Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) 5. Goodwill and Intangible AssetsGoodwillGoodwill arises from the acquisition method of accounting for business combinations and represents the excess of the purchase price over the fairvalue of the net assets and other identifiable intangible assets acquired. The fair values of net tangible assets and intangible assets acquired are based uponpreliminary valuations and the Company's estimates and assumptions are subject to change within the measurement period (potentially up to one year fromthe acquisition date). As of December 31, 2016, the Company completed its purchase price allocation for the acquisition of the wireless infrastructure accessbusiness.The following table presents the changes in the carrying amount of goodwill for the periods indicated: Years Ended December 31, 2016 2015 (in thousands)Beginning balance$49,779 $1,201Acquisition of wireless infrastructure access business6,935 —Acquisition of wireless infrastructure backhaul business19,301 —Acquisition of Entropic— 48,578Ending balance$76,015 $49,779The Company performs an annual impairment assessment on October 31st each year. In evaluating goodwill, the Company utilizes a qualitativeassessment, i.e., the “Step 0 Test,” as a precursor to the two-step quantitative process. If the Company fails the Step 0 Test, it proceeds to test for impairmentusing the two-step method. Step one is the identification of potential impairment. This involves comparing the fair value of each reporting unit, which theCompany has determined to be the entity itself, with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds the carryingamount, the goodwill of the reporting unit is considered not impaired and the second step of the impairment test is unnecessary. If the carrying amount of areporting unit exceeds its fair value, the second step of the impairment test is performed to measure the amount of impairment loss, if any.Using the Step 0 Test, the Company assessed qualitative factors to determine that it is more likely than not that the fair value of the reporting unit is notless than its carrying value. Based on our review of these qualitative factors and their respective weightings, we determined there were no indications ofimpairment associated with goodwill. As a result, no goodwill impairment was recognized as of October 31, 2016. In addition to its annual review, theCompany performs a test of impairment when indicators of impairment are present. As of December 31, 2016, there were no indications of impairment of theCompany's goodwill balances.F-24Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Acquired IntangiblesFinite-lived Intangible AssetsThe following table sets forth the Company’s finite-lived intangible assets resulting from business acquisitions and technology licenses purchased,which continue to be amortized: December 31, 2016 December 31, 2015 WeightedAverageUseful Life(in Years) Gross CarryingAmount AccumulatedAmortization Net CarryingAmount Gross CarryingValue AccumulatedAmortization Net CarryingAmount (in thousands)Licensed technology3 $3,311 $(2,957) $354 $2,921 $(2,725) $196Developed technology7 77,800 (13,550) 64,250 47,000 (4,652) 42,348Trademarks and trade names7 1,700 (405) 1,295 1,700 (162) 1,538Customer relationships3.7 20,000 (4,782) 15,218 4,700 (627) 4,073Covenants non-compete3 900 (156) 744 — — —Backlog0.5 26,600 (26,600) — 24,200 (24,200) — $130,311 $(48,450) $81,861 $80,521 $(32,366) $48,155The amortization expense related to intangible assets for the years ended December 31, 2016, 2015 and 2014 was $16.1 million, $29.9 million and$0.4 million, respectively.The following table sets forth the Company’s activities related to finite-lived intangible assets resulting from acquisitions, other additions, transfers todeveloped technology from IPR&D, and the related amortization of acquired finite-lived intangible assets: Years Ended December 31, 2016 2015 (in thousands)Beginning balance$48,155 $3,086Acquisition of Entropic— 74,200Acquisition of wireless infrastructure access business12,300 —Acquisition of wireless infrastructure backhaul business34,000 —Other additions390 100Transfers to developed technology from IPR&D3,100 700Amortization(16,084) (29,931)Ending balance$81,861 $48,155The Company regularly reviews the carrying amount of its long-lived assets subject to depreciation and amortization, as well as the useful lives, todetermine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. An impairment loss would berecognized when the sum of the expected future undiscounted net cash flows is less than the carrying amount of the asset. Should impairment exist, theimpairment loss would be measured based on the excess of the carrying amount of the asset over the asset’s fair value. During the year ended December 31,2016, no impairment losses related to finite-lived intangible assets were recognized.F-25Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The following table presents future amortization of the Company’s finite-lived intangible assets at December 31, 2016: Amortization(in thousands)2017$18,803201818,786201912,485202011,670202111,293Thereafter8,824Total$81,861Indefinite-lived Intangible AssetsThe following table sets forth the Company’s activities related to the indefinite-lived intangible assets resulting from additions to IPR&D throughacquisitions, transfers to developed technology from IPR&D and impairment losses: Years Ended December 31, 2016 2015 (in thousands)Beginning balance$3,200 $7,300Acquisition of Entropic— 18,200Acquisition of wireless infrastructure access business1,300 —Acquisition of wireless infrastructure backhaul business22,300 —Transfers to developed technology from IPR&D(3,100) (700)Impairment losses$(1,300) $(21,600)Ending balance$22,400 $3,200Impairment losses from indefinite lived intangible assets of $1.3 million for the year ended December 31, 2016 are related to the Company'sabandonment of IPR&D of the wireless infrastructure access business and were recognized in the quarter ended September 30, 2016. The Company performsits annual assessment of indefinite-lived intangible assets on October 31 each year, utilizing a qualitative test as a precursor to the quantitative testcomparing 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 impairmentexists, the Company proceeds to perform a quantitative analysis. Based on the Company’s assessment as of October 31, 2016, no additional impairment ofindefinite-lived intangible assets was recorded during the year ended December 31, 2016.The Company recorded $21.6 million in IPR&D impairment losses during the year ended December 31, 2015. The Company recorded a $17.8 millionimpairment loss for its CSS/FBC IPR&D asset, which was transferred to developed technology on October 31, 2015. This intangible asset was obtainedthrough the Entropic acquisition, having an initial fair value of $18.1 million. Due to updated customer demand information obtained in the fourth quarter,the Company revised its net revenue forecast and utilized the relief-from-royalty method to determine the fair value of the asset. In addition, the Companyfully impaired its CDR IPR&D asset, which contributed to a $3.8 million impairment loss. This asset was obtained as part of the Physpeed acquisition with aninitial fair value of $3.8 million.F-26Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) 6. Financial InstrumentsThe composition of financial instruments is as follows: December 31, 2016AmortizedCost Gross Unrealized FairValueGains Losses (in thousands)Assets Money market funds$39,181 $— $— $39,181Government debt securities28,025 — (32) 27,993Corporate debt securities25,923 — (7) 25,916 93,129 — (39) 93,090Less amounts included in cash and cash equivalents(39,181) — — (39,181) $53,948 $— $(39) $53,909 Fair Value atDecember 31, 2016 (in thousands)Liabilities Contingent consideration$375 December 31, 2015AmortizedCost Gross Unrealized FairValueGains Losses (in thousands)Assets Money market funds$17,144 $— $— $17,144Government debt securities17,303 — (30) 17,273Corporate debt securities45,353 — (84) 45,269 79,800 — (114) 79,686Less amounts included in cash and cash equivalents(17,144) — — (17,144) $62,656 $— $(114) $62,542 Fair Value atDecember 31, 2015 (in thousands)Liabilities Contingent consideration$395As of December 31, 2016, the Company held 25 government and corporate debt securities with an aggregate fair value of $42.2 million that were in anunrealized loss position for less than 12 months. The gross unrealized losses of $0.04 million at December 31, 2016 represent temporary impairments ongovernment and corporate debt securities related to multiple issuers, and were primarily caused by fluctuations in U.S. interest rates. The Company evaluatessecurities for other-than-temporary impairment on a quarterly basis. Impairment is evaluated considering numerous factors, and their relative significancevaries depending on the situation. Factors considered include the length of time and extent to which fair value has been less than the cost basis, the financialcondition and near-term prospects of the issuer; including changes in the financial condition of the security’s underlying collateral; any downgrades of thesecurity by a rating agency; nonpayment of scheduled interest, or the reduction or elimination of dividends; as well as our intent and ability to hold thesecurity in order to allow for an anticipated recovery in fair value.F-27Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) All of the Company’s long-term available-for-sale securities were due between 1 and 2 years as of December 31, 2016.The fair values of the Company’s financial instruments are the amounts that would be received in an asset sale or paid to transfer a liability in anorderly transaction between unaffiliated market participants and are recorded using a hierarchal disclosure framework based upon the level of subjectivity ofthe 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.The Company classifies its financial instruments within Level 1 or Level 2 of the fair value hierarchy on the basis of valuations using quoted marketprices or alternate pricing sources and models utilizing market observable inputs, respectively. The Company’s money market funds were valued based onquoted prices for the specific securities in an active market and were therefore classified as Level 1. The government and corporate debt securities have beenvalued on the basis of valuations provided by third-party pricing services, as derived from such services’ pricing models. The pricing services may use aconsensus price which is a weighted average price based on multiple sources or mathematical calculations to determine the valuation for a security, and havebeen classified as Level 2. The Company reviews Level 2 inputs and fair value for reasonableness and the values may be further validated by comparison toindependent pricing sources. In addition, the Company reviews third-party pricing provider models, key inputs and assumptions and understands the pricingprocesses at its third-party providers in determining the overall reasonableness of the fair value of its Level 2 financial instruments. As of December 31, 2016and 2015, the Company has not made any adjustments to the prices obtained from its third party pricing providers. The contingent liability is classified asLevel 3 as of December 31, 2016 and 2015 and is valued using an internal rate of return model. The assumptions used in preparing the internal rate of returnmodel include estimates for future revenues related to Physpeed products and services and a discount factor of 1 at December 31, 2016 and 0.41 atDecember 31, 2015. The assumptions used in preparing the internal rate of return model include estimates for outcome if milestone goals are achieved, theprobability of achieving each outcome and discount rates. Significant changes in any of the unobservable inputs used in the fair value measurement ofcontingent consideration in isolation could result in a significantly lower or higher fair value. A change in estimated future revenues would be accompaniedby a directionally similar change in fair value.The following table presents a summary of the Company’s financial instruments that are measured on a recurring basis: Fair Value Measurements at December 31, 2016 Balance at December 31, 2016 Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) (in thousands)Assets Money market funds$39,181 $39,181 $— $—Government debt securities27,993 — 27,993 —Corporate debt securities25,916 — 25,916 — $93,090 $39,181 $53,909 $—Liabilities Contingent consideration$375 $— $— $375 $375 $— $— $375F-28Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Fair Value Measurements at December 31, 2015 Balance atDecember 31,2015 Quoted Pricesin ActiveMarkets forIdentical Assets(Level 1) SignificantOtherObservableInputs(Level 2) SignificantUnobservableInputs(Level 3) (in thousands)Assets Money market funds$17,144 $17,144 $— $—Government debt securities17,273 — 17,273 —Corporate debt securities45,269 — 45,269 — $79,686 $17,144 $62,542 $—Liabilities Contingent consideration$395 $— $— $395 $395 $— $— $395The following summarizes the activity in Level 3 financial instruments: Fair Value at December 31, 2016 2015 (in thousands)Contingent Consideration (1) Beginning balance$395 $265Physpeed earn-out payment(240) —Loss recognized in earnings (2)220 130Ending balance$375 $395Net loss for the period included in earnings attributable to contingent consideration held at the end of the period:$220 $130(1)In connection with the acquisition of Physpeed, the Company recorded contingent consideration based upon the expected achievement of certain 2015and 2016 revenue milestones. Changes to the fair value of contingent consideration due to changes in assumptions used in preparing the valuationmodel are recorded in selling, general and administrative expense in the statements of operations.(2)Changes to the estimated fair value of contingent consideration were primarily due to revisions to the Company's expectations of earn-out achievement.There were no transfers between Level 1, Level 2 or Level 3 securities in the years ended December 31, 2016 and 2015.7. Balance Sheet DetailsCash and cash equivalents and investments consist of the following: December 31, 2016 December 31, 2015 (in thousands)Cash and cash equivalents$82,896 $67,956Short-term investments47,918 43,300Long-term investments5,991 19,242 $136,805 $130,498F-29Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Inventory consists of the following: December 31, 2016 December 31, 2015 (in thousands)Work-in-process$13,947 $15,713Finished goods12,636 16,730 $26,583 $32,443Property and equipment consist of the following: Useful Life(in Years) December 31, 2016 December 31, 2015 (in thousands)Furniture and fixtures5 $1,983 $2,458Machinery and equipment3 -5 27,028 23,679Masks and production equipment2 9,153 8,062Software3 3,625 3,017Leasehold improvements1 -5 11,635 9,573Construction in progressN/A 39 62 53,463 46,851Less accumulated depreciation and amortization (32,914) (24,993) $20,549 $21,858Deferred revenue and deferred profit consist of the following: December 31, 2016 December 31, 2015 (in thousands)Deferred revenue—rebates$464 $118Deferred revenue—distributor transactions7,987 5,695Deferred cost of net revenue—distributor transactions(2,460) (1,747) $5,991 $4,066Accrued price protection liability consists of the following activity: Years Ended December 31, 2016 2015 (in thousands)Beginning balance$20,026 $10,018Additional liability from acquisition— 3,486Charged as a reduction of revenue43,931 39,304Reversal of unclaimed rebates(1,303) (158)Payments(47,478) (32,624)Ending balance$15,176 $20,026F-30Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Accrued expenses and other current liabilities consist of the following: December 31, 2016 December 31, 2015 (in thousands)Accrued technology license payments$5,850 $3,000Accrued professional fees1,620 1,196Accrued engineering and production costs1,232 826Accrued restructuring536 3,416Accrued royalty846 2,042Accrued leases1,560 —Accrued customer credits1,207 951Other3,507 3,937 $16,358 $15,368F-31Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) 8. Stock-Based Compensation and Employee Benefit PlansCommon StockAt December 31, 2016, the Company had 500 million authorized shares of Class A common stock and 500 million authorized shares of Class Bcommon stock. Holders of the Company’s Class A and Class B common stock have identical voting rights, except that holders of Class A common stock areentitled to one vote per share and holders of Class B common stock are entitled to ten votes per share with respect to transactions that would result in achange of control of the Company or that relate to the Company’s equity incentive plans. In addition, holders of Class B common stock have the exclusiveright to elect two members of the Company’s Board of Directors, each referred to as a Class B Director. The shares of Class B common stock are not publiclytraded. Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock and in mostinstances automatically converts upon sale or other transfer. On March 29, 2017, each share of the Company’s then outstanding Class A common stock andClass B common stock will convert automatically into a single class of common stock pursuant to the terms of the Company’s Amended and RestatedCertificate of Incorporation. Following the conversion, each share of common stock will be entitled to one vote per share and otherwise have the samedesignations, rights, powers and preferences as the Class A common stock prior to the conversion. In addition, holders of the common stock will vote as asingle class of stock on any matter that is submitted to a vote of stockholders.Employee Benefit PlansAt December 31, 2016, the Company had stock-based compensation awards outstanding under the following plans: the 2004 Stock Plan, the 2010Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP, as well as the following former Entropic plans: theRF Magic 2000 Incentive Stock Plan, the 2001 Stock Option Plan, the 2007 Equity Incentive Plan, the 2007 Non-Employee Director's Plan and the 2012Inducement Award Plan. All current stock awards are issued under the 2010 Plan and ESPP.2010 Equity Incentive PlanThe 2010 Plan provides for the grant of incentive stock options, non-statutory stock options, restricted stock awards, restricted stock unit awards, stockappreciation rights, performance-based stock awards, and other forms of equity compensation, or collectively, stock awards. The aggregate number of sharesof Class A common stock that may be issued pursuant to stock awards under the 2010 Plan will increase by any shares subject to stock options or otherawards granted under the 2004 Stock Plan that expire or otherwise terminate without having been exercised in full and shares issued pursuant to awardsgranted under the 2004 Stock Plan that are forfeited to or repurchased by the Company. In addition, the number of shares of common stock reserved forissuance will automatically increase on the first day of each fiscal year, equal to the lesser of: 2,583,311 shares of the Company’s Class A common stock; fourpercent (4%) of the outstanding shares of the Company’s Class A common stock and Class B common stock on the last day of the immediately precedingfiscal year; or such lesser amount as the Company’s board of directors may determine. Options granted will generally vest over a four year period and the termcan be from seven to ten years. As of December 31, 2016, the number of shares reserved for issuance under the 2010 Plan is 10,689,175 shares.2010 Employee Stock Purchase PlanThe ESPP authorizes the issuance of shares of the Company’s Class A common stock pursuant to purchase rights granted to the Company’s employees.The number of shares of the Company’s common stock reserved for issuance will automatically increase on the first day of each fiscal year, equal to the leastof: 968,741 shares of the Company’s Class A common stock; one and a quarter percent (1.25%) of the outstanding shares of the Company’s Class A commonstock and Class B common stock on the first day of the fiscal year; or such lesser amount as may be determined by the Company's board of directors or acommittee appointed by the Company's board of directors to administer the ESPP. The ESPP is implemented through a series of offerings of purchase rights toeligible employees. Under the ESPP, the Company may specify offerings with a duration of not more than 27 months, and may specify shorter purchaseperiods within each offering. Each offering will have one or more purchase dates on which shares of the Company’s common stock will be purchased foremployees participating in the offering. An offering may be terminated under certain circumstances. Generally, all regular employees, including executiveofficers, employed by the Company may participate in the ESPP and may contribute up to 15% of their earnings for the purchase of the Company’s commonstock under the ESPP. Unless otherwise determined by the Company’s board of directors, Class A common stock will be purchased for accounts of employeesparticipating in the ESPP at a price per share equal to the lower of (a) 85% of the fair market value of a share of the Company’s Class A common stock on thefirst date of an offering or (b) 85% of the fair marketF-32Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) value of a share of the Company’s Class A common stock on the date of purchase. As of December 31, 2016, the number of shares of common stock reservedfor issuance under the ESPP is 967,545 shares.Employee Incentive BonusIn April 2012, the Company's compensation committee amended its Executive Incentive Bonus Plan to, among other things, permit the settlement ofawards under the plan in the form of shares of its Class A common stock. In May 2013, the Company's compensation committee amended its ExecutiveIncentive Bonus Plan to permit the settlement of awards under the plan in any combination of cash or shares of its Class A common stock. Additionally, theCompany settles a majority of bonus awards for all other employees in Class A common stock. When awards under the Executive Incentive Bonus Plan aresettled in Class A common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on theclosing sales price of the Company's Class A common stock as determined in trading on the New York Stock Exchange on the date approved by the Board ofDirectors. In August 2016, the Company issued 0.2 million freely-tradable shares of its Class A common stock in settlement of bonus awards to employees,including executives, for the January 1, 2016 to June 30, 2016 performance period. In May 2016, the Company issued 0.2 million shares of its Class Acommon stock in settlement of bonus awards to employees, including executives, for the July 1, 2015 to December 31, 2015 performance period. In August2015, the Company issued 0.3 million freely-tradable shares of our Class A common stock in settlement of bonus awards to employees, including executives,for the January 1, 2015 to June 30, 2015 performance period. In May 2015, the Company issued 0.2 million freely-tradable shares of our Class A commonstock in settlement of bonus awards to employees, including executives, for the fiscal 2014 performance period. At December 31, 2016, an accrual of $3.8million was recorded for bonus awards for employees for the July 1, 2016 to December 31, 2016 performance period, which the Company intends to settle inshares of its Class A common stock to be issued under its 2010 Equity Incentive Plan, as amended, with the number of shares issuable to plan participantsdetermined based on the closing sales price of the Company’s Class A common stock as determined in trading on the New York Stock Exchange at a date tobe determined. The Company's compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.Stock-Based CompensationStock-based compensation expense is classified in the consolidated statements of operations based on the department to which the related employeereports. The Company recognized stock-based compensation in the statements of operations as follows: Years Ended December 31, 2016 2015 2014 (in thousands)Cost of net revenue$210 $213 $131Research and development14,403 13,205 9,686Selling, general and administrative7,152 5,850 5,191 $21,765 $19,268 $15,008The total unrecognized compensation cost related to unvested stock options as of December 31, 2016 was $0.7 million, and the weighted averageperiod over which these equity awards are expected to vest is 0.90 years. The total unrecognized compensation cost related to unvested restricted stock unitsand restricted stock awards as of December 31, 2016 was $44.1 million, and the weighted average period over which these equity awards are expected to vestis 2.67 years.Stock OptionsThe Company uses the Black-Scholes valuation model to calculate the fair value of stock options and employee stock purchase rights granted toemployees. Stock-based compensation expense is recognized over the vesting period using the straight-line method.F-33Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The fair values of stock options and employee stock purchase rights (related to the Company's ESPP) were estimated at their respective grant dateusing the following assumptions:Stock Options Years Ended December 31, 2016 (1) 2015 (1) 2014Weighted-average grant date fair value per shareN/A N/A $4.03Risk-free interest rateN/A N/A 1.70%Dividend yieldN/A N/A —%Expected life (in years)N/A N/A 4.56VolatilityN/A N/A 51.00%__________________(1)No options were granted during the years ended December 31, 2016 and 2015.Cash received from exercise of stock options was $3.6 million, $8.2 million and $0.3 million during the year ended December 31, 2016, 2015 and2014, respectively. The tax benefit from stock options exercised was $5.7 million, $6.1 million and $0.4 million during the year ended December 31, 2016,2015 and 2014, respectively.Employee Stock Purchase Rights Years Ended December 31, 2016 2015 2014Weighted-average grant date fair value per share$5.85 - $6.20 $2.25 - $5.02 $2.03 - $2.47Risk-free interest rate0.38 - 0.6% 0.09 - 0.33% 0.05 - 0.07%Dividend yield—% —% —%Expected life (in years)0.50 0.50 0.50Volatility49.94 - 53.94% 32.65 - 59.14% 47.75 - 46.82%The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar tothose 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 theforeseeable future. The weighted-average expected life of options was calculated using the simplified method as prescribed by guidance provided by theSEC. This decision was based on the lack of historical data due to the Company’s limited number of stock option exercises under the 2010 Equity IncentivePlan.A summary of the Company’s stock option activity is as follows: Number of Options(in thousands) Weighted-AverageExercise Price Weighted-AverageContractual Term(in years) Aggregate IntrinsicValue(in thousands)Outstanding at December 31, 20153,572 $6.83 Granted (1)— N/A Exercised(492) 5.13 Canceled(55) 24.15 Outstanding at December 31, 20163,025 $6.78 2.73 $45,603Vested and expected to vest at December 31, 20163,018 $6.78 2.73 $45,522Exercisable at December 31, 20162,760 $6.65 2.62 $41,991___________________________(1)No options were granted during 2016.The intrinsic value of stock options exercised during 2016, 2015 and 2014 was $6.5 million, $6.6 million and $0.6 million, respectively.F-34Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Restricted Stock Units and Restricted Stock AwardsThe Company calculates the fair value of restricted stock units and restricted stock awards based on the fair market value of the Company’s Class Acommon stock on the grant date. Stock-based compensation expense is recognized over the vesting period using the straight-line method.A summary of the Company’s restricted stock unit and restricted stock award activity is as follows: Number of Shares(in thousands) Weighted-Average Grant-Date Fair Value per ShareOutstanding at December 31, 20153,642 $9.19 Granted2,932 18.83 Vested(2,308) 11.32 Canceled(596) 13.55Outstanding at December 31, 20163,670 14.679. Income TaxesThe domestic and international components of income (loss) before provision (benefit) from income taxes are presented as follows: Years Ended December 31, 2016 2015 2014 (in thousands)Domestic$75,778 $(44,094) $(9,631)Foreign(12,088) 1,188 886Income (loss) before income taxes$63,690 $(42,906) $(8,745)F-35Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The provision (benefit) for income taxes consists of the following: Years Ended December 31, 2016 2015 2014 (in thousands)Current: Federal$1,216 $— $—State(11) 16 1Foreign1,092 942 577Total current2,297 958 578Deferred: Federal17,492 (13,759) (3,341)State(8,271) (1,034) 253Foreign(2,459) 126 54Valuation allowance release due to acquisition— (1,757) (2,335)Change in valuation allowance(6,661) 14,891 3,087Total deferred101 (1,533) (2,282)Total income tax provision (benefit)$2,398 $(575) $(1,704)The actual provision (benefit) for income taxes differs from the amount computed using the federal statutory rate as follows: Years Ended December 31, 2016 2015 2014 (in thousands)Provision (benefit) at statutory rate$22,294 $(14,588) $(2,973)State income taxes (net of federal benefit)(13) 275 (391)Research and development credits(9,076) (2,083) (66)Foreign rate differential2,888 (62) (31)Stock compensation(5,756) 549 609Foreign deemed dividend51 279 —Transaction costs749 1,329 —Uncertain tax positions(1,204) 600 304Foreign tax credits(72) (144) —Permanent and other(802) 96 92Valuation allowance release due to acquisition— (1,757) (2,335)Valuation allowance(6,661) 14,931 3,087Total provision (benefit) for income taxes$2,398 $(575) $(1,704)F-36Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The components of the deferred income tax assets are as follows: December 31, 2016 2015 (in thousands)Deferred tax assets: Net operating loss carryforwards$19,524 $27,996Research and development credits58,170 48,531Accrued expenses and other13,387 13,654Accrued compensation2,073 1,747Stock-based compensation3,451 4,245Intangible assets8,575 7,198 105,180 103,371Less valuation allowance(100,284) (98,535) 4,896 4,836Deferred tax liabilities: Fixed assets(2,202) (2,322)Unremitted foreign earnings(2,909) (2,628)Net deferred tax liabilities$(215) $(114)At December 31, 2016, the Company had federal, state and foreign tax net operating loss carryforwards of approximately $38.1 million, $39.3 millionand $14.7 million, respectively. The federal and state tax loss carryforwards will begin to expire in 2020 and 2019, respectively, unless previously utilized.The foreign net operating loss carryforwards may be carried forward indefinitely provided certain requirements are met.At December 31, 2016, the Company had federal and state tax credit carryforwards of approximately $33.6 million and $43.5 million, respectively.The federal tax credit carryforward will begin to expire in 2020, unless previously utilized. The state tax credits do not expire. In addition, the Company hasfederal alternative minimum tax credit carryforwards of $1.0 million that can be carried forward indefinitely.The Company evaluated its net deferred income taxes, which included an assessment of the cumulative income or loss over the prior three-year periodand future periods, to determine if a valuation allowance is required. After considering its recent history of losses, the Company recorded a valuationallowance on its net federal deferred tax assets. During 2016, the Company maintained a valuation allowance against all of its federal and state deferred taxassets as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines. The Company also placed avaluation allowance on the foreign deferred tax assets of a newly formed entity. The Company will continue to assess the need for a valuation allowance onthe deferred tax assets by evaluating positive and negative evidence that may exist. The valuation allowance during 2016 related to operations decreased by$6.7 million.The Company adopted ASU No. 2016-09 in the second quarter of 2016, which is more fully described in Note 1. The new guidance requires, amongother things, excess tax benefits and tax deficiencies to be recorded in the income statement in the provision for income taxes when awards vest or are settled.For the year ended December 31, 2016, the impact of adoption on the Company's results of operations was to reduce the provision for income taxes andincrease net income by $8.3 million. Upon adoption, the Company had excess tax benefits for which a benefit could not be previously recognized ofapproximately $8.1 million; however, there was no cumulative effect on retained earnings in the consolidated balance sheet since the Company has a fullvaluation allowance against U.S. deferred tax assets.At December 31, 2016, the Company’s unrecognized tax benefits totaled $23.4 million, $17.1 million of which, if recognized at a time when thevaluation allowance no longer exists, would affect the effective tax rate. The Company will recognize interest and penalties related to unrecognized taxbenefits as a component of income tax expense. At December 31, 2016, the Company had accrued approximately $0.2 million of interest and penalties. TheCompany expects decreases to its unrecognized tax benefits of $0.2 million within the next twelve months.F-37Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) The following table summarizes the changes to the unrecognized tax benefits during 2016, 2015 and 2014: (in thousands)Balance as of December 31, 2013$5,462Additions based on tax positions related to the current year3,158Additions based on tax positions of prior years2,188Balance as of December 31, 201410,808Additions based on tax positions related to the current year2,585Additions related to acquisition13,733Decreases based on tax positions of prior year(1,073)Balance as of December 31, 2015$26,053Additions based on tax positions related to the current year2,025Decreases based on tax positions of prior year(4,661)Balance as of December 31, 2016$23,417The 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 December 31, 2016, the Company is no longer subject to federal, state or foreign income tax examinations for the years before 2013, 2012 and 2009,respectively. However, to the extent allowed by law, the tax authorities may have the right to examine prior periods where net operating losses or tax creditswere generated and carried forward, and make adjustments up to the amount of the net operating loss or credit carryforward amount.At December 31, 2013, the Company was under examination by the federal tax authorities for the tax years 2010 and 2011. This examination closed inJanuary 2014. The impact of any adjustments was reflected in 2013. The Company is not currently under federal, state or foreign examination.On January 2, 2013, the American Taxpayer Relief Act of 2012 was enacted. The Act included several provisions related to corporate income taxincluding the reinstatement of the credit for qualified research and development. The credit was reinstated for years beginning after January 1, 2012. OnDecember 19, 2014, the Tax Increase Prevention Act was enacted. The Act included several business tax provisions including the extension of the credit forqualified research and development through 2014. On December 18, 2015, the Protecting Americans from Tax Hikes Act of 2015 was enacted. The Actincluded several business tax provisions including the permanent extension of the credit for qualified research and development.10. Employee Retirement PlanThe Company has a 401(k) defined contribution retirement plan (the 401(k) Plan) covering all eligible employees. Participants may voluntarilycontribute on a pre-tax basis an amount not to exceed a maximum contribution amount pursuant to Section 401(k) of the Internal Revenue Code. TheCompany is not required to contribute, nor has it contributed, to the 401(k) Plan for any of the periods presented.F-38Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) 11. Commitments and ContingenciesLease Commitments and Other Contractual ObligationsThe Company leases facilities and certain equipment under operating lease arrangements expiring at various years through fiscal 2022. As ofDecember 31, 2016, future minimum payments under non-cancelable operating leases, other obligations and inventory purchase obligations are as follows: Operating Leases InventoryPurchaseObligations Other Obligations Total (in thousands) 2017$8,123 $30,464 $4,939 $43,52620186,268 — 910 7,17820196,961 — 14 6,97520206,357 — — 6,35720216,300 — — 6,300Thereafter1,592 — — 1,592Total minimum payments$35,601 $30,464 $5,863 $71,928The total rental expense for all operating leases was $2.9 million, $2.4 million and $1.7 million for the years ended December 31, 2016, 2015 and2014, respectively.The Company has subleased certain facilities that it ceased using in connection with a restructuring plan (Note 4). Such subleases expire at variousyears through fiscal 2022. As of December 31, 2016, future minimum rental income under no-cancelable subleases are as follows: Amount (in thousands)2017 $2,1442018 2,3622019 2,9272020 3,3922021 3,511Thereafter 293Total minimum rental income $14,629CrestaTech LitigationOn January 21, 2014, CrestaTech Technology Corporation, or CrestaTech, filed a complaint for patent infringement against the Company in theUnited States District Court of Delaware, or the District Court Litigation. In its complaint, CrestaTech alleges that the Company infringes U.S. Patent Nos.7,075,585, or the '585 Patent and 7,265,792, or the '792 Patent. In addition to asking for compensatory damages, CrestaTech alleges willful infringement andseeks a permanent injunction. CrestaTech also names Sharp Corporation, Sharp Electronics Corp. and VIZIO, Inc. as defendants based upon their alleged useof the Company's television tuners.On January 28, 2014, CrestaTech filed a complaint with the U.S. International Trade Commission, or ITC, again naming, among others, MaxLinear,Sharp, Sharp Electronics, and VIZIO, or the ITC Investigation. On May 16, 2014, the ITC granted CrestaTech’s motion to file an amended complaint addingsix OEM Respondents, namely, SIO International, Inc., Hon Hai Precision Industry Co., Ltd., Wistron Corp., Wistron Infocomm Technology (America) Corp.,Top Victory Investments Ltd. and TPV International (USA), Inc. which are collectively referred to with MaxLinear, Sharp and VIZIO as the CompanyRespondents. CrestaTech’s ITC complaint alleged a violation of 19 U.S.C. § 1337 through the importation into the United States, the sale for importation, orthe sale within the United States after importation of MaxLinear’s accused products that CrestaTech alleged infringe the same two patents asserted in theDelaware action. Through its ITC complaint, CrestaTechF-39Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) sought an exclusion order preventing entry into the United States of certain of the Company's television tuners and televisions containing such tuners fromSharp, Sharp Electronics, and VIZIO. CrestaTech also sought a cease and desist order prohibiting the Company Respondents from engaging in theimportation into, sale for importation into, the sale after importation of, or otherwise transferring within the United States certain of the Company's televisiontuners or televisions containing such tuners.On March 10, 2014, the court stayed the District Court Litigation pending resolution of the ITC Investigation.On December 15, 2014, the ITC held a trial in the ITC Investigation. On February 27, 2015, the Administrative Law Judge, or the ALJ, issued a writtenInitial Determination, or ID, ruling that the Company Respondents do not violate Section 1337 in connection with CrestaTech’s asserted patents becauseCrestaTech failed to satisfy the economic prong of the domestic industry requirement pursuant to Section 1337(a)(2). In addition, the ID stated that certain ofthe Company's television tuners and televisions incorporating those tuners manufactured and sold by certain customers infringe three claims of the ‘585Patent, and these three claims were not determined to be invalid. On April 30, 2015, the ITC issued a notice indicating that it intended to review portions ofthe ID finding no violation of Section 1337, including the ID’s findings of infringement with respect to, and validity of, the ‘585 Patent, and the ID’s findingthat CrestaTech failed to establish the existence of a domestic industry within the meaning of Section 1337.The ITC has subsequently issued its opinion, which terminated its investigation. The opinion affirmed the findings of the ALJ that no violation ofSection 1337 had occurred because CrestaTech had failed to establish the economic prong of the domestic industry requirement. The ITC also affirmed theALJ's finding of infringement with respect to the three claims of the '585 Patent that were not held to be invalid.On November 30, 2015, CrestaTech filed an appeal of the ITC decision with the United States Court of Appeals for the Federal Circuit, or the FederalCircuit. On March 7, 2016, CrestaTech voluntarily dismissed its appeal, resulting in a final determination of the ITC Investigation in the Company's favor.In addition, the Company has filed four petitions for inter partes review, or IPR, by the US Patent Office, two for each of the CrestaTech patents assertedagainst the Company. The Patent Trial and Appeal Board, or the PTAB, did not institute two of these IPRs as being redundant to IPRs filed by another partythat were already underway for the same CrestaTech patent. The remaining two petitions were instituted or instituted-in-part and, together with the IPRs filedby third parties, there are currently six pending IPR proceedings involving the two CrestaTech patents asserted against the Company. In October 2015, the PTAB issued final decisions in two of the six pending IPR proceedings (one for each of the two asserted patents), holding that allof the reviewed claims are unpatentable. Included in these decisions was one of the three claims of the ‘585 Patent mentioned above in connection with theITC’s final decision. CrestaTech appealed the PTAB’s decisions at the Federal Circuit. On November 8, 2016, the Federal Circuit issued an opinion affirmingthe PTAB’s finding of unpatentability.In August 2016, the PTAB issued final written decisions in the remaining four pending IPR proceedings (two for each of the asserted patents), holdingthat many of the reviewed claims - including the two remaining claims of the ‘585 Patent which the ITC held were infringed - are unpatentable. As a result ofthese IPR decisions, all 13 claims that CrestaTech asserted against the Company in the ITC Investigation have been found to be unpatentable by the PTAB.The parties have filed notices to appeal the two decisions related to the ‘585 Patent. Opening briefs are currently due in late January - early February 2017.CrestaTech, however, did not appeal the PTAB’s rulings related to the ‘792 Patent.On March 18, 2016, CrestaTech filed a petition for Chapter 7 bankruptcy in the Northern District of California. As a result of this proceeding, all rightsin the CrestaTech asserted patents, including the right to control the pending litigation, were assigned to CF Crespe LLC, or CF Crespe. CF Crespe is now thenamed party in the pending IPRs, the Federal Circuit appeal and District Court Litigation. CF Crespe has not sought to lift the stay in the District CourtLitigation given the resolution of the ITC Investigation.The Company cannot predict the outcome of any appeal by CF Crespe, CrestaTech, the District Court Litigation, or the IPRs. Any adversedetermination in the District Court Litigation could have a material adverse effect on the Company's business and operating results.Trango Systems, Inc. LitigationOn or about August 2, 2016, Trango Systems, Inc., or Trango, filed a complaint in the Superior Court of California, County of San Diego, CentralDivision, against defendants Broadcom Corporation, Inc., or Broadcom, and the Company,F-40Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) collectively, Defendants. On or about December 6, 2016, Trango filed its second amended complaint. Trango is a purchaser that alleges various fraud, breachof contract, and interference with economic relations claims in connection with the discontinuance of a chip line the Company recently acquired fromBroadcom. Trango seeks unspecified general and special damages, pre-judgment interest, expenses and costs, statutory penalties, attorneys’ fees, punitivedamages, and unspecified injunctive and equitable relief. The Company intends to vigorously defend against the lawsuit. On January 11, 2017, the Companyfiled its demurrer to each cause of action in the second amended complaint.The Company cannot predict the outcome of the Trango Systems, Inc. litigation. Any adverse determination in the Trango Systems, Inc. litigationcould have a material adverse effect on the Company's business and operating results.Other MattersIn addition, from time to time, the Company is subject to threats of litigation or actual litigation in the ordinary course of business, some of which maybe material. Other than the CrestaTech and Trango litigation described above, the Company believes that there are no other currently pending litigationmatters that, if determined adversely by the Company, would have a material effect on the Company's business or that would not be covered by theCompany's existing liability insurance.12. Concentration of Credit Risk, Significant Customers and Geographic InformationFinancial instruments, which potentially subject the Company to concentrations of credit risk, consist primarily of cash and cash equivalents, accountsreceivable and inventory. Collateral is generally not required for customer receivables. The Company limits its exposure to credit loss by placing its cashwith high credit quality financial institutions. At times, such deposits may be in excess of insured limits. The Company has not experienced any losses on itsdeposits of cash and cash equivalents.Significant CustomersThe Company markets its products and services to manufacturers of a wide range of electronic devices, including cable and terrestrial and satellite set-top boxes and gates, DOCSIS data and voice gateways, hybrid analog and digital televisions, satellite low-noise blocker transponders or outdoor units,physical medium devices that go into optical modules for data center, metro, and long-haul transport network applications, and RF transceiver and modemdevices for wireless access and backhaul applications. The Company makes periodic evaluations of the credit worthiness of its customers.Customers comprising greater than 10% of net revenues for each of the periods presented are as follows: Years Ended December 31, 2016 2015 2014Percentage of total net revenue Arris127% 28% 31%Technicolor210% 13% * * Represents less than 10% of the net revenue for the respective period.1 In January 2016, Arris completed its acquisition of Pace. The revenue percentage attributed to Arris includes sales made to Pace in the yearended December 31, 2016.2 In November 2015, Technicolor completed its purchase of Cisco’s connected devices business. The revenue percentage for fiscal year 2015 did not include1% revenue for Technicolor.Balances greater than 10% of accounts receivable, based on the Company's billings to the contract manufacturer customers, are as follows:F-41Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) December 31, 2016 2015Percentage of gross accounts receivable Pegatron Corporation17% 17%Sernet Technologies Corporation15% 14%WNC Corporation12% 16%MTI Jupiter Technologies* 13% * Represents less than 10% of the gross accounts receivable for the respective period end.Suppliers comprising greater than 10% of total inventory purchases are as follows: Years ended December 31, 2016 2015 2014Globalfoundries18% 22% 16%United Microelectronics Corporation16% 12% 23%Taiwan Semiconductor Manufacturing Company13% 14% *Tower-Jazz Semiconductor12% 11% *Semiconductor Manufacturing International Corp11% 11% 27%Advanced Semiconductor Engineering11% 11% 20% * Represents less than 10% of the inventory purchases for the respective period.Geographic InformationThe Company's consolidated net revenues by geographic area based on ship-to location are as follows (in thousands): Years Ended December 31, 2016 2015 2014 Amount % of total netrevenue Amount % of total netrevenue Amount % of total netrevenueAsia$360,325 93% $274,169 91% $125,122 94%United States9,181 2% 10,819 4% 567 —%Rest of world18,326 5% 15,372 5% 7,423 6%Total$387,832 100% $300,360 100% $133,112 100%The products shipped to individual countries representing greater than 10% of net revenue for each of the periods presented are as follows: Years Ended December 31, 2016 2015 2014Percentage of total net revenue China78% 77% 71%The determination of which country a particular sale is allocated to is based on the destination of the product shipment. No other individual country inAsia Pacific, United States, or the rest of the world accounted for more than 10% of net revenue during these periods.F-42Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Long-lived assets, which consists of property and equipment, intangible assets, and goodwill by geographic area are as follows (in thousands): As of December 31, 2016 2015 Amount % of total Amount % of totalUnited States$111,336 55% $121,697 99%Singapore78,318 39% 26 —%Rest of world11,171 6% 1,269 1%Total$200,825 100% $122,992 100%13. Selected Quarterly Financial Data (Unaudited)The following table presents the Company’s unaudited quarterly financial data for each of the eight quarters in the period ended December 31, 2016.In management’s opinion, this information has been presented on the same basis as the audited consolidated financial statements included in a separatesection of this report, and all necessary adjustments, consisting only of normal recurring adjustments, have been included in the amounts below to presentfairly the unaudited quarterly results when read in conjunction with the audited consolidated financial statements and related notes. The operating results forany quarter should not be relied upon as necessarily indicative of results for any future period. Year Ended December 31, 2016(1) First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts)Net revenue$102,685 $101,687 $96,324 $87,136Gross profit$61,170 $62,913 $55,504 $50,403Net income$20,681 $22,584 $9,679 $8,348Net income per share: Basic$0.33 $0.36 $0.15 $0.13Diluted$0.31 $0.33 $0.14 $0.12___________________(1) Includes impact of adoption of ASU 2016-09, Improvements to Share Based Compensation as described in Note 1. The impact of adoption by quarter wasto increase net income and reduce the provision for income taxes, and to increase basic and diluted net income per share by the following amounts: Year Ended December 31, 2016 First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts)Increase to net income$1,565 $3,549 $928 $2,249Reduction to income tax provision$(1,565) $(3,549) $(928) $(2,249) Increase to net income per share: Basic$0.02 $0.06 $0.01 $0.04Diluted$0.02 $0.04 $0.01 $0.05F-43Table of ContentsMAXLINEAR, INC.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(in thousands, except per share amounts and percentage data) Year Ended December 31, 2015 First Quarter Second Quarter Third Quarter Fourth Quarter (in thousands, except per share amounts)Net revenue$35,396 $70,824 $95,191 $98,949Gross profit$21,671 $26,942 $51,050 $55,760Net income (loss)$(4,722) $(30,647) $1,582 $(8,544)Net income (loss) per share: Basic$(0.12) $(0.58) $0.03 $(0.14)Diluted$(0.12) $(0.58) $0.03 $(0.14)14. Subsequent EventsOn February 8, 2017, the Company entered into a definitive agreement to acquire all of the stock in the Spain entity of Marvell Technology GroupLtd, or Marvell, along with acquiring certain other assets and liabilities related to Marvell’s G.hn business for $21.0 million in cash. The acquisition iscurrently expected to close in the second quarter of 2017.F-44EXHIBIT 21.1SIGNIFICANT SUBSIDIARIES OF MAXLINEAR, INC. Name Jurisdiction MaxLinear Asia Limited Malaysia Entropic Communications LLC United States MaxLinear Asia Singapore Pte. Ltd. Singapore EXHIBIT 23.1Consent of Independent Registered Public Accounting FirmWe have issued our reports dated February 8, 2017, with respect to the consolidated financial statements, schedule, and internal control over financialreporting included in the Annual Report of MaxLinear, Inc. on Form 10-K for the year ended December 31, 2016. We consent to the incorporation byreference of said reports in the Registration Statements of MaxLinear, Inc. on Form S-4 (File No. 333-202679) and on Forms S-8 (File No. 333-165770, FileNo. 333-172418, File No. 333-180666, File No. 333-187395, File No. 333-194856, File No. 333-203034, File No. 333-204017 and File No. 333-210418)./s/ Grant Thornton, LLPIrvine, CaliforniaFebruary 8, 2017EXHIBIT 23.2Consent of Independent Registered Public Accounting FirmWe consent to the incorporation by reference in the following Registration Statements:(1)Registration Statement (Form S-8 No. 333-165770) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(2)Registration Statement (Form S-8 No. 333-172418) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(3)Registration Statement (Form S-8 No. 333-180666) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(4)Registration Statement (Form S-8 No. 333-187395) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(5)Registration Statement (Form S-8 No. 333-194856) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(6)Registration Statement (Form S-8 No. 333-203034) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee stock Purchase Plan ofMaxLinear, Inc.,(7)Registration Statement (Form S-8 No. 333-210418) pertaining to the 2010 Equity Incentive Plan and the 2010 Employee Stock Purchase Plan ofMaxLinear, Inc.,(8)Registration Statement (Form S-8 No. 333-204017) pertaining to the RF Magic, Inc. 2000 Incentive Stock Plan, Entropic Communications, Inc. 2001Stock Option Plan, Entropic Communications, Inc. 2007 Non-Employee Directors’ Stock Option Plan and Entropic Communications, Inc. 2012Inducement Award Plan,(9)Registration Statement (Form S-4 No. 333-202679) pertaining to the registration of Class A Common Stock securities related to the EntropicCommunications, Inc. merger.of our reports dated February 17, 2016, with respect to the consolidated financial statements and schedule of MaxLinear, Inc., included in this Annual Report(Form 10-K) of MaxLinear, Inc., for the year ended December 31, 2016./s/ Ernst & Young LLPIrvine, CaliforniaFebruary 8, 2017EXHIBIT 31.1Certification of Principal Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Kishore Seendripu, Ph.D., certify that: 1.I have reviewed this Form 10-K of MaxLinear, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date:February 8, 2017 /s/ Kishore Seendripu, Ph.D. Kishore Seendripu, Ph.D. President and Chief Executive Officer (Principal Executive Officer)EXHIBIT 31.2Certification of Principal Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002I, Adam C. Spice, certify that: 1.I have reviewed this Form 10-K of MaxLinear, Inc.;2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make thestatements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects thefinancial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4.The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in ExchangeAct Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f) for theregistrant and have: a)Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensurethat material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities,particularly during the period in which this report is being prepared;b)Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under oursupervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for externalpurposes in accordance with generally accepted accounting principles;c)Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectivenessof the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d)Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscalquarter (registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, theregistrant's internal control over financial reporting; and 5.The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to theregistrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonablylikely to adversely affect the registrant's ability to record, process, summarize and report financial information; andb)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control overfinancial reporting.Date:February 8, 2017 /s/ Adam C. Spice Adam C. Spice Chief Financial Officer (Principal Financial Officer)EXHIBIT 32.1CERTIFICATION PURSUANT TO18 U.S.C. SECTION 1350,AS ADOPTED PURSUANT TO SECTION 906 OFTHE SARBANES-OXLEY ACT OF 2002I, Kishore Seendripu, Ph.D., certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report ofMaxLinear, Inc. on Form 10-K for the fiscal year ended December 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of MaxLinear, Inc.Date:February 8, 2017 By: /s/ Kishore Seendripu, Ph.D. Name: Kishore Seendripu, Ph.D. Title: President and Chief Executive OfficerI, Adam C. Spice, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that the Annual Report ofMaxLinear, Inc. on Form 10-K for the fiscal year ended December 31, 2016 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934and that information contained in such Annual Report on Form 10-K fairly presents in all material respects the financial condition and results of operations of MaxLinear, Inc. Date:February 8, 2017 By: /s/ Adam C. Spice Name: Adam C. Spice Title: Chief Financial Officer

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