Marvell Technology Group Ltd. Reports Second Quarter of Fiscal 2011 Results
Revenue: $896 Million, Up 5 Percent Sequentially
GAAP Net Income: $220 Million, $0.33 per share EPS
Free Cash Flow: $292 Million, 33 Percent of Revenue
Announces $500 Million Share Repurchase Plan
SANTA CLARA, Calif., Aug. 19 /PRNewswire-FirstCall/ -- Marvell Technology Group Ltd. (Nasdaq: MRVL), a global leader in integrated silicon solutions today reported financial results for the second quarter of fiscal 2011, ended July 31, 2010.
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Net revenue for the second quarter of fiscal 2011 was $896 million, a 40 percent increase from $641 million in the second quarter of fiscal 2010, ended August 1, 2009, and a 5 percent sequential increase from $856 million in the first quarter of fiscal 2011, ended May 1, 2010.
GAAP net income was $220 million, or $0.33 per share (diluted), for the second quarter of fiscal 2011, compared with a GAAP net income of $58 million, or $0.09 per share (diluted), for the second quarter of fiscal 2010. GAAP net income in the first quarter of fiscal 2011 was $206 million, or $0.30 per share (diluted).
Non-GAAP net income was $273 million, or $0.40 per share (diluted), for the second quarter of fiscal 2011, as compared with non-GAAP net income of $119 million, or $0.18 per share (diluted), for the second quarter of fiscal 2010. Non-GAAP net income for the first quarter of fiscal 2011 was $260 million, or $0.38 per share (diluted).
"We delivered excellent results for the second quarter," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "We experienced significant revenue growth in our mobile and wireless end market which increased over 50 percent sequentially, and over 140 percent year over year, while revenue from our networking end market grew 4 percent sequentially, and over 30 percent year over year. Despite the challenges of a softening macroeconomic environment for PCs, we continue to deliver best in class profitability on both operating and cash flow margins, demonstrating the robustness of our long-term business model driven by the transformation of our revenues to the mobile and wireless semiconductor end market. Given the long-term confidence we have in our business model, we are pleased to announce the Board of Directors has authorized a share repurchase program of $500 million."
Marvell reports net income (loss), basic and diluted net income (loss) 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 (loss) to non-GAAP net income for the three months ended July 31, 2010, May 1, 2010 and August 1, 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 second quarter of fiscal 2011 was 59.1 percent, compared to 55.0 percent for the second quarter of fiscal 2010 and 59.8 percent for the first quarter of fiscal 2011.
Non-GAAP gross margin for the second quarter of fiscal 2011 was 59.3 percent, compared to 55.3 percent for the second quarter of fiscal 2010 and 60.6 percent for the first quarter of fiscal 2011.
Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2011 were 675 million shares, compared with 648 million shares in the second quarter of fiscal 2010 and 678 million shares in the first quarter of fiscal 2011. Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2011 were 678 million shares, compared with 652 million shares for the second quarter of fiscal 2010 and 681 million shares for the first quarter of fiscal 2011.
Cash flow from operations for the second quarter of fiscal 2011 was $319 million, up from the $182 million in the second quarter of fiscal 2010 and up from the $256 million reported in the first quarter of fiscal 2011. Free cash flow for the second quarter of fiscal 2011 was $292 million, up from the $175 million reported in second quarter of fiscal 2010, and up from the $237 million reported in the first 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.
Share Repurchase Program
Marvell also announced today that its Board of Directors has authorized a program to repurchase up to $500 million of its outstanding common shares, depending on market conditions and other factors.
Marvell intends to effect the repurchase program in accordance with the conditions of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The repurchase program will be subject to market conditions and other factors and does not obligate Marvell to repurchase any dollar amount or number of its common shares. The program may be extended, modified, suspended or discontinued at any time. The repurchases, which are expected to be funded from Marvell's current cash and short-term position of over $2.3 billion, may occur in open market, privately negotiated or block transactions. As of July 31, 2010, Marvell had approximately 650 million common shares outstanding.
Conference Call
Marvell will be conducting a conference call on August 19, 2010 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal 2011. Interested parties may join the conference call by dialing 1-866-314-5050, pass-code 24135453. 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 19, 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 earnings per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP earnings 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 "Company" and "Marvell" refer 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 the Company's long term business model to deliver best in class profitability on both operating and cash flow margins; the Company's ability to fund common share purchases out of the Company's current cash position; the types of transactions pursuant to which repurchases will be made under the share repurchase program; and statements concerning the Company'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, the Company's financial condition and results of operations may vary from quarter to quarter; the impact of global economic conditions on the Company's business; significant dependence on the hard disk drive industry; highly competitive nature of the markets in which the Company competes; reliance on a few customers; market acceptance of the Company'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 second 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. The Company's results also remain subject to review by the Company'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 Six Months Ended
July 31, May 1, August 1, July 31, August 1,
2010 2010 2009 2010 2009
Net revenue $ 896,474 $ 855,579 $ 640,620 $ 1,752,053 $ 1,162,054
Cost of goods sold 366,682 343,985 288,059 710,667 545,689
Gross profit 529,792 511,594 352,561 1,041,386 616,365
Operating expenses:
Research and
development 228,211 219,111 196,190 447,322 402,279
Selling and
marketing 36,863 38,423 32,908 75,286 66,818
General and
administrative 25,440 23,108 29,468 48,548 132,196
Amortization and
write-off of
acquired intangible
assets 21,214 22,549 26,446 43,763 56,802
Total operating
expenses 311,728 303,191 285,012 614,919 658,095
Operating income
(loss) 218,064 208,403 67,549 426,467 (41,730)
Interest and other
income (expense), net 4,212 (3,752) 279 460 119
Income (loss) before
income taxes 222,276 204,651 67,828 426,927 (41,611)
Provision (benefit)
for income taxes 2,499 (1,116) 9,335 1,383 11,353
Net income (loss) $ 219,777 $ 205,767 $ 58,493 $ 425,544 (52,964)
Basic net income
(loss) per share $ 0.34 $ 0.32 $ 0.09 $ 0.66 $ (0.09)
Diluted net income
(loss) per share $ 0.33 $ 0.30 $ 0.09 $ 0.63 $ (0.09)
Shares used in
computing basic
earnings (loss) per
share 648,028 640,926 620,881 644,477 619,779
Shares used in
computing diluted
earnings (loss) per
share 675,220 678,059 648,110 676,639 619,779
Marvell Technology Group Ltd.
Reconciliation of GAAP Net Income to Non-GAAP Net Income
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Six Months Ended
July 31, May 1, August 1, July 31, August 1,
2010 2010 2009 2010 2009
GAAP net income (loss) $ 219,777 $ 205,767 $ 58,493 $ 425,544 $ (52,964)
Stock-based
compensation 30,689 26,896 30,015 57,585 61,663
Amortization and
write-off of acquired
intangible assets 21,214 22,549 26,446 43,763 56,802
Restructuring (a) 1,660 586 4,956 2,246 13,292
Legal/Tax related
matters (b) - 4,373 (1,202) 4,373 70,798
Other (c) - - - - 990
Non-GAAP net income $ 273,340 $ 260,171 $ 118,708 $ 533,511 $ 150,581
GAAP weighted average
shares - diluted 675,220 678,059 648,110 676,639 619,779
Non-GAAP adjustment 3,131 3,310 3,651 3,273 24,404
Non-GAAP weighted
average shares diluted
(d) 678,351 681,369 651,761 679,912 644,183
GAAP diluted net
income (loss) per
share $ 0.33 $ 0.30 $ 0.09 $ 0.63 $ (0.09)
Non-GAAP diluted net
income per share $ 0.40 $ 0.38 $ 0.18 $ 0.78 $ 0.23
GAAP gross profit: $ 529,792 $ 511,594 $ 352,561 $ 1,041,386 $ 616,365
Stock-based
compensation 1,692 2,236 1,810 3,928 5,926
Other - 4,373 - 4,373 990
Non-GAAP gross profit $ 531,484 $ 518,203 $ 354,371 $ 1,049,687 $ 623,281
GAAP gross profit as a
% of revenue 59.1% 59.8% 55.0% 59.4% 53.0%
Stock-based
compensation 0.2% 0.3% 0.3% 0.2% 0.5%
Other - 0.5% - 0.3% 0.1%
Non-GAAP gross profit 59.3% 60.6% 55.3% 59.9% 53.6%
GAAP research and
development: $ 228,211 $ 219,111 $ 196,190 $ 447,322 $ 402,279
Stock-based
compensation (22,089) (18,851) (22,193) (40,940) (43,930)
Restructuring (1,370) (129) (3,526) (1,499) (9,366)
Legal/Tax settlement - - 1,820 - 1,820
Non-GAAP research and
development $ 204,752 $ 200,131 $ 172,291 $ 404,883 $ 350,803
GAAP selling and
marketing: $ 36,863 $ 38,423 $ 32,908 $ 75,286 $ 66,818
Stock-based
compensation (2,397) (3,173) (3,659) (5,570) (7,370)
Restructuring - - (524) - (1,788)
Legal/Tax settlement - - 659 - 659
Non-GAAP selling and
marketing $ 34,466 $ 35,250 $ 29,384 $ 69,716 $ 58,319
GAAP general and
administrative: $ 25,440 $ 23,108 $ 29,468 $ 48,548 $ 132,196
Stock-based
compensation (4,511) (2,636) (2,353) (7,147) (4,437)
Restructuring (290) (457) (906) (747) (2,138)
Legal/Tax settlement - 158 - (71,842)
Non-GAAP general and
administrative $ 20,639 $ 20,015 $ 26,367 $ 40,654 $ 53,779
(a) Amounts represent restructuring related charges including severance costs
from reductions in force, asset impairment and a charge related to facilities
impairment.
(b) Fiscal quarter ended May 1, 2010 includes an amount representing the
portion of an IP litigation settlement related to previous fiscal years from
2003 through 2010. The six months ended August 1, 2009 includes a $72.0 million
charge in connection with the settlement of the class action litigation. Fiscal
quarter ended August 1, 2009 includes the net impact of our settlement with the
IRS related to our historical stock option practices. As the composition of the
settlement was different than the initial reserve, the net benefit includes a
$2.6 million benefit to operating expense with an offset of $1.4 million of
interest expense.
(c The six months ended August 1, 2009 includes underutilization charges
recorded in connection with 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)
July 31, January 30,
Assets 2010 2010
Current assets:
Cash, cash equivalents, and short-term investments $ 2,379,951 $ 1,796,717
Accounts receivable, net 490,755 356,796
Inventories 239,320 241,541
Prepaid expenses and other current assets 72,045 70,491
Total current assets 3,182,071 2,465,545
Property and equipment, net 343,445 342,497
Long-term investments 34,184 34,281
Goodwill and acquired intangible assets, net 2,153,424 2,176,763
Other non-current assets 154,153 151,854
Total assets $ 5,867,277 $ 5,170,940
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 385,509 $ 277,405
Accrued liabilities 201,787 207,877
Income taxes payable 19,204 19,992
Deferred income 86,019 59,396
Current portion of capital lease obligations 1,501 1,940
Total current liabilities 694,020 566,610
Capital lease obligations, net of current portion - 511
Other long-term liabilities 190,352 185,840
Total liabilities 884,372 752,961
Shareholders' equity:
Common stock 1,300 1,277
Additional paid-in capital 4,745,787 4,607,844
Accumulated other comprehensive gain (loss) 531 (885)
Retained earnings (accumulated deficit) 235,287 (190,257)
Total shareholders' equity 4,982,905 4,417,979
Total liabilities and shareholders' equity $ 5,867,277 $ 5,170,940
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Six Months Ended
July 31, August 1, July 31, August 1,
2010 2009 2010 2009
Cash flows from operating
activities:
Net income (loss) $ 219,777 $ 58,493 $ 425,544 $ (52,964)
Adjustments to reconcile net
income (loss) to net cash
provided
by operating activities:
Depreciation and
amortization 22,773 25,030 45,851 50,405
Stock-based compensation 30,689 30,015 57,585 61,663
Amortization and write-off
of acquired intangible
assets 21,214 26,446 43,763 56,802
Amortization of marketable
securities premium 2,777 - 4,812 -
Facilities impairment 1,140 - 1,140 -
Fair market value
adjustment to Intel
inventory sold (1,048) (1,733) (1,990) (3,076)
Excess tax benefits from
stock-based compensation (44) (40) (229) (69)
Deferred income taxes (1,457) 5,868 (1,457) 5,868
Changes in assets and
liabilities:
Accounts receivable (42,062) (43,095) (133,959) (106,361)
Inventories (31,501) (5,694) 3,916 100,587
Prepaid expenses and other
assets (3,927) (5,409) 6,454 8,921
Accounts payable 93,949 103,043 98,775 133,781
Accrued liabilities and
other (50) 5,604 2,248 69,059
Accrued employee
compensation 4,406 (14,007) (6,100) (974)
Income taxes payable (88) 3,585 1,853 4,928
Deferred income 2,690 (5,773) 26,623 (1,708)
Net cash provided by
operating activities 319,238 182,333 574,829 326,862
Cash flows from investing
activities:
Purchases of investments (522,932) - (710,810) -
Sales and maturities of
securities 198,305 50 347,745 50
Cash paid for acquisitions,
net (20,679) - (20,679) -
Purchases of technology
licenses (4,569) (3,250) (6,819) (12,550)
Purchases of property and
equipment (22,903) (3,765) (39,298) (7,179)
Net cash used in
investing activities (372,778) (6,965) (429,861) (19,679)
Cash flows from financing
activities:
Proceeds from the issuance
of common shares 31,789 20,636 80,477 21,021
Principal payments on
capital lease obligations (480) (442) (950) (875)
Excess tax benefits from
stock-based compensation 44 40 229 69
Net cash provided by
financing activities 31,353 20,234 79,756 20,215
Net increase (decrease) in
cash and cash equivalents (22,187) 195,602 224,724 327,398
Cash and cash equivalents at
beginning of period 1,352,339 1,059,205 1,105,428 927,409
Cash and cash equivalents at
end of period $ 1,330,152 $ 1,254,807 $ 1,330,152 $ 1,254,807
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 August 19, 2010
