MARVELL TECHNOLOGY GROUP LTD SANTA CLARA, Calif., May 25, 2017 /PRNewswire/ --
-- Q1 Revenue: $579 million
-- Q1 Gross Margin: 60.2% GAAP gross margin; 60.4% non-GAAP gross margin
-- Q1 Diluted earnings per share: $0.19 GAAP diluted earnings per share
from continuing operations; $0.24 non-GAAP diluted earnings per share
from continuing operations
-- Cash and short-term investments: $1.65 billion
Marvell Technology Group Ltd. (NASDAQ: MRVL), a leader in storage, networking and connectivity semiconductor solutions, today reported financial results for the first fiscal quarter of fiscal year 2018. Revenue for the first quarter of fiscal 2018 was $579 million, which exceeded the midpoint of the Company's guidance provided on March 2, 2017.
GAAP net income from continuing operations for the first quarter of fiscal 2018 was $97 million, or $0.19 per share. Non-GAAP net income from continuing operations for the first quarter of fiscal 2018 was $124 million, or $0.24 per diluted share. Cash flow from operations for the quarter was $135 million.
Subsequent to the close of Marvell's first quarter of fiscal 2018, the Company sold its LTE thin-modem business to ASR Microelectronics for a purchase price of $45 million. ASR is a provider of cellular platform SoCs and software for the cellular end market. This product line was classified as part of the Company's other product category. In the second quarter of fiscal 2018, this product line will be reclassified and added to discontinued operations. The Company's revenue guidance provided for the fiscal second quarter of 2018 excludes revenue associated with this sale, which has been approximately $5 million per quarter.
"Marvell executed well in the first quarter of fiscal year 2018 as a renewed focus on its core businesses of storage, networking and connectivity were able to generate revenue growth of 12% year-over-year, driven by the long-term secular growth trends in the amount of data being created, stored and transmitted both wired and wirelessly," said Marvell's President and CEO, Matt Murphy. "We are pleased to see that this growth was accompanied by a significant expansion in gross and operating margin, demonstrating the strength in our business model and the value Marvell's solutions are bringing to our customers."
Second Quarter of Fiscal 2018 Financial Outlook
-- Revenue is expected to be $585 to $615 million. This range excludes
approximately $5 million in revenue associated with sale of LTE
thin-modem business.
-- GAAP and non-GAAP gross margins are expected to be approximately 61%.
-- GAAP operating expenses are expected to be $237 million to $247 million.
-- Non-GAAP operating expenses are expected to be $215 million to $220
million.
-- GAAP diluted EPS from continuing operations is expected to be in the
range of $0.21 to $0.27.
-- Non-GAAP diluted EPS from continuing operations is expected to be in the
range of $0.26 to $0.30.
Discontinued Operations
The Company's financial results for prior periods presented herein have been recast to reflect certain businesses that were classified as discontinued operations during the fourth quarter of fiscal year 2017.
Conference Call
Marvell will conduct a conference call on Thursday, May 25, 2017 at 1:45 p.m. Pacific Time to discuss results for the first quarter of fiscal 2018. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 17273674. 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 June 2, 2017.
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 related charges, litigation settlement, and certain 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.
In fiscal 2018, Marvell began using a non-GAAP tax rate to compute the non-GAAP tax provision. This non-GAAP tax rate is based on Marvell's estimated annual GAAP income tax forecast, adjusted to account for items excluded from GAAP income in calculating Marvell's non-GAAP income, as well as the effects of significant non-recurring and period specific tax items which vary in size and frequency. Marvell's non-GAAP tax rate is determined on an annual basis and may be adjusted during the year to take into account events that may materially affect the non-GAAP tax rate such as tax law changes; significant changes in Marvell's geographic mix of revenue and expenses; or changes to Marvell's corporate structure. For the first quarter of fiscal 2018, a non-GAAP tax rate of 4% has been applied to the non-GAAP financial results.
Non-GAAP diluted net income per share from continuing operations is calculated by dividing non-GAAP net income from continuing operations by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP diluted 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 additional proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.
Marvell believes that the presentation of non-GAAP financial measures provide 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, financial measures calculated in accordance with GAAP. 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.
Externally, management believes that investors may find Marvell's non-GAAP financial measures useful in their assessment of Marvell's operating performance and the valuation of Marvell. Internally, Marvell's non-GAAP financial measures are used in the following areas:
-- Management's evaluation of Marvell's operating performance;
-- Management's establishment of internal operating budgets;
-- Management's performance comparisons with internal forecasts and
targeted business models; and
-- Management's determination of the achievement and measurement of certain
performance-based equity awards (adjustments may vary from award to
award).
Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Marvell's business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Marvell's results as reported under GAAP. Marvell expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from Marvell's non-GAAP net income should not be construed as an inference that these costs are unusual, infrequent or non-recurring.
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 regarding its second quarter of fiscal 2018 financial outlook; and Marvell's use of non-GAAP financial measures as important supplemental information. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "seeks," "estimates," "can," "may," "will," "would" 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, but not limited to: adverse impacts of litigation or regulatory activities; Marvell's ability to implement its restructuring in a timely manner; the amount and timing of anticipated charges associated with the restructuring; Marvell's ability to increase its operational efficiency and decrease its operating expenses to the anticipated level; Marvell's reliance on a few customers for a significant portion of its revenue; severe financial hardship or bankruptcy of one or more of Marvell's major customers; its ability to divest certain non-strategic businesses within the anticipated timeframes and with the anticipated cost savings; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's reliance on the hard disk drive, networking and wireless markets, which are highly cyclical and intensely competitive; 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; uncertainty in the worldwide economic conditions; risks associated with manufacturing and selling a majority of Marvell's products and Marvell's customers' products outside of the United States; risks associated with acquisition and consolidation activity in the semiconductor industry; and other risks detailed in Marvell's SEC filings from time to time. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's Annual Report on Form 10-K for the fiscal year ended January 28, 2017 as filed with the SEC on March 28, 2017, 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 first revolutionized the digital storage industry by moving information at speeds never thought possible. Today, that same breakthrough innovation remains at the heart of the Company's storage, network infrastructure, and wireless connectivity solutions. With leading intellectual property and deep system-level knowledge, Marvell's semiconductor solutions continue to transform the enterprise, cloud, automotive, industrial, and consumer markets. To learn more, visit: www.marvell.com.
Marvell(®) and the Marvell logo are registered trademarks of Marvell and/or its affiliates.
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
April 29, 2017 January 28, 2017 April 30, 2016
-------------- ---------------- --------------
Net revenue $579,180 $571,400 $519,383
Cost of goods sold 230,549 243,883 244,354
Gross profit 348,631 327,517 275,029
------- ------- -------
Operating expenses:
Research and development 193,027 181,557 226,541
Selling, general and administrative 55,211 59,233 64,163
Restructuring related charges 1,505 98,860 4,441
----- ------ -----
Total operating expenses 249,743 339,650 295,145
------- ------- -------
Operating income (loss) 98,888 (12,133) (20,116)
Interest and other income, net 3,333 3,780 1,488
-----
Income (loss) from continuing operations before
income taxes 102,221 (8,353) (18,628)
Provision (benefit) for income taxes 5,251 68,524 (5,357)
------
Income (loss) from continuing operations 96,970 $(76,877) (13,271)
------ -------- -------
Income (loss) from discontinued operations, net
of tax 9,651 (3,214) (9,408)
Net income (loss) $106,621 $(80,091) $(22,679)
======== ======== ========
Net income (loss) per share - Basic:
Continuing operations $0.19 $(0.15) $(0.03)
===== ====== ======
Discontinued operations $0.02 $(0.01) $(0.02)
===== ====== ======
Net income (loss) per share - basic $0.21 $(0.16) $(0.04)
Net income (loss) per share - Diluted:
Continuing operations $0.19 $(0.15) $(0.03)
===== ====== ======
Discontinued operations $0.02 $(0.01) $(0.02)
===== ====== ======
Net income (loss) per share - diluted $0.21 $(0.16) $(0.04)
Weighted average shares:
Basic 503,790 507,834 508,794
Diluted 517,592 507,834 508,794
Marvell Technology Group Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
April 29, January 28,
2017 2017
---- ----
Assets
Current assets:
Cash and cash equivalents $725,962 $814,092
Short-term investments 923,449 854,268
Accounts receivable, net 357,147 335,384
Inventories 178,145 171,969
Prepaid expenses and other current assets 44,577 58,771
Assets held for sale 39,708 45,846
------ ------
Total current assets 2,268,988 2,280,330
Property and equipment, net 239,358 243,397
Goodwill and acquired intangible assets, net 2,005,912 2,006,984
Other non-current assets 121,979 117,939
Total assets $4,636,237 $4,648,650
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $179,017 $143,484
Accrued liabilities 154,315 143,491
Accrued employee compensation 132,118 139,647
Deferred income 74,064 68,124
Liabilities held for sale 746 1,670
--- -----
Total current liabilities 540,260 496,416
Non-current income taxes payable 62,720 60,646
Other non-current liabilities 71,411 63,937
------ ------
Total liabilities 674,391 620,999
Shareholders' equity:
Common stock 1,001 1,012
Additional paid-in capital 2,876,507 3,016,775
Accumulated other comprehensive income (loss) (164) 23
Retained earnings 1,084,502 1,009,841
--------- ---------
Total shareholders' equity 3,961,846 4,027,651
---------
Total liabilities and shareholders' equity $4,636,237 $4,648,650
========== ==========
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited) (In thousands)
Three Months Ended
April 29, April 30,
2017 2016
---- ----
Cash flows from operating activities:
Net income (loss) $106,621 $(22,679)
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization 20,742 27,114
Share-based compensation 24,017 24,453
Amortization and write-off of acquired intangible
assets 1,071 2,946
Restructuring related charges (516) 896
Deferred income taxes and other (11,109) (1,115)
Gain on sale of a business (8,155) -
Changes in assets and liabilities:
Accounts receivable (21,763) 42,642
Inventories (11,542) 13,598
Prepaid expenses and other assets 6,422 (13,217)
Accounts payable 31,423 19,922
Accrued liabilities and other non-current
liabilities 448 (22,502)
Carnegie Mellon University accrued litigation
settlement (a) - (736,000)
Accrued employee compensation (7,529) 7,152
Deferred income 5,016 (1,234)
Net cash provided by (used in) operating
activities 135,146 (658,024)
------- --------
Cash flows from investing activities:
Purchases of available-for-sale securities (198,416) (93,365)
Sales of available-for-sale securities 78,764 272,271
Maturities of available-for-sale securities 82,235 97,788
Purchase of time deposits (75,000) (50,000)
Maturities of time deposits 75,000 -
Purchases of technology licenses (1,093) (4,050)
Purchases of property and equipment (10,026) (11,868)
Net proceeds from sale of a business 22,954 -
Other 7,275 -
----- ---
Net cash provided by (used in) investing
activities (18,307) 210,776
------- -------
Cash flows from financing activities:
Repurchases of common stock (166,293) -
Proceeds from employee stock plans 19,939 315
Minimum tax withholding paid on behalf of
employees for net share settlement (21,809) (15,270)
Dividend payments to shareholders (29,991) (30,461)
Payments on technology license obligations (6,815) (5,294)
Net cash used in financing activities (204,969) (50,710)
-------- -------
Net decrease in cash and cash equivalents (88,130) (497,958)
Cash and cash equivalents at beginning of period 814,092 1,278,180
Cash and cash equivalents at end of period $725,962 $780,222
======== ========
(a) The Company
paid $750.0
million to
Carnegie
Mellon
University
in
connection
with a
litigation
settlement
agreement
reached in
February
2016.
Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended
April 29, January 28, April 30,
2017 2017 2016
---- ---- ----
GAAP gross profit: $348,631 $327,517 $275,029
Special items:
Share-based compensation 1,426 1,641 1,784
Non-GAAP gross profit $350,057 $329,158 $276,813
======== ======== ========
GAAP gross margin 60.2% 57.3% 53.0%
==== ==== ====
Non-GAAP gross margin 60.4% 57.6% 53.3%
==== ==== ====
Total GAAP operating expenses $249,743 $339,650 $295,145
Special items:
Share-based compensation (20,941) (20,764) (20,396)
Restructuring related charges (a) (1,505) (98,860) (4,441)
Amortization of and write-off acquired
intangible assets (1,071) (1,480) (2,298)
Other operating expenses (b) (2,304) (315) (1,242)
Total special items (25,821) (121,419) (28,377)
-------
Total non-GAAP operating expenses $223,922 $218,231 $266,768
======== ======== ========
GAAP operating margin 17.1% (2.1)% (3.9)%
Share-based compensation 3.9% 3.9% 4.3%
Restructuring related charges (a) 0.3% 17.3% 0.9%
Amortization of and write-off acquired
intangible assets 0.2% 0.3% 0.4%
Other operating expenses (b) 0.3% - % 0.2%
--- --- --- ---
Non-GAAP operating margin 21.8% 19.4% 1.9%
==== ==== ===
GAAP net income (loss) $106,621 $(80,091) $(22,679)
Loss (income) from discontinued operations,
net of tax (9,651) 3,214 9,408
GAAP net income (loss) from continuing
operations 96,970 (76,877) (13,271)
------ ------- -------
Special items:
Share-based compensation 22,367 22,405 22,180
Restructuring related charges (a) 1,505 98,860 4,441
Amortization of and write-off acquired
intangible assets 1,071 1,480 2,298
Other operating expenses (b) 2,304 315 1,242
Pre-tax total special items 27,247 123,060 30,161
------ ------- ------
Non-GAAP income before income taxes 124,217 46,183 16,890
Other income tax effects and adjustments (c) 72 67,989 (1,071)
Non-GAAP net income from continuing
operations $124,289 $114,172 $15,819
======== ======== =======
Weighted average shares - basic 503,790 507,834 508,794
======= ======= =======
Weighted average shares - diluted 517,592 507,834 508,794
======= ======= =======
Non-GAAP weighted average shares - diluted
(d) 523,154 528,141 522,363
======= ======= =======
GAAP diluted net income (loss) per share
from continuing operations $0.19 $(0.15) $(0.03)
===== ====== ======
Non-GAAP diluted net income per share from
continuing operations $0.24 $0.22 $0.03
===== ===== =====
(a) Restructuring
related
charges
include costs
that qualify
under U.S.
GAAP as
restructuring
costs and
other
incremental
charges that
are a direct
result of
restructuring.
Examples of
other
incremental
charges
include
impairment of
equipment
specifically
identified as
part of the
restructuring
action.
(b) Other
operating
expenses in
the three
months ended
April 29,
2017 include
costs of
retention
bonuses
offered to
employees
who remained
through the
ramp down of
certain
operations
due to the
restructuring
action
announced in
November
2016.
(c) Other income
tax effects
and
adjustments
in the three
months ended
April 29,
2017
includes
adjustment
to the tax
provision
based on a
non-GAAP
tax rate of
4%. Other
income tax
effects and
adjustments
in the three
months ended
January 28,
2017
included
$68.0
million of
tax expense
related to
restructuring
actions.
(d) Non-GAAP
diluted
share count
excludes the
impact of
share-based
compensation
expense
expected to
be incurred
in future
periods and
not yet
recognized
in the
Company's
financial
statements,
which would
otherwise be
assumed to
be used to
repurchase
shares under
the GAAP
treasury
stock
method.
Quarterly Revenue Trend
Total Revenue (In thousands) % Change
Three Months Ended
------------------
April 29, 2017 January 28, 2017 April 30, 2016 YoY QoQ
-------------- ---------------- -------------- --- ---
Storage (1) $303,808 $310,771 $242,638 25% (2)%
Networking (2) 144,815 148,090 138,343 5% (2)%
Connectivity (3) 76,091 65,638 73,549 3% 16%
------ ------ ------ --- ---
Total Core 524,714 524,499 454,530 15% - %
Other (4) 54,466 46,901 64,853 (16)% 16%
Total Revenue (5) $579,180 $571,400 $519,383 12% 1%
======== ======== ======== === ===
Three Months Ended
% of Total April 29, January
28, April 30,
2017 2017 2016
---- ---- ----
Storage (1) 52% 54% 47%
Networking (2) 25% 26% 27%
Connectivity (3) 13% 12% 14%
--- --- ---
Total Core 90% 92% 88%
Other (4) 10% 8% 12%
Total Revenue 100% 100% 100%
=== === ===
(1) Storage products are comprised
primarily of HDD, SSD Controllers
and Enterprise Storage Solutions.
(2) Networking products are
comprised primarily of Ethernet
Switches, Ethernet Transceivers,
Embedded ARM Processors and
Automotive Ethernet, as well as a
few legacy product lines in which
we no longer invest, but will
generate a long tail of revenue for
several years.
(3) Wireless Connectivity products
are comprised primarily of WiFi
solutions including WiFi only,
WiFi/Bluetooth combos and WiFi
Microcontroller combos.
(4) Other products are comprised
primarily of Printer Solutions,
Application Processors,
Communication Processors, and
others.
(5) Excludes the revenue of certain
non-strategic businesses that were
classified as discontinued
operations.
For further information, contact:
T. Peter Andrew
Vice President, Investor Relations
408-222-0777
ir@marvell.com
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SOURCE Marvell Technology Group Ltd.
