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Marvell Technology Group Ltd. Reports Second Quarter of Fiscal Year 2014 Financial Results
  

SANTA CLARA, Calif., Aug. 22, 2013 /PRNewswire/ -- Marvell (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the second quarter of fiscal year 2014, ended August 3, 2013.

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

Key 2Q FY2014 Financial Highlights

  • Revenue: $807 Million
  • GAAP Net Income: $62 Million
  • GAAP EPS: $0.12
  • Non-GAAP Net Income: $118 Million
  • Non-GAAP EPS: $0.23
  • Free Cash Flow: $65 Million

3Q FY2014 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 21, 2013.

  • Revenue is expected to be in the range of $850 to $890 Million.
  • GAAP Gross Margin is expected to be in the range of 50.7% +/- 100 bps. Non-GAAP Gross Margin is expected to be in the range of 51% +/- 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 $315 Million +/- $10 Million.
  • GAAP EPS expected to be in the range of $0.15 +/- $0.02. Non-GAAP EPS expected to be in the range of $0.25 +/- $0.02.

2Q FY2014 Summary

Revenue for the second quarter of fiscal 2014 was $807 million, a 10 percent sequential increase from $734 million in the first quarter of fiscal 2014, ended May 4, 2013, and a 1 percent decrease from revenue of $816 million in the second quarter of fiscal 2013, ended July 28, 2012.  

GAAP net income for the second quarter of fiscal 2014 was $62 million, or $0.12 per share (diluted), compared with GAAP net income of $53 million, or $0.11 per share (diluted), for the first quarter of fiscal 2014, and $93 million, or $0.16 per share (diluted), for the second quarter of fiscal 2013.   

Non-GAAP net income was $118 million, or $0.23 per share (diluted), for the second quarter of fiscal 2014, compared with non-GAAP net income of $98 million, or $0.19 per share (diluted), for the first quarter of fiscal 2014, and $142 million, or $0.24 per share (diluted), for the second quarter of fiscal 2013.

"Our results in the second quarter were at the high-end of our guidance mainly due to better demand and share gains in our storage end market and strong double digit growth in our mobile and wireless end markets," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "Many of our customers are introducing new devices using our innovative solutions, which should drive continued success across all of our end markets. We expect growth to be driven by increased traction in areas such as mobile handsets, tablets, connectivity, smart home devices and SSDs."

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 3, 2013, May 4, 2013 and July 28, 2012 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 2014 was 52.2 percent, compared to 54.3 percent for the first quarter of fiscal 2014 and 53.2 percent for the second quarter of fiscal 2013.

Non-GAAP gross margin for the second quarter of fiscal 2014 was 53.0 percent, compared to 54.6 percent for the first quarter of fiscal 2014 and 53.6 percent for the second quarter of fiscal 2013.

Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2014 were 501 million shares, compared with 505 million shares in the first quarter of fiscal 2014 and 570 million shares in the second quarter of fiscal 2013. Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2014 were 516 million shares, compared with 522 million shares for the first quarter of fiscal 2014 and 587 million shares for the second quarter of fiscal 2013. The decrease in shares used to compute both Marvell's GAAP and non-GAAP net income per diluted share was primarily due to Marvell's share repurchase program.

Cash flow from operations for the second quarter of fiscal 2014 was $86 million, compared to the $84 million reported in the first quarter of fiscal 2014 and the $189 million reported in the second quarter of fiscal 2013. Free cash flow for the second quarter of fiscal 2014 was $65 million, compared to the $53 million reported in the first quarter of fiscal 2014 and the $174 million reported in the second quarter of fiscal 2013. 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.  

Under the share repurchase program, Marvell repurchased approximately 7.2 million shares for a total of $83 million in the second quarter of fiscal 2014. Over the past 12 quarters, Marvell has repurchased and retired approximately 211 million shares, or about 30 percent of its outstanding shares.

Marvell also paid a quarterly dividend of $0.06 per share on July 3, 2013 to all shareholders of record as of June 13, 2013. Marvell intends to pay its next quarterly dividend of $0.06 per share on October 3, 2013 to all shareholders of record as of September 12, 2013.

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, 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 22, 2013 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal 2014. Interested parties may join the conference call by dialing 1-866-700-6293 or 1-617-213-8835, pass-code 40320337.  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 22, 2013.    

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, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of stock-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 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.

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 Marvell's: expectations and statements regarding: its financial outlook for the third quarter of fiscal 2014; its innovative solutions driving continued success across all of our end markets; increased traction in areas such as mobile handsets, tablets, connectivity, smart home devices and SSDs; its dividend program including the declaration of, timing of, funding of and quarterly amount of dividends; and its use of non-GAAP financial measures 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 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; uncertainty in the worldwide economic conditions; 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; Marvell's ability to generate cash flows; 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 quarter ended August 3, 2013, 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 4, 2013 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 is a global leader in providing complete silicon solutions enabling the digital connected lifestyle. From mobile communications to storage, 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:


Sukhi Nagesh

Holly Zheng

Investor Relations

Media Relations

408-222-8373

408-222-9202

sukhi@marvell.com 

hollyz@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 3,


May 4,


July 28,


August 3,


July 28,







2013


2013


2012


2013


2012
















Net revenue


$ 807,056


$ 734,369


$ 816,104


$ 1,541,425


$ 1,612,455

Cost of goods sold


386,059


335,438


381,839


721,497


748,161

Gross profit


420,997


398,931


434,265


819,928


864,294

Operating expenses:












Research and development


292,642


279,052


264,175


571,694


520,145


Selling and marketing


38,548


39,989


41,034


78,537


81,100


General and administrative


27,192


26,323


25,718


53,515


51,423


Amortization and write-off of acquired intangible assets


10,638


10,686


13,023


21,324


27,378



Total operating expenses


369,020


356,050


343,950


725,070


680,046

Operating income


51,977


42,881


90,315


94,858


184,248

Interest and other income, net


8,253


3,160


5,864


11,413


6,921

Income before income taxes


60,230


46,041


96,179


106,271


191,169

Provision (benefit) for income taxes


(1,596)


(7,168)


3,105


(8,764)


3,552

Net income


$   61,826


$   53,209


$   93,074


$    115,035


$    187,617
















Basic net income per share


$       0.13


$       0.11


$       0.17


$          0.23


$          0.33

Diluted net income per share


$       0.12


$       0.11


$       0.16


$          0.23


$          0.32
















Shares used in computing basic earnings per share


494,293


502,180


562,362


498,237


571,193

Shares used in computing diluted earnings per share


500,625


505,387


570,325


503,006


582,532

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)










































August 3,


February 2,

Assets






2013


2013

Current assets:










Cash, cash equivalents, and short-term investments



$ 1,726,198


$  1,918,990


Accounts receivable, net




430,874


330,238


Inventories






335,320


250,420


Prepaid expenses and other current assets


66,238


85,698



Total current assets




2,558,630


2,585,346

Property and equipment, net




363,486


372,971

Long-term investments





16,299


16,769

Goodwill and acquired intangible assets, net



2,104,255


2,121,793

Other non-current assets




161,574


164,885



Total assets





$ 5,204,244


$  5,261,764












Liabilities and Shareholders' Equity






Current liabilities:









Accounts payable





$    355,164


$     286,552


Accrued liabilities





242,953


261,186


Deferred income





75,465


60,150



Total current liabilities




673,582


607,888

Other non-current liabilities




138,152


169,281



Total liabilities





811,734


777,169












Shareholders' equity:









Common stock





988


1,017


Additional paid-in capital




2,801,316


2,945,643


Accumulated other comprehensive income


(1,572)


1,148


Retained earnings





1,591,778


1,536,787



Total shareholders' equity



4,392,510


4,484,595



Total liabilities and shareholders' equity


$ 5,204,244


$  5,261,764

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)
























Three Months Ended


Six Months Ended









August 3,


July 28,


August 3,


July 28,









2013


2012


2013


2012

Cash flows from operating activities:









Net income


$   61,826


$   93,074


$ 115,035


$ 187,617

Adjustments to reconcile net income to net cash provided by operating activities:










Depreciation and amortization


25,697


21,285


50,663


42,484


Stock-based compensation


41,091


33,228


74,604


60,420


Amortization of acquired intangible assets


10,638


13,023


21,324


27,378


Other expense, net


1,816


2,272


4,339


5,175


Excess tax benefits from stock-based compensation


(25)


(3)


(32)


(44)


Changes in assets and liabilities:











Accounts receivable


(60,524)


26,610


(100,636)


16,491



Inventories


(64,170)


7,832


(84,293)


8,033



Prepaid expenses and other assets


12,503


11,393


19,305


15,635



Accounts payable


54,933


6,288


83,869


27,537



Accrued liabilities and other non-current liabilities


(13,013)


(4,204)


(33,094)


13,939



Accrued employee compensation


(471)


(24,033)


3,952


(24,681)



Deferred income


16,195


2,427


15,315


7,881




Net cash provided by operating activities


86,496


189,192


170,351


387,865

Cash flows from investing activities:










Purchases of available-for-sale securities


(164,631)


(225,255)


(471,469)


(646,907)


Sales and maturities of available-for-sale securities


162,909


322,532


498,680


881,309


Investments in privately-held companies


(750)


(750)


(750)


(5,750)


Cash paid for acquisitions, net




(2,551)



Purchases of technology licenses


(1,750)


(4,407)


(7,610)


(6,452)


Purchases of property and equipment


(18,981)


(10,830)


(39,061)


(29,734)




Net cash (used in) provided by investing activities


(23,203)


81,290


(22,761)


192,466

Cash flows from financing activities:










Repurchase of common stock (a)


(88,114)


(250,327)


(304,808)


(473,484)


Proceeds from employee stock plans


53,316


39,526


73,121


57,329


Minimum tax withholding paid on behalf of employees for net share settlement


(510)


(598)


(9,888)


(9,477)


Dividend payment to shareholders


(29,791)


(33,537)


(60,044)


(33,537)


Payment on technology license obligations


(984)



(6,301)



Excess tax benefits from stock-based compensation


25


3


32


44




Net cash used in financing activities


(66,058)


(244,933)


(307,888)


(459,125)

Net (decrease) increase in cash and cash equivalents


(2,765)


25,549


(160,298)


121,206

Cash and cash equivalents at beginning of period


594,420


880,559


751,953


784,902

Cash and cash equivalents at end of period


$ 591,655


$ 906,108


$ 591,655


$ 906,108





(a) 

Marvell records all repurchases as well as investment purchases and sales, based on trade date in accordance with U.S. GAAP. Cash paid for repurchase of Marvell common shares includes a total of 7.1 million shares repurchased for $82.6 million in the second quarter of fiscal 2014, adjusted for repurchases made within the final three day     s of the current and previous quarters that are accrued but not yet paid due to the standard settlement period that normally takes up to three days.









 

 

Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP

(Unaudited)

(In thousands, except per share amounts)





















Three Months Ended


Six Months Ended







August 3,


May 4,


July 28,


August 3,

July 28,







2013


2013


2012


2013

2012















GAAP net income


$   61,826


$   53,209


$   93,074


$ 115,035

$ 187,617

Stock-based compensation


41,091


33,513


33,228


74,604

60,420

Amortization of acquired intangible assets


10,638


10,686


13,023


21,324

27,378

Acquisition-related costs (a)


(1,081)


465


1,577


(616)

4,033

Restructuring


178


228


859


406

974

Legal/Tax related matters(b)


5,228


-


250


5,228

250

Non-GAAP net income


$ 117,880


$   98,101


$ 142,011


$ 215,981

$ 280,672















GAAP weighted average shares - diluted


500,625


505,387


570,325


503,006

582,532


Non-GAAP adjustment


15,021


17,094


16,302


16,058

13,558

Non-GAAP weighted average shares diluted (c)


515,646


522,481


586,627


519,064

596,090















GAAP diluted net income per share


$       0.12


$       0.11


$       0.16


$       0.23

$       0.32

Non-GAAP diluted net income per share 


$       0.23


$       0.19


$       0.24


$       0.42

$       0.47















GAAP gross profit:


$ 420,997


$ 398,931


$ 434,265


$ 819,928

$ 864,294


Stock-based compensation


1,868


1,867


1,775


3,735

3,898


Acquisition-related costs (a)


-


-


1,054


-

2,983


Legal/Tax related matters(b)


4,728


-


-


4,728

-

Non-GAAP gross profit


$ 427,593


$ 400,798


$ 437,094


$ 828,391

$ 871,175















GAAP gross margin


52.2%


54.3%


53.2%


53.2%

53.6%


Stock-based compensation


0.2%


0.3%


0.2%


0.2%

0.2%


Acquisition-related costs (a)


-


-


0.2%


-

0.2%


Legal/Tax related matters(b)


0.6%


-


-


0.3%

-

Non-GAAP gross margin


53.0%


54.6%


53.6%


53.7%

54.0%















GAAP research and development:


$ 292,642


$ 279,052


$ 264,175


$ 571,694

$ 520,145


Stock-based compensation


(28,982)


(23,279)


(22,413)


(52,261)

(39,587)


Acquisition-related costs (a)


1,135


(400)


(466)


735

(908)


Restructuring


-


-


(42)


-

(44)

Non-GAAP research and development


$ 264,795


$ 255,373


$ 241,254


$ 520,168

$ 479,606















GAAP selling and marketing:


$   38,548


$   39,989


$   41,034


$   78,537

$   81,100


Stock-based compensation


(3,648)


(3,392)


(3,458)


(7,040)

(6,494)


Acquisition-related costs (a)


(34)


(45)


(50)


(79)

(96)


Restructuring


-


-


(7)


-

-

Non-GAAP selling and marketing


$   34,866


$   36,552


$   37,519


$   71,418

$   74,510















GAAP general and administrative:


$   27,192


$   26,323


$   25,718


$   53,515

$   51,423


Stock-based compensation


(6,593)


(4,975)


(5,582)


(11,568)

(10,441)


Acquisition-related costs (a)


(20)


(20)


(7)


(40)

(46)


Restructuring


(178)


(228)


(810)


(406)

(930)


Legal/Tax related matters(b)


(500)


-


(250)


(500)

(250)

Non-GAAP general and administrative


$   19,901


$   21,100


$   19,069


$   41,001

$   39,756



(a) 

Acquisition-related costs include the step-up in fair value of acquired inventory that was sold during the period, the amortization of retention bonuses required by the terms of the acquisition and an adjustment for a contingent milestone which is not expected to be met.



(b) 

Legal/Tax related matters during the three and six months ended August 3, 2013 includes estimated settlement fees related to ongoing litigation matters. The amounts recorded do not relate to Marvell's litigation with Carnegie Mellon University (CMU). 



(c) 

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 stock-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 FY2014

Note : Amounts represent the midpoint of the expected range


Outlook







GAAP gross margin


50.7%


Stock-based compensation, acquisition related costs, and other


0.3%

Non-GAAP gross margin


51.0%






Q3 FY2014



Outlook




GAAP operating expenses


$          370


Stock-based compensation, acquisition-related costs, restructuring,




amortization of intangible assets and other


(55)

Non-GAAP operating expenses


$          315






Q3 FY2014




Outlook








GAAP diluted earnings per share


$         0.15


Stock-based compensation, acquisition-related costs, restructuring,




amortization of intangible assets and other


0.10

Non-GAAP earnings per share


$         0.25

SOURCE Marvell

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