MARVELL TECHNOLOGY GROUP LTD SANTA CLARA, Calif., Sept. 6, 2016 /PRNewswire/ -- Marvell (NASDAQ:MRVL), a world leader in storage, cloud infrastructure, Internet of Things (IoT), connectivity and multimedia semiconductor solutions, today reported financial results for the second quarter of fiscal year 2017, ended July 30, 2016. Revenues for the second quarter of fiscal 2017 were $626 million, up approximately 16 percent from $541 million in the prior quarter and down approximately 12 percent from the same quarter of last year.
"We experienced a seasonally strong second quarter, driven by solid demand from customers across storage, networking, and wireless end markets," said Matt Murphy, President and CEO. "We are also beginning to see the benefits of improved focus on product cost as well as a more disciplined approach to spending, which resulted in better than expected earnings per share."
In the second quarter of fiscal 2017, storage revenue increased 13 percent sequentially, reflecting higher HDD and SSD demand. Networking revenue in the second quarter of fiscal 2017 grew 12 percent sequentially due to continued strength in enterprise networking demand. Mobile and wireless revenue grew 21 percent sequentially, mainly driven by seasonal game console production ramps. Mobile handset-related revenues in the second quarter of fiscal 2017 were $9 million, down from $22 million in the first quarter, reflecting the anticipated declines due to the restructuring actions announced on September 24, 2015.
Net income on a GAAP basis for the second quarter of fiscal 2017 was $51 million, or $0.10 per diluted share. On a non-GAAP basis, net income for the second fiscal quarter of 2017 was $92 million, or $0.18 per diluted share.
Third Quarter of Fiscal 2017 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 September 5, 2016.
-- Revenue is expected to be flat to down 4 percent from the second
quarter.
-- GAAP and Non-GAAP Gross Margins are expected to be in the range of 52
percent to 54 percent.
-- GAAP and Non-GAAP Operating Expenses are expected to be approximately
flat from the second quarter.
-- GAAP Diluted EPS are expected to be in the range of $0.03 to $0.08.
-- Non-GAAP Diluted EPS are expected to be in the range of $0.08 to $0.13.
Adjustments to Reported Non-GAAP EPS for Q1 FY2017
In the first quarter of fiscal 2017, Marvell reported Non-GAAP diluted net income per share of $0.01. Subsequent to our earnings release on July 27, 2016, the Company discovered an error in the calculation of reported Non-GAAP tax benefit for income tax for the first quarter of fiscal 2017 which resulted in an understatement of our Non-GAAP net income and Non-GAAP EPS (diluted). After correction of this error, Non-GAAP net income increased from $6.5 million, as reported, to $9.3 million, as adjusted, and Non-GAAP EPS (diluted) increased from $0.01 to $0.02 per share. This error had no effect on the Company's reported GAAP results for the first quarter of fiscal 2017. Refer to the Reconciliation from GAAP to Non-GAAP table and related footnotes at the end of the press release for more details.
Conference Call
Marvell will conduct a conference call on Tuesday, September 6, 2016 at 8:15 a.m. Eastern Time (5:15 a.m. Pacific Time) to discuss results for the second quarter of fiscal year 2017. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 63627351. 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 October 6, 2016.
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. Non-GAAP diluted 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 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 and to also include the dilutive/anti-dilutive effects of common stock options and restricted stock units, as applicable. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.
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, 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 third quarter of fiscal 2017 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: actions that may be taken by Marvell as a result of the Audit Committee's investigation; adverse impacts of litigation or regulatory activities; Marvell's ability to hire a Chief Accounting Officer and Controller in a timely manner; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's reliance on the hard disk drive and mobile and wireless markets, which are highly cyclical and intensely competitive; costs and liabilities relating to current and future litigation; Marvell's reliance on a few customers for a significant portion of its revenue; 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; 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 Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2016 as filed with the SEC on August 10, 2016, 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. From storage to cloud infrastructure, Internet of Things (IoT), connectivity and multimedia, 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, personal 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.
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
July 30, April 30, August 1, July 30, August 1,
2016 2016 2015 2016 2015
---- ---- ---- ---- ----
Net revenue $626,404 $540,822 $710,492 $1,167,226 $1,434,780
Cost of goods sold 287,608 259,210 461,719 546,818 812,872
------- ------- ------- ------- -------
Gross profit 338,796 281,612 248,773 620,408 621,908
Operating expenses:
Research and
development 228,562 241,271 297,321 469,833 577,435
Selling and
marketing 31,094 31,379 30,841 62,473 67,015
General and
administrative 37,173 35,623 691,230 72,796 732,257
Amortization of
acquired
intangible assets 2,461 2,461 2,568 4,922 5,136
Total
operating
expenses 299,290 310,734 1,021,960 610,024 1,381,843
------- ------- --------- ------- ---------
Operating income (loss) 39,506 (29,122) (773,187) 10,384 (759,935)
Interest and other income, net 6,284 1,488 6,790 7,772 11,957
----- ----- ----- ----- ------
Income (loss) before income taxes 45,790 (27,634) (766,397) 18,156 (747,978)
Provision (benefit) for income taxes (5,515) (4,955) 5,543 (10,470) 9,872
------ ------ ----- ------- -----
Net income (loss) $51,305 $(22,679) $(771,940) $28,626 $(757,850)
======= ======== ========= ======= =========
Basic net income (loss) per share $0.10 $(0.04) $(1.49) $0.06 $(1.47)
===== ====== ====== ===== ======
Diluted net income (loss) per share $0.10 $(0.04) $(1.49) $0.06 $(1.47)
===== ====== ====== ===== ======
Shares used in computing basic earnings
(loss) per share 511,235 508,794 516,368 510,014 516,298
Shares used in computing diluted
earnings (loss) per share 514,314 508,794 516,368 513,669 516,298
Marvell Technology Group Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
July 30, January 30,
Assets 2016 2016
---- ----
Current assets:
Cash, cash equivalents
and short-term
investments $1,624,009 $2,282,749
Accounts
receivable, net 348,683 323,300
Inventories 202,717 210,017
Prepaid expenses and
other current assets 54,870 102,560
Total
current
assets 2,230,279 2,918,626
Property and equipment, net 274,774 299,540
Long-term investments 8,974 11,296
Goodwill and acquired intangible assets, net 2,042,063 2,047,955
Other non-current assets 160,586 164,710
------- -------
Total
assets $4,716,676 $5,442,127
========== ==========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts
payable $212,950 $180,372
Accrued
liabilities 219,489 253,691
Carnige Mellon University
accrued litigation
settlement - 736,000
Deferred
income 72,049 55,722
Total
current
liabilities 504,488 1,225,785
Other non-current liabilities 53,100 76,219
------ ------
Total
liabilities 557,588 1,302,004
------- ---------
Shareholders' equity:
Common stock 1,022 1,015
Additional paid-
in capital 3,075,579 3,028,921
Accumulated other
comprehensive income 4,015 (795)
Retained
earnings 1,078,472 1,110,982
Total
shareholders'
equity 4,159,088 4,140,123
Total liabilities
and shareholders'
equity $4,716,676 $5,442,127
========== ==========
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
------------------ ----------------
July 30, August 1, July 30, August 1,
2016 2015 2016 2015
---- ---- ---- ----
Cash flows from operating activities:
Net income (loss) $51,305 $(771,940) $28,626 $(757,850)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and
amortization 26,866 25,191 53,980 51,811
Share-based
compensation 37,196 36,674 61,649 69,895
Amortization of
acquired
intangible
assets 2,946 3,053 5,892 6,106
Non-cash
restructuring
and other
related charges 129 900 1,025 1,473
Other non-cash
expense, net 589 2,282 1,950 1,721
Excess tax
benefits from
share-based
compensation (5) (7) (5) (25)
Changes in assets
and liabilities:
Accounts
receivable (68,025) (23,907) (25,383) 3,234
Inventories (6,364) 12,903 7,234 (18,415)
Prepaid
expenses and
other
assets(a) 6,658 9,359 (9,035) 11,328
Accounts
payable 20,437 (5,167) 40,359 11,958
Accrued
liabilities
and other
non-current
liabilities
(a) (7,741) 753,191 (766,243) 741,615
Accrued
employee
compensation (22,270) (14,507) (15,118) (28,931)
Deferred
income 17,561 (1,441) 16,327 (8,468)
------ ------ ------ ------
Net cash provided by
(used in) operating
activities 59,282 26,584 (598,742) 85,452
Cash flows from investing activities:
Purchases of
available-for-
sale securities (110,358) (173,465) (203,723) (566,365)
Sales and
maturities of
available-for-
sale securities 116,506 222,295 486,565 469,790
Purchase of time
deposits (75,000) - (125,000) -
Distribution from
(investments in)
privately-held
companies - 208 - 208
Purchases of
technology
licenses (3,995) (2,071) (8,045) (5,677)
Purchases of
property and
equipment (12,509) (16,986) (24,377) (24,320)
Purchase of
equipment
previously
leased - - - (10,240)
------------
Net cash provided by
(used in) investing
activities (85,356) 29,981 125,420 (136,604)
Cash flows from financing activities:
Repurchase of
common stock (b) - (175,311) - (195,584)
Proceeds from
employee stock
plans 244 44,161 559 57,174
Minimum tax
withholding paid
on behalf of
employees
for net share
settlement (112) (697) (15,382) (23,007)
Dividend payments
to shareholders (30,675) (31,194) (61,136) (62,104)
Payments on
technology
license
obligations (4,858) (4,732) (10,152) (8,799)
Excess tax
benefits from
share-based
compensation 5 7 5 25
----------
Net cash used in
financing activities (35,396) (167,766) (86,106) (232,295)
------- -------- ------- --------
Net increase (decrease) in cash and
cash equivalents (61,470) (111,201) (559,428) (283,447)
Cash and cash equivalents at
beginning of period 780,222 1,038,731 1,278,180 1,210,977
------- --------- --------- ---------
Cash and cash equivalents at end of
period $718,752 $927,530 $718,752 $927,530
======== ======== ======== ========
(a) In the six
months
ended July
30, 2016,
the Company
paid a
total of
$750.0
million to
CMU in
connection
with the
settlement
agreement
that was
reached in
February
2016. Of
this
settlement,
the Company
recognized
a charge of
$736.0
million in
fiscal
2016. The
remaining
$14.0
million was
recorded in
prepaid
expenses
and other
assets, to
be
recognized
in cost of
good sold
over the
remaining
term of the
license
from
February
2016
through
April 2018.
For further
detail of
the
accounting
for the
settlement,
see "Note
13 -
Carnegie
Mellon
University
Settlement"
in the
Notes to
the
Unaudited
Condensed
Consolidated
Financial
Statements
included in
the
Company's
Quarterly
Report on
Form 10-Q
for the
quarter
ended April
30, 2016.
(b) Marvell
records all
repurchases
of common
stock
consistent
with the
way it
records
investment
purchases
and sales,
based on
trade date
in
accordance
with U.S.
GAAP. In
the three
and six
months
ended
August 1,
2015, cash
paid for
repurchase
of Marvell
common
shares was
adjusted
for
repurchases
of $19.7
million
made within
the final
three days
of the
quarter
that are
accrued but
not yet
paid due to
the
standard
settlement
period that
normally
takes up to
three days.
Reconciliations from GAAP to Non-GAAP
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
------------------ ----------------
July 30, April 30, August 1, July 30, August 1,
2016 2016(d) 2015 2016 2015
---- ------ ---- ---- ----
GAAP net income (loss) $51,305 $(22,679) $(771,940) $28,626 $(757,850)
Share-based compensation 37,196 24,453 36,674 61,649 69,895
Restructuring and other
related charges (a) 721 4,441 13,000 5,162 13,592
Amortization of acquired
intangible assets 2,946 2,946 3,346 5,892 6,839
Litigation matters (b) (115) 100 748,117 (15) 746,417
Other (c) 103 (2,743) 10,205 173 31,587
Non-GAAP net income, as
reported $92,156 $6,518 $39,402 $101,487 $110,480
======= ====== ======= ======== ========
Non-GAAP net income, as adjusted (d) $9,331
======
GAAP weighted average shares -
diluted 514,314 508,794 516,368 513,669 516,298
Non-GAAP adjustment 12,139 13,569 16,574 10,739 17,753
------
Non-GAAP weighted average
shares diluted (e) 526,453 522,363 532,942 524,408 534,051
======= ======= ======= ======= =======
GAAP diluted net income per
share $0.10 $(0.04) $(1.49) $0.06 $(1.47)
===== ====== ====== ===== ======
Non-GAAP diluted net income
per share, as reported $0.18 $0.01 $0.07 $0.19 $0.21
===== ===== ===== ===== =====
Non-GAAP diluted net income per share, as adjusted (d) $0.02
=====
GAAP gross profit: $338,796 $281,612 $248,773 $620,408 $621,908
Share-based compensation 2,832 1,802 2,012 4,634 3,559
Restructuring and other related
charges (a) - - - - -
Amortization of acquired
intangible assets 485 485 778 970 1,703
Litigation matters (b) - - 81,390 - 79,690
Non-GAAP gross profit $342,113 $283,899 $332,953 $626,012 $706,860
======== ======== ======== ======== ========
GAAP gross margin 54.1% 52.1% 35.0% 53.2% 43.3%
Share-based compensation 0.4% 0.3% 0.3% 0.3% 0.3%
Restructuring and other related
charges (a) 0.0% 0.0% 0.0% 0.0% 0.0%
Amortization of acquired
intangible assets 0.1% 0.1% 0.1% 0.1% 0.1%
Litigation matters (b) 0.0% 0.0% 11.5% 0.0% 5.6%
Non-GAAP gross margin 54.6% 52.5% 46.9% 53.6% 49.3%
==== ==== ==== ==== ====
GAAP research and development: $228,562 $241,271 $297,321 $469,833 $577,435
Share-based compensation (28,581) (24,396) (27,807) (52,977) (52,588)
Restructuring and other related
charges (a) 329 (813) (11,680) (484) (11,680)
Litigation matters (b) - - (5,000) - (5,000)
Other (c) (174) 49 (134) (125) (134)
Non-GAAP research and
development $200,136 $216,111 $252,700 $416,247 $508,033
======== ======== ======== ======== ========
GAAP selling and marketing: $31,094 $31,379 $30,841 $62,473 $67,015
Share-based compensation (3,315) (2,942) (2,707) (6,257) (5,284)
Restructuring and other related
charges (a) (27) 1 - (26) -
Other (c) 71 (304) - (233) -
Non-GAAP selling and marketing $27,823 $28,134 $28,134 $55,957 $61,731
======= ======= ======= ======= =======
GAAP general and
administrative: $37,173 $35,623 $36,563 $72,796 $77,590
Share-based compensation (2,468) 4,687 (4,148) 2,219 (8,464)
Restructuring and other related
charges (a) (1,023) (3,629) (1,320) (4,652) (1,912)
Litigation matters (b) 115 (100) (7,060) 15 (7,060)
Other (c) - (886) (2,748) (886) (21,050)
Non-GAAP general and
administrative $33,797 $35,695 $21,287 $69,492 $39,104
======= ======= ======= ======= =======
GAAP Carnegie Mellon
University litigation
settlement $ - $ - $654,667 $ - $654,667
Litigation matters (b) - - (654,667) - (654,667)
Non-GAAP Carnegie Mellon
University litigation
settlement $ - $ - $ - $ - $ -
============= ============= ============== ============= ==============
GAAP provision (benefit) for
income taxes $(5,515) $(4,955) $5,543 $(10,470) $9,872
Other (c) - 3,884 (7,323) 1,071 (10,403)
Non-GAAP provision (benefit)
for income taxes, as reported $(5,515) $(1,071) $(1,780) $(9,399) $(531)
======= ======= ======= ======= =====
Non-GAAP provision (benefit) for income taxes, as
adjusted (d) $(3,884)
=======
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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
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