Warrant Liability Expenses/Gains - are associated with mark-to-market fair value adjustments which are largely based on the value of our common stock, which may vary from period to period due to factors such as stock price volatility. We believe these amounts are not correlated to future business operations and including such charges does not reflect our ongoing operations.

Non Cash Interest, Net - includes amounts associated with the amortization of certain fees associated with the establishment of our Credit Agreement and Term Loans that are being amortized over the life of the agreement. We believe these amounts are non-cash in nature and not correlated to future business operations and including such charges does not reflect our ongoing operations.

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 and Integration 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 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.

Other - historical amounts primarily include transaction expenses incurred as part of our Credit Agreement Amendment in the fourth fiscal quarter of 2016. 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 cash tax rate associated with our Adjusted Non-GAAP income over a period of time. These adjustments have resulted in an estimated Adjusted Non-GAAP cash tax rate of 12% and 15% for our fiscal years 2017 and 2016, respectively. We believe it is beneficial for our management to review Adjusted Non-GAAP cash tax rate on a consistent basis over periods of time. Certain items including many of the items noted above may have a significant impact on our US GAAP tax expense and associated tax rate during a specific period of time.

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 and reduces this amount by our capital expenditures in the applicable period. 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
			December 30, 2016					September 30, 2016					January 1, 2016
Revenue			$	151,752				$	152,697				$	115,774
Cost of revenue			73,257					70,893					55,456
Gross profit			78,495					81,804					60,318
Operating expenses:
Research and development			30,174					30,109					25,322
Selling, general and administrative			36,496					40,265					34,686
Restructuring charges			1,287					1,365					157
Total operating expenses			67,957					71,739					60,165
Income from operations			10,538					10,065					153
Other income (expense):
Warrant liability expense			(4,823		)			(12,691		)			(14,878		)
Interest expense, net			(7,350		)			(5,310		)			(4,346		)
Other (expense) income, net			(4		)			5					100
Total other expense			(12,177		)			(17,996		)			(19,124		)
Loss before income taxes			(1,639		)			(7,931		)			(18,971		)
Income tax expense (benefit)			532					(11,804		)			(2,201		)
(Loss) income from continuing operations			(2,171		)			3,873					(16,770		)
Income from discontinued operations			1,206					1,228					1,199
Net (loss) income			$	(965	)			$	5,101				$	(15,571	)
Net (loss) income per share:
Basic:
(Loss) income from continuing operations			$	(0.04	)			$	0.07				$	(0.32	)
Income from discontinued operations			0.02					0.02					0.02
(Loss) income per share - basic			$	(0.02	)			$	0.10				$	(0.29	)
Diluted:
(Loss) income from continuing operations			$	(0.04	)			$	0.07				$	(0.32	)
Income from discontinued operations			0.02					0.02					0.02
(Loss) income per share - diluted			$	(0.02	)			$	0.09				$	(0.29	)
Shares - Basic			53,737					53,676					53,015
Shares - Diluted			53,737					55,285					53,015

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited and in thousands)
				December 30, 2016					September 30, 2016
ASSETS
Current assets:
Cash and cash equivalents				$	353,917				$	332,977
Short term investments				23,750					23,776
Accounts receivable, net				112,245					108,331
Inventories				115,219					114,935
Income tax receivable				21,025					21,607
Prepaids and other current assets				15,619					11,318
Total current assets				641,775					612,944
Property and equipment, net				101,845					99,167
Goodwill and intangible assets, net				359,015					379,626
Deferred income taxes				88,565					89,606
Other long-term assets				5,495					7,208
TOTAL ASSETS				$	1,196,695				$	1,188,551
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of lease payable				$	1,047				$	1,152
Current portion of long-term debt obligations				6,051					6,051
Accounts payable, accrued liabilities and other				79,965					84,947
Total current liabilities				87,063					92,150
Lease payable, less current portion				14,147					2,463
Long-term debt obligations, less current portion				572,963					573,882
Common stock warrant liability				43,076					38,253
Deferred income taxes				9,564					11,765
Other long-term liabilities				6,923					7,254
Total liabilities				733,736					725,767
Stockholders' equity				462,959					462,784
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY				$	1,196,695				$	1,188,551

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited and in thousands)
			Three Months Ended
			December 30, 2016					January 1, 2016
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss			$	(965	)			$	(15,571	)
Adjustments to reconcile loss to net operating cash			31,711					39,334
Change in operating assets and liabilities			(10,339		)			(8,249		)
Net cash provided by operating activities			20,407					15,514
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net			875					(85,517		)
Purchases, sales and maturities of investments			(80		)			9,543
Proceeds from sale of assets			104					—
Purchases of property and equipment			(4,942		)			(6,230		)
Acquisition of intellectual property			—					(476		)
Net cash used in investing activities			(4,043		)			(82,680		)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from corporate facility financing obligation			4,250					—
Payments of notes payable and assumed debt			(1,801		)			(9,606		)
Proceeds from stock option exercises and employee stock purchases			2,600					2,817
Repurchase of common stock			—					(339		)
Other financing activities			(38		)			—
Net cash provided by (used in) financing activities			5,011					(7,128		)
EFFECT OF EXCHANGE RATE CHANGES ON CASH AND CASH EQUIVALENTS			(435		)			(210		)
NET CHANGE IN CASH AND CASH EQUIVALENTS			20,940					(74,504		)
CASH AND CASH EQUIVALENTS — Beginning of period			332,977					122,312
CASH AND CASH EQUIVALENTS — End of period			$	353,917				$	47,808

MACOM TECHNOLOGY SOLUTIONS HOLDINGS, INC. RECONCILIATION OF GAAP TO NON-GAAP RESULTS (unaudited and in thousands, except per share data)
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Amount					% Revenue					Amount					% Revenue					Amount					% Revenue
Gross profit - GAAP			$	78,495				51.7					$	81,804				53.6					$	60,318				52.1
Amortization expense			6,001					4.0					6,366					4.2					7,167					6.2
Share-based and non-cash compensation			794					0.5					628					0.4					542					0.5
Acquisition and integration related costs			1,546					1.0					542					0.4					(68		)			(0.1		)
Adjusted gross profit (NonGAAP)			$	86,836				57.2					$	89,340				58.5					$	67,959				58.7
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Amount					% Revenue					Amount					% Revenue					Amount					% Revenue
Operating expenses - GAAP			$	67,957				44.8					$	71,739				47.0					$	60,165				52.0
Amortization expense			(6,467		)			(4.3		)			(6,498		)			(4.3		)			(4,423		)			(3.8		)
Share-based and non-cash compensation			(9,291		)			(6.1		)			(9,099		)			(6.0		)			(10,881		)			(9.4		)
Impairment and restructuring charges			(1,287		)			(0.8		)			(1,365		)			(0.9		)			(157		)			(0.1		)
Litigation costs			(264		)			(0.2		)			(1,037		)			(0.7		)			(108		)			(0.1		)
Acquisition and integration related costs			(4,768		)			(3.1		)			(2,146		)			(1.4		)			(4,315		)			(3.7		)
Other			—					—					(573		)			(0.4		)			—					—
Adjusted operating expenses (NonGAAP)			$	45,880				30.2					$	51,021				33.4					$	40,281				34.8
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Amount					% Revenue					Amount					% Revenue					Amount					% Revenue
Income (loss) from operations - GAAP			$	10,538				6.9					$	10,065				6.6					$	153				0.1
Amortization expense			12,468					8.2					12,864					8.4					11,590					10.0
Share-based and non-cash compensation			10,085					6.6					9,727					6.4					11,423					9.9
Impairment and restructuring charges			1,287					0.8					1,365					0.9					157					0.1
Litigation costs			264					0.2					1,037					0.7					108					0.1
Acquisition and integration related costs			6,314					4.2					2,688					1.8					4,247					3.7
Other			—					—					573					0.4					—					—
Adjusted income from operations (NonGAAP)			$	40,956				27.0					$	38,319				25.1					$	27,678				23.9
Depreciation expense			5,535					3.6					4,689					3.1					3,903					3.4
Consulting income			1,875					1.2					1,880					1.2					1,954					1.7
Adjusted EBITDA			$	48,366				31.9					$	44,888				29.4					$	33,535				29.0
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Amount					% Revenue					Amount					% Revenue					Amount					% Revenue
Net (loss) income - GAAP			$	(965	)			(0.6		)			$	5,101				3.3					$	(15,571	)			(13.4		)
Amortization expense			12,468					8.2					12,864					8.4					11,590					10.0
Share-based and non-cash compensation			10,085					6.6					9,727					6.4					11,423					9.9
Impairment and restructuring charges			1,287					0.8					1,365					0.9					157					0.1
Warrant liability expense			4,823					3.2					12,691					8.3					14,879					12.9
Non-cash interest, net			702					0.5					503					0.3					398					0.3
Litigation costs			263					0.2					1,037					0.7					108					0.1
Acquisition and integration related costs			6,314					4.2					2,688					1.8					4,227					3.7
Discontinued operations, excluding consulting income			669					0.4					647					0.4					676					0.6
Other			—					—					573					0.4					—					—
Tax effect of non-GAAP adjustments			(3,810		)			(2.5		)			(17,114		)			(11.2		)			(6,054		)			(5.2		)
Adjusted net income (NonGAAP)			$	31,836				21.0					$	30,082				19.7					$	21,833				18.9
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			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) income - diluted			$	(965	)			$	(0.02	)			$	5,101				$	0.09				$	(15,571	)			$	(0.29	)
Adjusted (NonGAAP)			$	31,836				$	0.57				$	30,082				$	0.54				$	21,833				$	0.40
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Shares										Shares										Shares
Diluted shares - GAAP			53,737										55,285										53,015
Incremental shares			1,875										—										1,997
Adjusted diluted shares (NonGAAP)			55,612										55,285										55,012
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Amount					% Revenue					Amount					% Revenue					Amount					% Revenue
Interest expense, net - GAAP			$	7,350				4.8					$	5,310				3.5					$	4,346				3.8
Non-cash interest expense			(702		)			(0.5		)			(503		)			(0.3		)			(398		)			(0.3		)
Adjusted Interest Expense (NonGAAP)			$	6,648				4.4					$	4,807				3.1					$	3,948				3.4
			Three Months Ended
			December 30, 2016										September 30, 2016										January 1, 2016
			Amount					% Revenue					Amount					% Revenue					Amount					% Revenue
Cash flow from operations			$	20,407				13.4					$	24,885				16.3					$	15,514				13.4
Capital expenditures			(4,942		)			(3.3		)			(7,226		)			(4.7		)			(6,706		)			(5.8		)
Free cash flow			$	15,465				10.2					$	17,659				11.6					$	8,808				7.6

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