MARVELL TECHNOLOGY GROUP LTD 
SANTA CLARA, Calif., Aug. 21, 2014 /PRNewswire/ -- Marvell Technology Group Ltd. (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the second quarter of fiscal year 2015, ended August 2, 2014.
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Key Second Quarter of Fiscal 2015 Financial Highlights
-- Revenue: Q2 FY 2015, $962 Million
-- GAAP Net Income: Q2 FY 2015, $139 Million
-- GAAP Diluted EPS: Q2 FY 2015, $0.27
-- Non-GAAP Net Income: Q2 FY 2015, $181 Million
-- Non-GAAP Diluted EPS: Q2 FY 2015, $0.34
-- Free Cash Flow: Q2 FY 2015, $137 Million
Third Quarter of Fiscal 2015 Financial Outlook
Marvell's financial outlook does not include the potential impact of future share repurchases, pending litigation matters, business combinations, asset acquisitions or other investments that may be completed after August 20, 2014.
-- Revenue is expected to be in the range of $960 Million to $1 Billion.
-- GAAP Gross Margin is expected to be in the range of 49.7% +/- 100 bps.
Non-GAAP Gross Margin is expected to be in the range of 50.0% +/- 100
bps.
-- GAAP Operating Expenses are expected to be in the range of $370 Million
+/- $10 Million. Non-GAAP Operating Expenses to be in the range of $330
Million +/- $10 Million.
-- GAAP Diluted EPS expected to be in the range of $0.21 +/- $0.02.
Non-GAAP Diluted EPS expected to be in the range of $0.29 +/- $0.02.
Second Quarter of Fiscal 2015 Summary
Revenue for the second quarter of fiscal 2015 was $962 million, approximately flat from $958 million in the first quarter of fiscal 2015, ended May 3, 2014, and a 19 percent increase from revenue of $807 million in the second quarter of fiscal 2014, ended August 3, 2013.
GAAP net income for the second quarter of fiscal 2015 was $139 million, or $0.27 per share (diluted), compared with GAAP net income of $99 million, or $0.19 per share (diluted), for the first quarter of fiscal 2015, and $62 million, or $0.12 per share (diluted), for the second quarter of fiscal 2014.
Non-GAAP net income was $181 million, or $0.34 per share (diluted), for the second quarter of fiscal 2015, compared with non-GAAP net income of $144 million, or $0.27 per share (diluted), for the first quarter of fiscal 2015 and $118 million, or $0.23 per share (diluted), for the second quarter of fiscal 2014.
Marvell reports net income, basic and diluted net income per share, in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income to non-GAAP net income for the three months ended August 2, 2014, May 3, 2014 and August 3, 2013 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of share-based compensation, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other exit related costs, and certain one-time expenses and benefits.
GAAP gross margin for the second quarter of fiscal 2015 was 50.3 percent, compared to 48.4 percent for the first quarter of fiscal 2015 and 52.2 percent for the second quarter of fiscal 2014.
Non-GAAP gross margin for the second quarter of fiscal 2015 was 50.6 percent, compared to 48.8 percent for the first quarter of fiscal 2015 and 53.0 percent for the second quarter of fiscal 2014.
Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2015 were 520 million shares, compared with 521 million shares in the first quarter of fiscal 2015 and 501 million shares in the second quarter of fiscal 2014.
Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2015 were 533 million shares, compared with 530 million shares for the first quarter of fiscal 2015 and 516 million shares for the second quarter of fiscal 2014.
Cash flow from operations for the second quarter of fiscal 2015 was $157 million, compared to the $235 million reported in the first quarter of fiscal 2015 and the $86 million reported in the second quarter of fiscal 2014. Free cash flow for the second quarter of fiscal 2015 was $137 million, compared to the $211 million reported in the first quarter of fiscal 2015 and the $65 million reported in the second quarter of fiscal 2014. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of technology licenses reported under investing and financing activities in the consolidated statement of cash flows.
Marvell paid a quarterly dividend of $0.06 per share on July 2, 2014 to all shareholders of record as of June 12, 2014. Marvell intends to pay its next quarterly dividend of $0.06 per share on October 2, 2014 to all shareholders of record as of September 11, 2014.
The payment of future quarterly cash dividends on Marvell's common shares is subject to, among other things, the best interests of its shareholders, its results of operations, cash balances and future cash requirements, financial condition, developments in ongoing litigation, statutory requirements of Bermuda law, and other factors that the board of directors may deem relevant.
Conference Call
Marvell will be conducting a conference call on Thursday, August 21, 2014 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal year 2015. Interested parties may join the conference call by dialing 1- 866-318-8619 or 1-617-399-5138, pass-code 56522168. The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until September 21, 2014.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other exit-related costs, litigation settlement, and certain one-time expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP net income per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP net income per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of share-based compensation expected to be incurred in future periods but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also include the dilutive/anti-dilutive effects of common stock options and restricted stock units.
Marvell believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Marvell's financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell's Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC's website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.
Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, including: Marvell's expectations and statements regarding its financial outlook for the third quarter of fiscal 2015; its dividend program including the declaration of, timing of, funding of, payment of and quarterly amount of dividends; and its use of non-GAAP financial measures as important supplemental information. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "can," "will" and similar expressions identify such forward-looking statements. These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. Actual events or results may differ materially from those described in this press release due to a number of risks and uncertainties, including, among others: Marvell's reliance on a few customers for a significant portion of its revenue; costs and liabilities relating to current and future litigation; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner and the adoption of those products in the market; seasonality in sales of consumer devices in which Marvell's products are incorporated; Marvell's ability to compete in products and prices in an intensely competitive industry; uncertainty in the worldwide economic conditions; Marvell's ability to recruit and retain skilled personnel; and other risks detailed in Marvell's SEC filings from time to time. When Marvell files its Quarterly Report on Form 10-Q for the second quarter of fiscal 2015, the financial statements may differ from the results disclosed in this press release because judgments and estimates that management used in preparing the financial results reported in this press release may need to be updated to the date of the filing. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in the Marvell's latest Quarterly Report on Form 10-Q for the quarter ended May 3, 2014 as filed with the SEC, and other factors detailed from time to time in Marvell's filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.
About Marvell
Marvell (NASDAQ: MRVL) is a global leader in providing complete silicon solutions and Kinoma® software enabling the "Smart Life and Smart Lifestyle." From mobile communications to storage, Internet of Things (IoT), cloud infrastructure, digital entertainment and in-home content delivery, Marvell's diverse product portfolio aligns complete platform designs with industry-leading performance, security, reliability and efficiency. At the core of the world's most powerful consumer, network and enterprise systems, Marvell empowers partners and their customers to always stand at the forefront of innovation, performance and mass appeal. By providing people around the world with mobility and ease of access to services adding value to their social, private and work lives, Marvell is committed to enhancing the human experience.
As used in this release, the term "Marvell" refers to Marvell Technology Group Ltd. and its subsidiaries. For more information, please visit www.Marvell.com.
Marvell® and the Marvell logo are registered trademarks of Marvell and/or its affiliates.
For further information, contact:
John Spencer Ahn Sue Kim
Investor Relations Media Relations
408-222-7544 408-222-1942
johnahn@marvell.com suekim@marvell.com
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
August 2, May 3, August 3, August 2, August 3,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
Net revenue $961,545 $957,830 $807,056 $1,919,375 $1,541,425
Cost of goods sold 477,741 493,860 386,059 971,601 721,497
------- ------- ------- ------- -------
Gross profit 483,804 463,970 420,997 947,774 819,928
Operating expenses:
Research and
development 294,764 295,363 292,642 590,127 571,694
Selling and
marketing 33,949 38,358 38,548 72,307 78,537
General and
administrative 31,333 30,573 27,192 61,906 53,515
Amortization
and write-
off of
acquired
intangible
assets 3,304 6,689 10,638 9,993 21,324
Total operating expenses 363,350 370,983 369,020 734,333 725,070
------- ------- ------- ------- -------
Operating income 120,454 92,987 51,977 213,441 94,858
Interest and other income, net 12,263 1,925 8,253 14,188 11,413
------ ----- ----- ------ ------
Income before income taxes 132,717 94,912 60,230 227,629 106,271
Benefit for income taxes (6,153) (4,567) (1,596) (10,720) (8,764)
------ ------ ------ ------- ------
Net income $138,870 $99,479 $61,826 $238,349 $115,035
======== ======= ======= ======== ========
Basic net income per share $0.27 $0.20 $0.13 $0.47 $0.23
===== ===== ===== ===== =====
Diluted net income per share $0.27 $0.19 $0.12 $0.46 $0.23
===== ===== ===== ===== =====
Shares used in computing basic
earnings per share 511,821 505,105 494,293 508,463 498,237
Shares used in computing
diluted earnings per share 520,269 520,751 500,625 520,510 503,006
Marvell Technology Group Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
August 2, February 1,
Assets 2014 2014
---- ----
Current assets:
Cash, cash
equivalents and
short-term
investments $2,300,004 $1,969,405
Accounts
receivable, net 498,484 453,496
Inventories 393,957 347,861
Prepaid expenses
and other
current assets 96,561 68,458
-------------
Total current assets 3,289,006 2,839,220
Property and equipment, net 344,836 356,165
Long-term investments 13,422 16,279
Goodwill and acquired intangible
assets, net 2,068,017 2,078,980
Other non-current assets 150,413 160,366
------- -------
Total assets $5,865,694 $5,451,010
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $415,718 $316,389
Accrued
liabilities 293,378 273,170
Deferred income 82,887 61,747
-------------
Total current liabilities 791,983 651,306
Other non-current liabilities 112,177 123,794
------- -------
Total liabilities 904,160 775,100
------- -------
Shareholders' equity:
Common stock 1,028 1,005
Additional paid-
in capital 3,049,864 2,941,650
Accumulated other
comprehensive
income 627 597
Retained earnings 1,910,015 1,732,658
-------------
Total shareholders' equity 4,961,534 4,675,910
Total liabilities and shareholders'
equity $5,865,694 $5,451,010
========== ==========
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
------------------ ----------------
August 2, August 3, August 2, August 3,
2014 2013 2014 2013
---- ---- ---- ----
Cash flows from operating activities:
Net income $138,870 $61,826 $238,349 $115,035
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and
amortization 26,263 25,697 53,269 50,663
Share-based
compensation 35,020 41,091 64,989 74,604
Amortization and
write-off of
acquired
intangible assets 3,789 10,638 10,963 21,324
Other expense
(income), net (7,596) 1,816 (6,126) 4,339
Excess tax
benefits from
share-based
compensation (32) (25) (76) (32)
Changes in assets
and liabilities:
Accounts
receivable 33,419 (60,524) (30,159) (100,636)
Inventories (43,194) (64,170) (46,299) (84,293)
Prepaid
expenses and
other assets (24,996) 12,503 (27,157) 19,305
Accounts
payable 2,558 54,933 87,686 83,869
Accrued
liabilities
and other
non-current
liabilities 10,096 (13,013) 2,962 (33,094)
Accrued
employee
compensation (7,451) (471) 22,550 3,952
Deferred
income (9,792) 16,195 21,140 15,315
------ ------ ------ ------
Net cash provided by
operating activities 156,954 86,496 392,091 170,351
Cash flows from investing activities:
Purchases of
available-for-
sale securities (153,881) (164,631) (335,770) (471,469)
Sales and
maturities of
available-for-
sale securities 190,099 162,909 372,410 498,680
Investments in
privately-held
companies - (750) (441) (750)
Cash paid for
acquisitions, net - - - (2,551)
Purchases of
technology
licenses (1,298) (1,750) (9,409) (7,610)
Purchases of
property and
equipment (15,823) (18,981) (31,954) (39,061)
--------
Net cash provided by (used
in) investing activities 19,097 (23,203) (5,164) (22,761)
Cash flows from financing activities:
Repurchase of
common stock (a) - (88,114) - (304,808)
Proceeds from
employee stock
plans 49,282 53,316 68,374 73,121
Minimum tax
withholding paid
on behalf of
employees
for net share
settlement (637) (510) (24,923) (9,888)
Dividend payments
to shareholders (30,820) (29,791) (60,992) (60,044)
Payments on
technology
license
obligations (2,677) (984) (2,677) (6,301)
Excess tax
benefits from
share-based
compensation 32 25 76 32
---
Net cash provided by (used
in) financing activities 15,180 (66,058) (20,142) (307,888)
------ ------- ------- --------
Net increase (decrease) in cash and cash
equivalents 191,231 (2,765) 366,785 (160,298)
Cash and cash equivalents at beginning
of period 1,141,304 594,420 965,750 751,953
--------- ------- ------- -------
Cash and cash equivalents at end of
period $1,332,535 $591,655 $1,332,535 $591,655
========== ======== ========== ========
(a) Marvell records all repurchases
as well as investment
purchases and sales, based on
trade date in accordance with
U.S. GAAP. There were no
repurchases of common stock in
the three and six months ended
August 2, 2014.
Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
August 2, May 3, August 3, August 2, August 3,
2014 2014 2013 2014 2013
---- ---- ---- ---- ----
GAAP net income $138,870 $99,479 $61,826 $238,349 $115,035
Share-based compensation 35,020 29,969 41,091 64,989 74,604
Amortization and write-off of
acquired intangible assets 4,229 7,614 10,638 11,843 21,324
Acquisition-related costs (a) - - (1,081) - (616)
Restructuring and other exit-
related costs (b) 735 5,088 178 5,823 406
Litigation settlement (c) 475 2,000 5,228 2,475 5,228
Other (d) 2,155 - - 2,155
Non-GAAP net income $181,484 $144,150 $117,880 $325,634 $215,981
======== ======== ======== ======== ========
GAAP weighted average shares -
diluted 520,269 520,751 500,625 520,510 503,006
Non-GAAP adjustment 13,201 9,625 15,021 11,413 16,058
------
Non-GAAP weighted average shares
diluted (e) 533,470 530,376 515,646 531,923 519,064
======= ======= ======= ======= =======
GAAP diluted net income per share $0.27 $0.19 $0.12 $0.46 $0.23
===== ===== ===== ===== =====
Non-GAAP diluted net income per
share $0.34 $0.27 $0.23 $0.61 $0.42
===== ===== ===== ===== =====
GAAP gross profit: $483,804 $463,970 $420,997 $947,774 $819,928
Share-based compensation 1,733 2,299 1,868 4,032 3,735
Amortization of acquired intangible
assets 925 925 - 1,850 -
Litigation settlement (c) - - 4,728 - 4,728
Non-GAAP gross profit $486,462 $467,194 $427,593 $953,656 $828,391
======== ======== ======== ======== ========
GAAP gross margin 50.3% 48.4% 52.2% 49.4% 53.2%
Share-based compensation 0.2% 0.3% 0.2% 0.2% 0.2%
Amortization of acquired intangible
assets 0.1% 0.1% - 0.1% -
Litigation settlement (c) - - 0.6% - 0.3%
Non-GAAP gross margin 50.6% 48.8% 53.0% 49.7% 53.7%
==== ==== ==== ==== ====
GAAP research and development: $294,764 $295,363 $292,642 $590,127 $571,694
Share-based compensation (24,276) (20,368) (28,982) (44,644) (52,261)
Acquisition-related costs (a) - - 1,135 - 735
Restructuring and other exit-related
costs (b) (412) (4,682) - (5,094) -
Non-GAAP research and development $270,076 $270,313 $264,795 $540,389 $520,168
======== ======== ======== ======== ========
GAAP selling and marketing: $33,949 $38,358 $38,548 $72,307 $78,537
Share-based compensation (2,617) (2,928) (3,648) (5,545) (7,040)
Acquisition-related costs (a) - - (34) - (79)
Restructuring and other exit-related
costs (b) 48 (48) - - -
Non-GAAP selling and marketing $31,380 $35,382 $34,866 $66,762 $71,418
======= ======= ======= ======= =======
GAAP general and administrative: $31,333 $30,573 $27,192 $61,906 $53,515
Share-based compensation (6,394) (4,374) (6,593) (10,768) (11,568)
Acquisition-related costs (a) - - (20) - (40)
Restructuring and other exit-related
costs (b) (371) (358) (178) (729) (406)
Litigation settlement (c) (475) (2,000) (500) (2,475) (500)
Other (d) (2,155) (2,155)
Non-GAAP general and
administrative $21,938 $23,841 $19,901 $45,779 $41,001
======= ======= ======= ======= =======
(a) Acquisition-
related costs
include the
amortization
of retention
bonuses
required by
the terms of
an
acquisition.
(b) Restructuring
and other
exit-related
costs include
costs that
qualify under
U.S. GAAP as
restructuring
costs, as
well as
operating
expenses
related to
assets
classified as
held-for-
sale that did
not qualify
as
discontinued
operations.
(c) The amounts
recorded do
not relate to
Marvell's
litigation
with Carnegie
Mellon
University.
(d) Costs
associated
with the
surety bond
to appeal the
Carnegie
Mellon
University
judgment.
(e) For purposes
of
calculating
non-GAAP
diluted net
income per
share, the
GAAP diluted
weighted
average
shares
outstanding
is adjusted
to exclude
the potential
benefits of
share-based
compensation
costs
expected to
be incurred
in future
periods but
not yet
recognized in
the financial
statements.
Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP Outlook
(Unaudited)
(In millions, except per share amounts)
Q3 FY2015
Note : Amounts represent the midpoint of the expected range Outlook
-------
GAAP gross margin 49.7%
Share-based compensation, amortization of intangible assets and other 0.3%
Non-GAAP gross margin 50.0%
====
Q3 FY2015
Outlook
-------
GAAP operating expenses $370
Share-based compensation, restructuring,
amortization of intangible assets and other (40)
Non-GAAP operating expenses $330
====
Q3 FY2015
Outlook
-------
GAAP diluted earnings per share $0.21
Share-based compensation, restructuring,
amortization of intangible assets and other 0.08
Non-GAAP diluted earnings per share $0.29
=====
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SOURCE Marvell Technology Group Ltd.
