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Marvell Technology Group Ltd. Reports Second Fiscal Quarter 2013 Financial Results
Revenue: $816 Million, a 2 percent sequential increase
GAAP Net Income: $93 Million, EPS of $0.16
Non-GAAP Net Income: $142 Million, EPS of $0.24
Free Cash Flow: $174 Million, 21 Percent of Revenue

SANTA CLARA, Calif., Aug. 16, 2012 /PRNewswire/ -- Marvell Technology Group Ltd. (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the second quarter of fiscal 2013, ended July 28, 2012.

(Logo: http://photos.prnewswire.com/prnh/20100719/SF36559LOGO-b)

Revenue for the second quarter of fiscal 2013 was $816 million, a 2 percent sequential increase from $796 million in the first quarter of fiscal 2013, ended April 28, 2012, and a decrease of 9 percent from $898 million in the second quarter of fiscal 2012, ended July 30, 2011.  

GAAP net income for the second quarter of fiscal 2013 was $93 million, or $0.16 per share (diluted), compared with GAAP net income of $95 million, or $0.16 per share (diluted), for the first quarter of fiscal 2013, and $192 million, or $0.31 per share (diluted), for the second quarter of fiscal 2012.   

Non-GAAP net income was $142 million, or $0.24 per share (diluted), for the second quarter of fiscal 2013, compared with non-GAAP net income of $139 million, or $0.23 per share (diluted) for the first quarter of fiscal 2013 and $234 million, or $0.38 per share (diluted) for the second quarter of fiscal 2012.

"Our results in the second quarter were affected primarily by the slowdown in the macro-economic environment that impacted our storage and mobile end markets. However, our SSD, 500 gigabyte per platter HDD and wireless connectivity products grew double digits sequentially and our networking end market continued to outperform on the strength of new products and share gains," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "Despite the soft near-term demand environment, we are maintaining good profitability and continue to deliver shareholder value through our share repurchase and dividend programs."

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 July 28, 2012, April 28, 2012 and July 30, 2011 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, and certain one-time expenses and benefits. 

GAAP gross margin for the second quarter of fiscal 2013 was 53.2 percent, compared to 54.0 percent for the first quarter of fiscal 2013 and 57.9 percent for the second quarter of fiscal 2012. 

Non-GAAP gross margin for the second quarter of fiscal 2013 was 53.6 percent, compared to 54.5 percent for the first quarter of fiscal 2013 and 58.1 percent for the second quarter of fiscal 2012.

Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2013 were 570 million shares, compared with 595 million shares in the first quarter of fiscal 2013 and 623 million shares in the second quarter of fiscal 2012. Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2013 were 587 million shares, compared with 606 million shares for the first quarter of fiscal 2013 and 625 million shares for the second quarter of fiscal 2012.

Cash flow from operations for the second quarter of fiscal 2013 was $189 million, compared to the $199 million reported in the first quarter of fiscal 2013 and down from the $263 million in the second quarter of fiscal 2012. Free cash flow for the second quarter of fiscal 2013 was $174 million, compared to the $178 million reported in the first quarter of fiscal 2013 and down from the $235 million in the second quarter of fiscal 2012. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of IP licenses.  

Under the share repurchase program, Marvell repurchased approximately 20 million shares for a total of $250 million in the second quarter of fiscal 2013. Over the past eight quarters, Marvell has repurchased and retired approximately 127 million shares, or about 19 percent, of its outstanding shares demonstrating its commitment to returning shareholder value.

Marvell also paid its first quarterly dividend of $0.06 per share on July 11, 2012 to all shareholders of record as of June 21, 2012. Marvell will pay its next quarterly dividend of $0.06 per share on October 4, 2012 to all shareholders of record as of September 13, 2012.

Marvell intends to pay a regular quarterly cash dividend on its common shares subject to, among other things, the best interests of its shareholders, its results of operations, cash balances and future cash requirements, financial condition, 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 August 16, 2012 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal 2013. Interested parties may join the conference call by dialing 1- 800-901-5248 or 1-617-786-4512, pass-code 95854864. 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 13, 2012. 

Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of stock-based compensation expense, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, 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 (diluted), the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the benefits of stock compensation costs attributable to future services and 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 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, 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.

About Marvell 
Marvell is a global leader in the development of storage, communications and consumer silicon solutions. Marvell's diverse product portfolio includes switching, transceiver, communications controller, wireless and storage solutions that power the entire communications infrastructure, including enterprise, metro, home and storage networking. 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.   

Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Marvell's ability to maintain profitability and deliver shareholder value; relating to the declaration of, timing of, funding of and quarterly amount of dividends; and statements concerning Marvell's use of non-GAAP net income and net income per share as important supplemental information. 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 document 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; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner; uncertainty in the worldwide economic environment; seasonality in sales of consumer devices in which our products are incorporated; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's ability to recruit and retain skilled personnel; ability to generate cash flows; substantial costs of current and any future litigation; and other risks detailed in Marvell's SEC filings from time to time. When Marvell files its Form 10-Q for the quarter ended July 28, 2012, 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 April 28, 2012, 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.

Marvell® and the Marvell logo are registered trademarks of Marvell and/or its affiliates.

 

For further information, contact:

Sukhi Nagesh

Daniel Yoo

Investor Relations

Media Relations

408-222-8373

408-222-2187

sukhi@marvell.com 

yoo@marvell.com

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)












Three Months Ended


Six Months Ended


July 28,


April 28,


July 30,


July 28,


July 30,


2012


2012


2011


2012


2011











Net revenue

$ 816,104


$ 796,351


$ 897,520


$ 1,612,455


$ 1,699,922

Cost of goods sold

381,839


366,322


378,117


748,161


712,592

Gross profit

434,265


430,029


519,403


864,294


987,330

Operating expenses:











Research and development

264,175


255,970


249,604


520,145


492,141


Selling and marketing

41,034


40,066


40,390


81,100


78,542


General and administrative

25,718


25,705


23,631


51,423


48,415


Amortization of acquired intangible assets

13,023


14,355


11,138


27,378


25,479


Total operating expenses

343,950


336,096


324,763


680,046


644,577

Operating income

90,315


93,933


194,640


184,248


342,753

Interest and other income, net

5,864


1,057


2,064


6,921


1,846

Income before income taxes

96,179


94,990


196,704


191,169


344,599

Provision for income taxes

3,105


447


4,312


3,552


5,346

Net income

$   93,074


$   94,543


$ 192,392


$    187,617


$    339,253











Basic net income per share

$       0.17


$       0.16


$       0.32


$          0.33


$          0.54

Diluted net income per share

$       0.16


$       0.16


$       0.31


$          0.32


$          0.53















Shares used in computing basic earnings per share

562,362


580,024


608,511


571,193


623,728

Shares used in computing diluted earnings per share

570,325


594,739


623,132


582,532


640,136

 

 

Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP

(Unaudited)

(In thousands, except per share amounts)












Three Months Ended


Six Months Ended


July 28,


April 28,


July 30,


July 28,


July 30,


2012


2012


2011


2012


2011











GAAP net income


$   93,074


$   94,543


$ 192,392


$ 187,617


$ 339,253

Stock-based compensation


33,228


27,192


30,355


60,420


57,835

Amortization of acquired intangible assets


13,023


14,355


11,138


27,378


25,479

Acquisition-related costs (a)


1,577


2,456


-


4,033


-

Restructuring


859


115


567


974


1,186

Legal/Tax related matters


250


-


-


250


-

Non-GAAP net income


$ 142,011


$ 138,661


$ 234,452


$ 280,672


$ 423,753












GAAP weighted average shares - diluted


570,325


594,739


623,132


582,532


640,136

     Non-GAAP adjustment


16,302


10,814


1,645


13,558


3,726

Non-GAAP weighted average shares diluted (b)


586,627


605,553


624,777


596,090


643,862












GAAP diluted net income per share


$       0.16


$       0.16


$       0.31


$       0.32


$       0.53

Non-GAAP diluted net income per share 


$       0.24


$       0.23


$       0.38


$       0.47


$       0.66












GAAP gross profit:


$ 434,265


$ 430,029


$ 519,403


$ 864,294


$ 987,330

     Stock-based compensation


1,775


2,123


1,916


3,898


3,611

     Acquisition-related costs (a)


1,054


1,929


-


2,983


-

Non-GAAP gross profit


$ 437,094


$ 434,081


$ 521,319


$ 871,175


$ 990,941












GAAP gross margin


53.2%


54.0%


57.9%


53.6%


58.1%

     Stock-based compensation


0.2%


0.3%


0.2%


0.2%


0.2%

     Acquisition-related costs (a)


0.2%


0.2%


-


0.2%


-

Non-GAAP gross margin


53.6%


54.5%


58.1%


54.0%


58.3%












GAAP research and development:


$ 264,175


$ 255,970


$ 249,604


$ 520,145


$ 492,141

     Stock-based compensation


(22,413)


(17,174)


(22,128)


(39,587)


(41,721)

     Acquisition-related costs (a)


(466)


(442)


-


(908)


-

     Restructuring


(42)


(2)


(139)


(44)


(307)

Non-GAAP research and development


$ 241,254


$ 238,352


$ 227,337


$ 479,606


$ 450,113











GAAP selling and marketing:


$   41,034


$   40,066


$   40,390


$   81,100


$   78,542

     Stock-based compensation


(3,458)


(3,036)


(3,207)


(6,494)


(5,861)

     Acquisition-related costs (a)


(50)


(46)


-


(96)


-

     Restructuring


(7)


7


-


-


-

Non-GAAP selling and marketing


$   37,519


$   36,991


$   37,183


$   74,510


$   72,681















GAAP general and administrative:


$   25,718


$   25,705


$   23,631


$   51,423


$   48,415

     Stock-based compensation


(5,582)


(4,859)


(3,104)


(10,441)


(6,642)

     Acquisition-related costs (a)


(7)


(39)


-


(46)


-

     Restructuring


(810)


(120)


(428)


(930)


(879)

     Legal/Tax related matters


(250)


-


-


(250)


-

Non-GAAP general and administrative


$   19,069


$   20,687


$   20,099


$   39,756


$   40,894

















(a) 

Acquisition-related costs include the step-up in fair value of acquired inventory that was sold during the period, and the amortization of retention bonuses required by the terms of the acquisition. Restructuring costs related to recently completed acquisitions are included within "Restructuring" in the table above.
















(b) 

For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation costs attributable to future services and not yet recognized in the financial statements.

 

Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)














July 28,


January 28,

Assets

2012


2012

Current assets:





Cash, cash equivalents, and short-term investments


$ 2,134,193


$  2,246,498


Accounts receivable, net


390,772


407,263


Inventories


345,712


354,119


Prepaid expenses and other current assets


58,904


71,081


     Total current assets


2,929,581


3,078,961

Property and equipment, net


381,154


383,801

Long-term investments


18,103


23,215

Goodwill and acquired intangible assets, net


2,146,118


2,173,496

Other non-current assets


109,596


108,146


     Total assets


$ 5,584,552


$  5,767,619








Liabilities and Shareholders' Equity





Current liabilities:






Accounts payable


$    335,100


$     304,695


Accrued liabilities


223,508


224,900


Deferred income


67,840


59,959


Total current liabilities


626,448


589,554

Other long-term liabilities


154,990


164,047


     Total liabilities


781,438


753,601












Shareholders' equity:






Common stock


1,115


1,167


Additional paid-in capital


3,317,578


3,683,112


Accumulated other comprehensive income


1,378


776


Retained earnings


1,483,043


1,328,963


     Total shareholders' equity


4,803,114


5,014,018


     Total liabilities and shareholders' equity


$ 5,584,552


$  5,767,619

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)










Three Months Ended


Six Months Ended


July 28,


July 30,


July 28,


July 30,


2012


2011


2012


2011

Cash flows from operating activities:









Net income


$   93,074


$ 192,392


$ 187,617


$   339,253

Adjustments to reconcile net income to net cash provided

  by operating activities:


















Depreciation and amortization


21,285


22,437


42,484


46,474


Stock-based compensation


33,228


30,355


60,420


57,835


Amortization of acquired intangible assets


13,023


11,138


27,378


25,479


Other expense, net


2,272


3,291


5,175


7,145


Excess tax benefits from stock-based compensation


(3)


(11)


(44)


(14)


Changes in assets and liabilities:











Accounts receivable


26,610


19,711


16,491


53,649



Inventories


7,832


(22,897)


8,033


(76,004)



Prepaid expenses and other assets


11,393


16,794


15,635


17,438



Accounts payable



6,288


12,294


27,537


6,999



Accrued liabilities and other


(4,204)


5,359


13,939


(91)



Accrued employee compensation


(24,033)


(14,387)


(24,681)


(29,267)



Deferred income


2,427


(13,063)


7,881


(8,334)




Net cash provided by operating activities


189,192


263,413


387,865


440,562

Cash flows from investing activities:










Purchases of marketable securities


(225,255)


(462,705)


(646,907)


(1,139,884)


Purchases of strategic investments


(750)


(503)


(5,750)


(2,253)


Sales and maturities of investments


322,532


408,522


881,309


681,069


Cash paid for acquisitions, net



(430)




(16,760)


Purchases of technology licenses


(4,407)


(3,325)


(6,452)


(6,615)


Purchases of property and equipment


(10,830)


(25,227)


(29,734)


(42,245)




Net cash provided by (used in) investing activities


81,290


(83,668)


192,466


(526,688)

Cash flows from financing activities:
























Repurchase of common stock


(250,327)


(135,740)


(473,484)


(939,241)


Proceeds from employee stock plans


39,526


36,782


57,329


46,623


Minimum tax withholding paid on behalf of employees 










 for net share settlement


(598)


(234)


(9,477)


(4,868)


Dividend payment to shareholders


(33,537)



(33,537)



Principal payments on capital lease obligations





(511)


Excess tax benefits from stock-based compensation


3


11


44


14




Net cash used in financing activities


(244,933)


(99,181)


(459,125)


(897,983)

Net increase (decrease) in cash and cash equivalents


25,549


80,564


121,206


(984,109)

Cash and cash equivalents at beginning of period


880,559


782,401


784,902


1,847,074

Cash and cash equivalents at end of period


$ 906,108


$ 862,965


$ 906,108


$   862,965

 

SOURCE Marvell Technology Group Ltd.

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