MACOM Technology Solutions Holdings, Inc. (Exact Name of Registrant As Specified in Its Charter)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 29, 2017 or ¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-35451 MACOM Technology Solutions Holdings, Inc. (Exact name of registrant as specified in its charter) Delaware 27-0306875 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 100 Chelmsford Street Lowell, MA 01851 (Address of principal executive offices and zip code) (978) 656-2500 (Registrant’s telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨ Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required 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 shorter period that the registrant was required to submit and post such files). Yes x No ¨ Indicate 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,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act. Large accelerated filer x Accelerated filer ¨ Non-accelerated filer ¨ (Do not check if a smaller reporting company) Smaller reporting company ¨ Emerging growth company ¨ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.¨ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x As of February 2, 2018, there were 64,405,673 shares of the registrant’s common stock outstanding. MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. FORM 10-Q TABLE OF CONTENTS Page No. PART I—FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) 1 Condensed Consolidated Balance Sheets 1 Condensed Consolidated Statements of Operations 2 Condensed Consolidated Statements of Comprehensive Loss 3 Condensed Consolidated Statement of Stockholders’ Equity 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24 Item 3. Quantitative and Qualitative Disclosures About Market Risk 30 Item 4. Controls and Procedures 31 PART II—OTHER INFORMATION Item 1. Legal Proceedings 32 Item1A. Risk Factors 32 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 33 Item 6. Exhibits 34 Signatures 35 PART I—FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands) (Unaudited) December 29, September 29, 2017 2017 ASSETS Current assets: Cash and cash equivalents $ 152,085 $ 130,104 Short term investments 44,585 84,121 Accounts receivable (less allowances of $8,924 and $9,410, respectively) 97,123 136,096 Inventories 143,136 136,074 Income tax receivable 18,933 18,493 Assets held for sale — 35,571 Prepaid and other current assets 25,363 22,438 Total current assets $ 481,225 $ 562,897 Property and equipment, net 132,010 131,019 Goodwill 316,239 313,765 Intangible assets, net 601,920 621,092 Deferred income taxes 948 948 Other investments 41,500 — Other long-term assets 7,418 7,402 TOTAL ASSETS $ 1,581,260 $ 1,637,123 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Current portion of lease payable $ 796 $ 815 Current portion of long-term debt 6,885 6,885 Accounts payable 25,807 47,038 Accrued liabilities 50,981 60,237 Liabilities held for sale — 2,144 Total current liabilities $ 84,469 $ 117,119 Lease payable, less current portion 19,163 17,275 Long-term debt, less current portion 660,696 661,471 Warrant liability 26,167 40,775 Deferred income taxes 15,555 15,172 Other long-term liabilities 7,409 7,937 Total liabilities $ 813,459 $ 859,749 Stockholders’ equity: Common stock 64 64 Treasury stock, at cost (330) (330) Accumulated other comprehensive income 2,999 2,977 Additional paid-in capital 1,055,636 1,041,644 Accumulated deficit (290,568) (266,981) Total stockholders’ equity $ 767,801 $ 777,374 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 1,581,260 $ 1,637,123 See notes to condensed consolidated financial statements. 1 MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) Three Months Ended December 29, December 30, 2017 2016 Revenue $ 130,925 $ 151,752 Cost of revenue 69,971 73,257 Gross profit 60,954 78,495 Operating expenses: Research and development 41,651 30,174 Selling, general and administrative 37,634 36,496 Restructuring charges 4,662 1,287 Total operating expenses 83,947 67,957 (Loss) income from operations (22,993) 10,538 Other (expense) income Warrant liability gain (expense) 14,608 (4,823) Interest expense, net (7,239) (7,350) Other income (expense) 7 (4) Total other income (expense), net 7,376 (12,177) Loss before income taxes (15,617) (1,639) Income tax expense 1,353 532 Loss from continuing operations (16,970) (2,171) (Loss) income from discontinued operations (5,599) 1,206 Net loss $ (22,569) $ (965) Net (loss) income per share: Basic (loss) income per share: Loss from continuing operations $ (0.26) $ (0.04) (Loss) income from discontinued operations (0.09) 0.02 Loss per share - basic $ (0.35) $ (0.02) Diluted (loss) income per share: Loss from continuing operations $ (0.49) $ (0.04) (Loss) income from discontinued operations (0.09) 0.02 Loss per share - diluted $ (0.57) $ (0.02) Shares used: Basic 64,325 53,737 Diluted 65,109 53,737 See notes to condensed consolidated financial statements. 2 MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS (In thousands) (Unaudited) Three Months Ended December 29, December 30, 2017 2016 Net loss $ (22,569) $ (965) Unrealized loss on short term investments, net of tax (267) (46) Foreign currency translation gain (loss), net of tax 289 (9,597) Other comprehensive income (loss), net of tax 22 (9,643) Total comprehensive loss $ (22,547) $ (10,608) See notes to condensed consolidated financial statements. 3 MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY (In thousands) (Unaudited) Accumulated Other Additional Total Common Stock Treasury Stock Comprehensive Paid-in Accumulated Stockholders’ Shares Amount Shares Amount Income Capital Deficit Equity Balance at September 29, 2017 64,279 $ 64 (23) $ (330) $ 2,977 $ 1,041,644 $ (266,981) $ 777,374 Cumulative effect of ASU 2016-09 — — — — — 1,018 (1,018) — Stock options exercises 14 — — — — 46 — 46 Vesting of restricted common stock and units 24 — — — — — — — Issuance of common stock pursuant to employee stock purchase plan 114 — — — — 3,195 — 3,195 Shares repurchased for stock withholdings on restricted stock awards (9) — — — — (259) — (259) Share-based compensation — — — — — 9,992 — 9,992 Other comprehensive loss, net of tax — — — — 22 — — 22 Net loss — — — — — — (22,569) (22,569) Balance at December 29, 2017 64,422 $ 64 (23) $ (330) $ 2,999 $ 1,055,636 $ (290,568) $ 767,801 See notes to condensed consolidated financial statements. 4 MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Three Months Ended December 29, 2017 December 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $ (22,569) $ (965) Adjustments to reconcile net loss to net cash provided by operating activities (net of acquisitions): Depreciation and intangibles amortization 26,874 18,475 Share-based compensation 9,992 8,183 Warrant liability (gain) expense (14,608) 4,823 Acquired inventory step-up amortization 224 — Deferred financing cost amortization 1,029 702 Deferred income taxes 403 (1,054) Changes in assets held for sale from discontinued operations (6,219) — Other adjustments, net 966 582 Change in operating assets and liabilities (net of acquisitions): Accounts receivable 38,874 (4,488) Inventories (8,017) (1,583) Prepaid expenses and other assets (6,583) (673) Accounts payable (14,445) 931 Accrued and other liabilities (2,225) (5,547) Income taxes (3,162) 1,021 Net cash provided by operating activities 534 20,407 CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of businesses, net — 875 Purchases of property and equipment (13,823) (4,942) Proceeds from sale of assets — 104 Proceeds from sales and maturities of investments 57,382 8,822 Purchases of investments (17,987) (8,902) Purchases of other investments (5,000) — Payments associated with discontinued operations (263) — Net cash provided by (used in) investing activities 20,309 (4,043) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from stock option exercises and employee stock purchases 3,241 2,600 Payments on notes payable (1,721) (1,513) Payments of capital leases and assumed debt (216) (288) Repurchase of common stock (259) — Proceeds from corporate facility financing obligation — 4,250 Other adjustments — (38) Net cash provided by financing activities 1,045 5,011 Foreign currency effect on cash 93 (435) NET CHANGE IN CASH AND CASH EQUIVALENTS 21,981 20,940 CASH AND CASH EQUIVALENTS — Beginning of period $ 130,104 $ 332,977 CASH AND CASH EQUIVALENTS — End of period $ 152,085 $ 353,917 See notes to condensed consolidated financial statements.

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