Marvell Technology Group Ltd. Reports Third Quarter of Fiscal 2011 Results
Revenue: $959 Million, Up 7 Percent Sequentially
GAAP Net Income: $256 Million, $0.38 per share EPS
Free Cash Flow: $338 Million, 35 Percent of Revenue
SANTA CLARA, Calif., Nov. 18, 2010 /PRNewswire-FirstCall/ -- Marvell Technology Group Ltd. (Nasdaq: MRVL), a global leader in integrated silicon solutions, today reported financial results for the third quarter of fiscal 2011, ended October 30, 2010.
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Net revenue for the third quarter of fiscal 2011 was $959 million, a 20 percent increase from $803 million in the third quarter of fiscal 2010, ended October 31, 2009, and an 7 percent sequential increase from $896 million in the second quarter of fiscal 2011, ended July 31, 2010.
GAAP net income was $256 million, or $0.38 per share (diluted), for the third quarter of fiscal 2011, compared with a GAAP net income of $202 million, or $0.31 per share (diluted), for the third quarter of fiscal 2010. GAAP net income in the second quarter of fiscal 2011 was $220 million, or $0.33 per share (diluted).
Non-GAAP net income was $307 million, or $0.45 per share (diluted), for the third quarter of fiscal 2011, as compared with non-GAAP net income of $232 million, or $0.35 per share (diluted), for the third quarter of fiscal 2010. Non-GAAP net income for the second quarter of fiscal 2011 was $273 million, or $0.40 per share (diluted).
"We delivered excellent results, which were at the high-end of our original guidance for the third quarter," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "We delivered significant long term growth in all of our target end-markets. We continue to make excellent progress within our mobile and wireless end market, which increased over 20 percent sequentially, and we experienced improved demand within our storage end-market as revenue increased 3 percent sequentially. Furthermore, we continue to deliver robust margins and significant free cash flow, which highlights the long term leverage our business model can deliver."
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 October 30, 2010, July 31, 2010 and October 31, 2009 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization and write-offs of acquired intangible assets, restructuring costs and certain other expenses or benefits.
GAAP gross margin for the third quarter of fiscal 2011 was 59.3 percent, compared to 57.5 percent for the third quarter of fiscal 2010 and 59.1 percent for the second quarter of fiscal 2011.
Non-GAAP gross margin for the third quarter of fiscal 2011 was 59.5 percent, compared to 57.8 percent for the third quarter of fiscal 2010 and 59.3 percent for the second quarter of fiscal 2011.
Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2011 were 675 million shares, compared with 660 million shares in the third quarter of fiscal 2010 and 675 million shares in the second quarter of fiscal 2011. Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2011 were 677 million shares, compared with 664 million shares for the third quarter of fiscal 2010 and 678 million shares for the second quarter of fiscal 2011.
Cash flow from operations for the third quarter of fiscal 2011 was $368 million, up from the $204 million in the third quarter of fiscal 2010 and up from the $319 million reported in the second quarter of fiscal 2011. Free cash flow for the third quarter of fiscal 2011 was $338 million, up from the $196 million reported in third quarter of fiscal 2010, and up from the $292 million reported in the second quarter of fiscal 2011. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of technology licenses.
Conference Call
Marvell will be conducting a conference call on November 18, 2010 at 1:45 p.m. Pacific Time to discuss results for the third quarter of fiscal 2011. Interested parties may join the conference call by dialing 1-866-510-0707, pass-code 19248119. 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 December 18, 2010.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP 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 income per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of compensation costs 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/antidilutive effects of common stock options and restricted stock.
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 Technology Group Ltd. (NASDAQ: MRVL) 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 the "Marvell" refers to Marvell Technology Group Ltd. and its subsidiaries. For more information please visit www.marvell.com.
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the sustainability of Marvell's ability to deliver long term growth, robust margins and significant free cash flow; and statements concerning Marvell's 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 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 financial condition and results of operations may vary from quarter to quarter; the impact of global economic conditions on Marvell's business; significant dependence on the hard disk drive industry; highly competitive nature of the markets in which Marvell competes; reliance on a few customers; market acceptance of Marvell's products; and the impact of current or future intellectual property litigation and claims for indemnification. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's latest Annual Report on Form 10-K for the year ended January 30, 2010, subsequent Quarterly Reports on Form 10-Q and Current Reports on Form 8-K as filed with the SEC. When Marvell files its Form 10-Q for the third quarter of fiscal 2011, 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. Marvell's results also remain subject to review by Marvell's independent registered public accounting firm. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
October October October October
30, July 31, 31, 30, 31,
2010 2010 2009 2010 2009
$ $
Net revenue $ 959,327 $ 896,474 $ 803,098 2,711,380 1,965,152
Cost of goods
sold 390,808 366,682 341,617 1,101,475 887,306
Gross profit 568,519 529,792 461,481 1,609,905 1,077,846
Operating
expenses:
Research and
development 218,420 228,211 212,873 665,742 615,152
Selling and
marketing 39,751 36,863 35,442 115,037 102,260
General and
administrative 29,576 25,440 16,660 78,124 148,856
Amortization of acquired
intangible assets 21,770 21,214 26,450 65,533 83,252
Total
operating
expenses 309,517 311,728 291,425 924,436 949,520
Operating
income 259,002 218,064 170,056 685,469 128,326
Interest and
other income
(expense), net (1,665) 4,212 (1,373) (1,205) (1,254)
Income before
income taxes 257,337 222,276 168,683 684,264 127,072
Provision
(benefit) for
income taxes 1,605 2,499 (32,916) 2,988 (21,563)
Net income $ 255,732 $ 219,777 $ 201,599 $ 681,276 148,635
Basic net
income per
share $ 0.39 $ 0.34 $ 0.32 $ 1.05 $ 0.24
Diluted net
income per
share $ 0.38 $ 0.33 $ 0.31 $ 1.01 $ 0.23
Shares used in computing
basic earnings per share 649,782 648,028 623,613 646,246 621,057
Shares used in computing
diluted earnings per
share 674,789 675,220 659,739 676,023 647,863
Marvell Technology Group Ltd.
Reconciliation of GAAP Net Income to Non-GAAP Net Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
October October October October
30, July 31, 31, 30, 31,
2010 2010 2009 2010 2009
$ $ $
GAAP net income 255,732 219,777 201,599 $ 681,276 $ 148,635
Stock-based compensation 29,541 30,689 34,377 87,126 96,040
Amortization of acquired
intangible assets 21,770 21,214 26,450 65,533 83,252
Restructuring (a) 259 1,660 1,919 2,504 15,211
Legal/Tax related matters
(b) - - (32,569) 4,373 38,229
Other (c) - - - - 990
$ $ $
Non-GAAP net income 307,302 273,340 231,776 $ 840,812 $ 382,357
GAAP weighted average
shares - diluted 674,789 675,220 659,739 676,023 647,863
Non-GAAP adjustment 2,710 3,131 4,297 3,050 2,938
Non-GAAP weighted average
shares diluted (d) 677,499 678,351 664,036 679,073 650,801
GAAP diluted net income
per share $ 0.38 $ 0.33 $ 0.31 $ 1.01 $ 0.23
Non-GAAP diluted net
income per share $ 0.45 $ 0.40 $ 0.35 $ 1.24 $ 0.59
$ $ $ $ $
GAAP gross profit: 568,519 529,792 461,481 1,609,905 1,077,846
Stock-based
compensation 1,818 1,692 2,389 5,746 8,315
Other - - - - 990
Non-GAAP gross $ $ $ $ $
profit 570,337 531,484 463,870 1,615,651 1,087,151
GAAP gross profit as a %
of revenue 59.3% 59.1% 57.5% 59.4% 54.8%
Stock-based
compensation 0.2% 0.2% 0.3% 0.2% 0.4%
Other - - - - 0.1%
Non-GAAP gross
profit 59.5% 59.3% 57.8% 59.6% 55.3%
GAAP research and $ $ $
development: 218,420 228,211 212,873 $ 665,742 $ 615,152
Stock-based
compensation (19,795) (22,089) (24,134) (60,735) (68,064)
Restructuring (187) (1,370) (1,338) (1,686) (10,704)
Legal/Tax settlement - - - - 1,820
Non-GAAP research and $ $ $
development 198,438 204,752 187,401 $ 603,321 $ 538,204
GAAP selling and
marketing: $ 39,751 $ 36,863 $ 35,442 $ 115,037 $ 102,260
Stock-based
compensation (3,208) (2,397) (4,087) (8,778) (11,457)
Restructuring - - (51) - (1,839)
Legal/Tax
settlement - - - - 659
Non-GAAP selling and
marketing $ 36,543 $ 34,466 $ 31,304 $ 106,259 $ 89,623
GAAP general and
administrative: $ 29,576 $ 25,440 $ 16,660 $ 78,124 $ 148,856
Stock-based
compensation (4,720) (4,511) (3,767) (11,867) (8,204)
Restructuring (72) (290) (530) (818) (2,668)
Legal/Tax settlement - - - - (71,842)
Non-GAAP general and
administrative $ 24,784 $ 20,639 $ 12,363 $ 65,439 $ 66,142
(a) Amounts represent restructuring-related charges, including severance costs
from reductions in force and asset impairment, as well as a charge related
to facilities impairment.
(b) The nine months ended October 30, 2010 includes an amount representing the
portion of an IP litigation settlement. The nine months ended October 31,
2009 includes a $72.0 million charge in connection with the settlement of a
class action litigation. This is offset by a $27.3 million benefit in the
fiscal quarter ended October 31, 2009 resulting from the expiration of the
statute of limitations related to a tax contingency reserve, in addition to
a $5.3 million income tax benefit related to the adjustment of a prior year
deferred tax asset.
(c) The nine months ended October 31, 2009 includes underutilization charges
related to the rampdown of the Malaysia test operations.
(d) 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)
October 31, January 30,
Assets 2010 2010
Current assets:
Cash, cash equivalents, and short-term investments $ 2,675,273 $ 1,796,717
Accounts receivable, net 467,975 356,796
Inventories 227,936 241,541
Prepaid expenses and other current assets 78,576 70,491
Total current assets 3,449,760 2,465,545
Property and equipment, net 347,588 342,497
Long-term investments 30,865 34,281
Goodwill and acquired intangible assets, net 2,131,666 2,176,763
Other non-current assets 161,793 151,854
Total assets $ 6,121,672 $ 5,170,940
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 352,216 $ 283,362
Accrued liabilities 234,710 201,920
Income taxes payable 22,540 19,992
Deferred income 88,216 59,396
Current portion of capital lease obligations 1,011 1,940
Total current liabilities 698,693 566,610
Capital lease obligations, net of current portion - 511
Other long-term liabilities 194,973 185,840
Total liabilities 893,666 752,961
Shareholders' equity:
Common stock 1,297 1,277
Additional paid-in capital 4,732,088 4,607,844
Accumulated other comprehensive income (loss) 3,602 (885)
Retained earnings (accumulated deficit) 491,019 (190,257)
Total shareholders' equity 5,228,006 4,417,979
Total liabilities and shareholders' equity $ 6,121,672 $ 5,170,940
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
October October October
30, 31, October 30, 31,
2010 2009 2010 2009
Cash flows from operating
activities:
Net income $ 255,732 $ 201,599 $ 681,276 $ 148,635
Adjustments to reconcile net
income to net cash provided
by operating
activities:
Depreciation and
amortization 23,140 24,571 68,991 74,976
Stock-based
compensation 29,541 34,377 87,126 96,040
Amortization of acquired
intangible assets 21,770 26,450 65,533 83,252
Facilities
impairment - - 1,140 -
Amortization of
marketable securities
premium 4,756 - 9,568 -
Fair market value adjustment to
acquired inventory sold (401) (10,807) (2,391) (13,883)
Excess tax benefits from
stock-based compensation (440) (136) (669) (205)
Deferred income
taxes (5,029) 263 (6,486) 6,131
Changes in assets and
liabilities:
Restricted
cash - 24,500 - 24,500
Accounts
receivable 22,780 (65,857) (111,179) (172,218)
Inventories 11,940 (17,039) 15,856 83,548
Prepaid expenses and
other assets (10,172) (1,362) (3,718) 7,559
Accounts payable (34,508) 38,281 63,935 172,062
Accrued
liabilities and
other 8,205 (82,687) 10,785 (13,628)
Accrued employee
compensation 33,065 36,123 26,965 35,149
Income taxes
payable 5,310 (33,988) 7,163 (29,060)
Deferred income 2,197 29,246 28,820 27,538
Net cash provided by operating
activities 367,886 203,534 942,715 530,396
Cash flows from investing
activities:
Purchases of
investments (312,890) (426,998) (1,023,700) (426,998)
Sales and maturities of
investments 330,993 10,268 678,738 10,318
Cash paid for
acquisitions, net - - (20,679) -
Purchases of technology
licenses (5,830) - (12,649) (12,550)
Purchases of property
and equipment (23,969) (7,629) (63,267) (14,808)
Net cash used in
investing activities (11,696) (424,359) (441,557) (444,038)
Cash flows from financing
activities:
Repurchase of
common stock (60,594) - (60,594) -
Proceeds from employee
stock plans 17,196 13,728 97,673 34,749
Principal payments on
capital lease
obligations (490) (451) (1,440) (1,326)
Excess tax benefits from
stock-based compensation 440 136 669 205
Net cash (used in) provided by
financing activities (43,448) 13,413 36,308 33,628
Net increase (decrease) in cash
and cash equivalents 312,742 (207,412) 537,466 119,986
Cash and cash equivalents
at beginning of period 1,330,152 1,254,807 1,105,428 927,409
Cash and cash equivalents $ $ $
at end of period 1,642,894 1,047,395 $ 1,642,894 1,047,395
For further information, contact: Jeff Palmer Tom Hayes Investor Relations Corporate Marketing 408-222-8373 408-222-2815 jpalmer@marvell.com tom@marvell.com
SOURCE Marvell Technology Group Ltd.
Released November 18, 2010
