Litigation Costs - includes gains, losses and expenses related to the resolution of other-than-ordinary-course threatened and actually filed lawsuits and other-than-ordinary-course contractual disputes and legal matters. We exclude these gains and losses because they are not considered by management in making operating decisions. We believe such gains, losses and expenses do not necessarily reflect the performance of our ongoing operations for the period in which such charges are recognized and the amount of such gains or losses and expenses can vary significantly between companies and make comparisons less reliable.

Acquisition, Integration and Restructuring Related Costs - includes such items as professional fees incurred in connection with pre-acquisition and integration specific activities, post-acquisition employee retention amounts, contingent consideration adjustments, severance and other amounts accrued or paid to terminated employees of acquired businesses, costs including salaries incurred which are not expected to have a continuing contribution to operations or are expected to have a diminishing contribution during the integration or restructuring period and the amortization of the fair market step-up value of acquired inventory and fixed assets. We believe the exclusion of these items is useful in providing management a basis to evaluate ongoing operating activities and strategic decision making.

Discontinued Operations excluding consulting income - includes the profit and loss amounts of discontinued operations, with the exception of consulting income associated with a consulting agreement we entered into at the time of our Automotive business divestiture. We believe excluding gains and losses associated with historically divested businesses from our net income provides management with a comparable basis to our current ongoing operating activities. We do not exclude the consulting agreement income classified as discontinued operations because management views this income as part of our ongoing operations and correlated with future operations since we both derive income and incur ongoing costs associated with the consulting services available under the consulting agreement.

Equity Investment losses - includes losses associated with non-marketable equity investments. We believe these amounts are non-cash in nature and not correlated to future business operations and including such amounts does not reflect our ongoing operations.

Other - primarily includes transaction expenses incurred as part of our Credit Agreement Amendments in the second, third and fourth fiscal quarters of 2017. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Tax Effect of Non-GAAP Adjustments - adjustments to arrive at an estimate of our Adjusted Non-GAAP tax rate associated with our Adjusted Non-GAAP income over a period of time. We determine our Adjusted Non-GAAP income tax rate by using applicable rates in taxing jurisdictions and assessing certain factors including our historical and forecast earnings by jurisdiction, discrete items, cash taxes paid in relation to our Adjusted Non-GAAP Net Income before income taxes and our ability to realize tax assets. We generally assess this Adjusted Non-GAAP income tax rate quarterly and have utilized 12% for our first fiscal quarter of 2017, 10% for our second, third and fourth fiscal quarters of 2017 and 8% for our first and second fiscal quarters of 2018. Our historical effective income tax rate under GAAP has varied significantly from our Adjusted Non-GAAP income tax rate. Items that have historically resulted in significant difference between our effective income tax rate under GAAP and our Adjusted Non-GAAP income tax rate include changes in fair values of the common stock warrant liability, which is excluded from our Adjusted Non-GAAP net Income and is neither deductible nor taxable for tax purposes, income taxed in foreign jurisdictions at generally lower tax rates, non-deductible compensation, research and development tax credits and merger expenses, as well as the establishment of a valuation allowance against our U.S. deferred tax assets during the three months ended March 31, 2017. We believe it is beneficial for our management to review our Adjusted Non-GAAP income tax rate on a consistent basis over periods of time. Items such as those noted above may have a significant impact on our U.S. GAAP income tax expense and associated effective tax rate over time. Our Adjusted Non-GAAP income tax rate is an estimate, and may differ from our effective income tax rate determined under GAAP.

Adjusted EBITDA - is a calculation that adds depreciation expense and consulting agreement income to our Adjusted Non-GAAP Income from Operations. Adjusted EBITDA is a measure that management reviews and utilizes for operational analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analysis purposes.

Free Cash Flow - is a calculation that starts with cash flow from operating activities, reduces this amount by our capital expenditures in the applicable period and adds AppliedMicro transaction related payments. Free Cash Flow is a measure that management reviews and utilizes for cash flow analysis purposes. We believe competitors and others in the financial industry utilize this Non-GAAP measure for analyzing a company's cash flow.

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited and in thousands, except per share data)
			Three Months Ended															Six Months Ended
			March 30, 2018					December 29, 2017					March 31, 2017					March 30, 2018					March 31, 2017
Revenue			$		150,414			$		130,925			$		186,084			$		281,338			$		337,836
Cost of revenue			84,813					69,971					117,220					154,784					190,477
Gross profit			65,601					60,954					68,864					126,554					147,359
Operating expenses:
Research and development			41,596					41,651					39,685					83,246					69,859
Selling, general and administrative			39,287					37,634					62,327					76,922					98,822
Impairment charges			6,575					—					—					6,575					—
Restructuring charges			1,539					4,662					469					6,200					1,757
Total operating expenses			88,997					83,947					102,481					172,943					170,438
Loss from operations			(23,396			)		(22,993			)		(33,617			)		(46,389			)		(23,079			)
Other income (expense):
Warrant liability gain (expense)			17,015					14,608					(2,573			)		31,624					(7,395			)
Interest expense, net			(7,970			)		(7,239			)		(7,374			)		(15,209			)		(14,724			)
Other (expense) income, net			(4,139			)		7					(898			)		(4,133			)		(903			)
Total other income (expense)			4,906					7,376					(10,845			)		12,282					(23,022			)
Loss before income taxes			(18,490			)		(15,617			)		(44,462			)		(34,107			)		(46,101			)
Income tax (benefit) expense			(3,024			)		1,353					89,805					(1,671			)		90,337
Loss from continuing operations			(15,466			)		(16,970			)		(134,267			)		(32,436			)		(136,438			)
(Loss) income from discontinued operations			(18			)		(5,599			)		4,136					(5,617			)		5,342
Net loss			$		(15,484	)		$		(22,569	)		$		(130,131	)		$		(38,053	)		$		(131,096	)
Net (loss) income per share:
Basic:
Loss from continuing operations			$		(0.24	)		$		(0.26	)		$		(2.21	)		$		(0.50	)		$		(2.38	)
(Loss) income from discontinued operations			0.00					(0.09			)		0.07					(0.09			)		0.09
Loss per share - basic			$		(0.24	)		$		(0.35	)		$		(2.14	)		$		(0.59	)		$		(2.29	)
Diluted:
Loss from continuing operations			$		(0.50	)		$		(0.49	)		$		(2.21	)		$		(0.98	)		$		(2.38	)
(Loss) income from discontinued operations			0.00					(0.09			)		0.07					(0.09			)		0.09
Loss per share - diluted			$		(0.50	)		$		(0.57	)		$		(2.14	)		$		(1.07	)		$		(2.29	)
Shares - Basic			64,549					64,325					60,813					64,437					57,276
Shares - Diluted			65,132					65,109					60,813					65,120					57,276

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(unaudited and in thousands)
			March 30, 2018					September 29, 2017
ASSETS
Current assets:
Cash and cash equivalents			$		162,695			$		130,104
Short term investments			27,396					84,121
Accounts receivable, net			107,093					136,096
Inventories			143,897					136,074
Income tax receivable			18,970					18,493
Assets held for sale, current			—					35,571
Prepaids and other current assets			15,158					22,438
Total current assets			475,209					562,897
Property and equipment, net			138,542					131,019
Goodwill and intangible assets, net			901,129					934,857
Deferred income taxes			1,713					948
Other investments			37,415					—
Other long-term assets			7,162					7,402
TOTAL ASSETS			$		1,561,170			$		1,637,123
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable			$		804			$		815
Current portion of long-term debt obligations			6,885					6,885
Liabilities held for sale			—					2,144
Accounts payable, accrued liabilities and other			80,898					107,275
Total current liabilities			88,587					117,119
Lease payable, less current portion			23,586					17,275
Long-term debt obligations, less current portion			659,921					661,471
Common stock warrant liability			9,151					40,775
Deferred income taxes			15,975					15,172
Other long-term liabilities			5,684					7,937
Total liabilities			802,904					859,749
Stockholders' equity			758,266					777,374
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$		1,561,170			$		1,637,123

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited and in thousands)
			Six Months Ended
			March 30, 2018					March 31, 2017
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$		(38,053	)		$		(131,096	)
Depreciation and amortization			54,439					40,097
Share based compensation			15,342					17,731
Warrant liability (gain) expense			(31,624			)		7,395
Acquired inventory step-up amortization			224					31,373
Gain from discontinued operations			—					(21,770			)
Deferred income taxes			(573			)		86,123
Loss on minority equity investment			4,085					—
Impairment of assets			9,143					—
Other adjustments to reconcile loss to net operating cash			(2,860			)		7,134
Inventories			(9,240			)		458
Accounts receivable			28,992					(10,879			)
Change in other operating assets and liabilities			(18,719			)		(5,727			)
Net cash provided by operating activities			11,156					20,839
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net			—					(229,423			)
Sales, purchases and maturities of investments			56,241					(7,939			)
Purchases of other investments			(5,000			)		—
Payments associated with discontinued operations			(263			)		21,985
Purchases of property and equipment			(26,580			)		(16,295			)
Net cash provided by (used in) investing activities			24,398					(231,672			)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from corporate facility financing obligation			1,081					4,250
Payments of notes payable and assumed debt			(3,847			)		(3,644			)
Proceeds from stock option exercises and employee stock purchases			3,252					2,688
Repurchase of common stock			(3,846			)		(10,027			)
Other adjustments			—					(2,517			)
Net cash used in financing activities			(3,360			)		(9,250			)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			397					(279			)
NET CHANGE IN CASH AND CASH EQUIVALENTS			32,591					(220,362			)
CASH AND CASH EQUIVALENTS — Beginning of period			130,104					332,977
CASH AND CASH EQUIVALENTS — End of period			$		162,695			$		112,615
Supplemental disclosure of non-cash activities
Issuance of common stock in connection with the AppliedMicro Acquisition			—					465,082

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC.
RECONCILIATION OF GAAP TO NON-GAAP RESULTS
(unaudited and in thousands, except per share data)
			Three Months Ended																														Six Months Ended
			March 30, 2018										December 29, 2017										March 31, 2017										March 30, 2018										March 31, 2017
			Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue
Gross profit - GAAP			$		65,601				43.6				$		60,954				46.6				$		68,864				37.0				$		126,554				45.0				$		147,359				43.6
Amortization expense			8,173						5.4				8,146						6.2				7,277						3.9				16,320						5.8				13,279						3.9
Share-based and non-cash compensation			952						0.6				927						0.7				966						0.5				1,879						0.7				1,760						0.5
Impairment related charges			2,568						1.7				—						—				—						—				2,568						0.9				—						—
Acquisition, integration and restructuring related costs			358						0.2				338						0.3				31,793						17.1				697						0.2				33,359						9.9
Adjusted gross profit (Non-GAAP)			$		77,652				51.6				$		70,365				53.7				$		108,900				58.5				$		148,018				52.6				$		195,757				57.9

			Three Months Ended																								Six Months Ended
			March 30, 2018								December 29, 2017								March 31, 2017								March 30, 2018								March 31, 2017
			Amount				% Revenue				Amount				% Revenue				Amount				% Revenue				Amount				% Revenue				Amount				% Revenue
Operating expenses - GAAP			88,997				59.2				83,947				64.1				102,481				55.1				172,943				61.5				170,438				50.4
Amortization expense			(11,753	)			(7.8	)			(10,993	)			(8.4	)			(7,163	)			(3.8	)			(22,746	)			(8.1	)			(13,630	)			(4.0	)
Share-based and non-cash compensation			(3,683	)			(2.4	)			(8,289	)			(6.3	)			(11,260	)			(6.1	)			(11,972	)			(4.3	)			(20,551	)			(6.1	)
Impairment and restructuring charges			(8,114	)			(5.4	)			(4,661	)			(3.6	)			(469	)			(0.3	)			(12,775	)			(4.5	)			(1,757	)			(0.5	)
Litigation costs			(781	)			(0.5	)			(746	)			(0.6	)			(780	)			(0.4	)			(1,527	)			(0.5	)			(1,041	)			(0.3	)
Acquisition, integration and restructuring related costs			(2,753	)			(1.8	)			(2,315	)			(1.8	)			(22,334	)			(12.0	)			(5,069	)			(1.8	)			(27,102	)			(8.0	)
Other			—				—				—				—				(183	)			(0.1	)			—				—				(184	)			(0.1	)
Adjusted operating expenses (Non-GAAP)			61,913				41.2				56,943				43.5				60,292				32.4				118,854				42.2				106,173				31.4

			Three Months Ended																														Six Months Ended
			March 30, 2018										December 29, 2017										March 31, 2017										March 30, 2018										March 31, 2017
			Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue
Loss from operations - GAAP			$		(23,396	)			(15.6	)			$		(22,993	)			(17.6	)			$		(33,617	)			(18.1	)			$		(46,389	)			(16.5	)			$		(23,079	)			(6.8	)
Amortization expense			19,926						13.2				19,139						14.6				14,440						7.8				39,065						13.9				26,909						8.0
Share-based and non-cash compensation			4,635						3.1				9,215						7.0				12,226						6.6				13,851						4.9				22,311						6.6
Impairment and restructuring charges			10,681						7.1				4,661						3.6				469						0.3				15,343						5.5				1,757						0.5
Litigation costs			781						0.5				746						0.6				780						0.4				1,527						0.5				1,041						0.3
Acquisition, integration and restructuring related costs			3,112						2.1				2,653						2.0				54,127						29.1				5,765						2.0				60,441						17.9
Other			—						—				—						—				183						0.1				—						—				184						0.1
Adjusted income from operations (Non-GAAP)			$		15,739				10.5				$		13,421				10.3				$		48,608				26.1				$		29,162				10.4				$		89,564				26.5
Depreciation expense			7,622						5.1				7,466						5.7				6,173						3.3				15,088						5.4				11,708						3.5
Consulting income			—						—				—						—				1,875						1.0				—						—				3,717						1.1
Adjusted EBITDA (Non-GAAP)			$		23,361				15.5				$		20,887				16.0				$		56,656				30.4				$		44,250				15.7				$		104,989				31.1

			Three Months Ended																														Six Months Ended
			March 30, 2018										December 29, 2017										March 31, 2017										March 30, 2018										March 31, 2017
			Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue
Net loss - GAAP			$		(15,484	)			(10.3	)			$		(22,569	)			(17.2	)			$		(130,131	)			(69.9	)			$		(38,053	)			(13.5	)			$		(131,096	)			(38.8	)
Amortization expense			19,926						13.2				19,139						14.6				14,440						7.8				39,065						13.9				26,909						8.0
Share-based and non-cash compensation			4,635						3.1				9,215						7.0				12,226						6.6				13,851						4.9				22,311						6.6
Impairment and restructuring charges			10,681						7.1				4,661						3.6				469						0.3				15,343						5.5				1,757						0.5
Warrant liability (gain) expense			(17,015			)			(11.3	)			(14,608			)			(11.2	)			2,573						1.4				(31,624			)			(11.2	)			7,395						2.2
Non-cash interest, net			1,508						1.0				1,028						0.8				721						0.4				2,536						0.9				1,424						0.4
Litigation costs			781						0.5				746						0.6				780						0.4				1,527						0.5				1,041						0.3
Acquisition, integration and restructuring related costs			3,112						2.1				2,653						2.0				54,127						29.1				5,765						2.0				60,441						17.9
Discontinued operations, excluding consulting income			18						—				5,599						4.3				(2,261			)			(1.2	)			5,617						2.0				(1,592			)			(0.5	)
Equity investment losses			4,085						2.7				—						—				—						—				4,085						1.5				—						—
Other			—						—				—						—				1,055						0.6				—						—				1,055						0.3
Tax effect of non-GAAP adjustments			(3,762			)			(2.5	)			775						0.6				85,424						45.9				(2,986			)			(1.1	)			81,615						24.2
Adjusted net income (Non-GAAP)			$		8,485				5.6				$		6,639				5.1				$		39,423				21.2				$		15,126				5.4				$		71,260				21.1

			Three Months Ended																																Six Months Ended
			March 30, 2018											December 29, 2017											March 31, 2017										March 30, 2018										March 31, 2017
			Net Income (Loss)						Income (loss) per diluted share					Net Income (Loss)						Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share					Net Income (Loss)					Income (loss) per diluted share
Net loss - GAAP			$		(15,484	)								$		(22,569	)								(130,131		)								(38,053		)								(131,096		)
Warrant liability gain			(17,015			)								(14,608			)								—										(31,624		)								—
Net loss - diluted			$		(32,499	)			$	(0.50	)			$		(37,177	)			$	(0.57	)			$	(130,131	)			$	(2.14	)			$	(69,677	)			$	(1.07	)			$	(131,096	)			$	(2.29	)
Adjusted (Non-GAAP)			$		8,485				$	0.13				$		6,639				$	0.10				$	39,423				$	0.63				$	15,126				$	0.23				$	71,260				$	1.20

			Three Months Ended									Six Months Ended
			March 30, 2018			December 29, 2017			March 31, 2017			March 30, 2018			March 31, 2017
			Shares			Shares			Shares			Shares			Shares
Diluted shares - GAAP			65,132			65,109			60,813			65,120			57,276
Incremental shares			478			500			2,031			489			1,953
Adjusted diluted shares (Non-GAAP)			65,610			65,609			62,844			65,609			59,229

			Three Months Ended																													Six Months Ended
			March 30, 2018										December 29, 2017										March 31, 2017									March 30, 2018										March 31, 2017
			Amount						% Revenue				Amount						% Revenue				Amount					% Revenue				Amount						% Revenue				Amount						% Revenue
Interest expense, net - GAAP			$		7,970				5.3				$		7,239				5.5				$		7,374			4.0				$		15,209				5.4				$		14,724				4.4
Non-cash interest expense			(1,508			)			(1.0	)			(1,028			)			(0.8	)			(721			)		(0.4	)			(2,536			)			(0.9	)			(1,423			)			(0.4	)
Adjusted Interest Expense (Non-GAAP)			$		6,462				4.3				$		6,211				4.7				$		6,653			3.6				$		12,673				4.5				$		13,301				3.9

			Three Months Ended																														Six Months Ended
			March 30, 2018										December 29, 2017										March 31, 2017										March 30, 2018										March 31, 2017
			Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue				Amount						% Revenue
Cash flow from operations			$		10,621				7.1				$		534				0.4				$		432				0.2				$		11,156				4.0				$		20,839				6.2
Capital expenditures			(12,756			)			(8.5	)			(13,823			)			(10.6	)			(11,353			)			(6.1	)			(26,580			)			(9.4	)			(16,295			)			(4.8	)
AppliedMicro transaction related payments			—						—				4,015						3.1				28,114						15.1				4,015						1.4				28,114						8.3
Free cash flow (Non-GAAP)			$		(2,135	)			(1.4	)			$		(9,274	)			(7.1	)			$		17,193				9.2				$		(11,409	)			(4.1	)			$		32,658				9.7
Free cash flow as a percentage of adjusted net income			(25			)%							(140			)%							44			%							(75			)%							46			%

			Three Months Ended
			March 30, 2018
			Reported				LR4 Impact				Pro Forma
Revenue			$150,414				$12,389				$138,025
Adjusted gross profit (Non-GAAP)			77,652				3,575				74,077
as a % of Revenue			51.6	%			28.9	%			53.7	%
Adjusted net income (Non-GAAP)			8,485				2,645				5,840
Adjusted diluted EPS (Non-GAAP)			0.13				0.04				0.09

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