Marvell Technology Group Ltd. Reports Fourth Quarter and Fiscal 2008 Results
Marvell Achieves Record Revenues for FY2008, Up 36 Percent on Prior Year
GAAP Net Income of $1.3 Million versus Net Loss of $141 Million in Prior Year
SANTA CLARA, Calif., March 6 /PRNewswire-FirstCall/ -- Marvell Technology Group Ltd. (Nasdaq: MRVL), a leader in storage, communications, and consumer silicon solutions, today reported financial results for its fourth quarter and fiscal year ended February 2, 2008.
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Net revenue for the fourth quarter of fiscal 2008 was a record $845 million, an increase of 36% over net revenue of $622 million for the fourth quarter of fiscal 2007 and an 11% sequential increase from net revenue of $758 million for the third quarter of fiscal 2008. Net income under generally accepted accounting principles (GAAP) was $1.3 million, or $0.00 per share (diluted), for the fourth quarter of fiscal 2008 compared with net loss under GAAP of $140.6 million, or $0.24 per share (diluted), for the fourth quarter of fiscal 2007 and net loss under GAAP of $6.4 million, or $0.01 per share (diluted), for the third quarter of fiscal 2008. Shares used to compute GAAP net income per share (diluted), for the fourth quarter ended February 2, 2008 increased to 627 million shares compared with 587 million shares used to compute GAAP net loss per share (diluted) for the fourth quarter ended January 27, 2007 and 591 million shares used to compute GAAP net loss per share (diluted) for the third quarter ended October 27, 2007.
Marvell has reached a tentative settlement with the plaintiffs in the previously disclosed federal derivative lawsuits related to historical stock option practices. The Company has accrued $16 million in its fourth quarter 2008 financial statements related to anticipated payments pursuant to the tentative settlement. The tentative settlement requires court approval before it becomes final. Marvell anticipates that the parties will finalize and submit formal settlement documentation to the court in the next few months.
"We are pleased with our financial performance this quarter and believe we have turned the corner on improving our profitability," stated Dr. Sehat Sutardja, Marvell's President and CEO. "Marvell achieved record revenues during fiscal 2008, putting us on track to achieve a better than $3 billion annual run rate. Our improved operating margins and earnings per share on a pro forma basis demonstrate clear focus on controlling operating costs. The better than anticipated sales trends during the fourth fiscal quarter was due to strong demand for our system-on-a-chip products for the storage market, better than expected demand for our enterprise-class communication products and better than seasonal demand for our cellular products. The results demonstrate successful investment in a broad range of technologies and our ability to integrate these technologies into superior products across many markets."
Net revenue for the year ended February 2, 2008 was $2,895 million, an increase of 29% over net revenue of $2,238 million for the year ended January 27, 2007. The increase in net revenue during fiscal 2008 is primarily attributable to sales of cellular and wireless communications products. Net loss under GAAP was $114.4 million or $0.19 per share (diluted) for the year ended February 2, 2008 compared with net loss under GAAP of $12.1 million or $0.02 per share (diluted) for the year ended January 27, 2007.
Marvell reports net income (loss) and basic and diluted net income (loss) per share in accordance with GAAP and additionally on a non-GAAP basis. A discussion of Marvell's use of these non-GAAP financial measures is set forth below, and reconciliations of GAAP net income (loss) to non-GAAP net income for the three months ended February 2, 2008, October 27, 2007 and January 27, 2007 and year ended February 2, 2008 and January 27, 2007, respectively, appear in the financial statements portion of this release. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization of acquired intangible assets, restructuring costs and cumulative effect of change in accounting principle.
Non-GAAP net income increased to $122.9 million, or $0.20 per share (diluted) for the fourth quarter of fiscal 2008, a 495% increase as compared with non-GAAP net income of $20.7 million, or $0.03 per share (diluted), for the fourth quarter of fiscal 2007 and an increase of 43% over non-GAAP net income of $86.2 million, or $0.14 per share (diluted) for the third quarter of fiscal 2008. The improvement in non-GAAP net income during the fourth quarter of fiscal 2008 was primarily due to better than anticipated revenue growth of storage and Ethernet connectivity products. Shares used to compute non-GAAP net income per diluted share for the fourth quarter of fiscal 2008 was 627 million shares compared with 634 million shares for the fourth quarter of fiscal 2007 and 631 million shares for the third quarter of fiscal 2008.
Non-GAAP gross margin for the fourth quarter of fiscal 2008 was 48.7% as compared to non-GAAP gross margin of 48.3% for the third quarter of fiscal 2008 and non-GAAP gross margin of 48.2% for the fourth quarter of fiscal 2007.
Non-GAAP net income was $280.1 million, or $0.44 per share (diluted) for the year ended February 2, 2008, compared with non-GAAP net income of $359.0 million, or $0.56 per share (diluted) for the year ended January 27, 2007. The decline in non-GAAP net income during fiscal 2008 versus fiscal 2007 is primarily due to the integration of the Intel Communication-Applications Processor group into the Marvell organization. Shares used in computing non- GAAP net income per share for the year ended February 2, 2008 decreased to 630 million shares compared with 638 million shares for the year ended January 27, 2007.
Non-GAAP gross margin for fiscal 2008 was 48.8% compared to non-GAAP gross margin for fiscal 2007 of 51.3%.
Marvell will be conducting a conference call today at 1:45 p.m. PST to discuss its fourth quarter business. The call is being webcast by Thomson/CCBN and can be accessed at Marvell's web site at www.marvell.com. The webcast is also being distributed through Thomson StreetEvents Network. Individual investors can listen to the call at www.earnings.com, Thomson's individual investor portal, powered by StreetEvents. Institutional investors can access the call via Thomson StreetEvents (www.streetevents.com), a password-protected event management site. The conference call will also be available via the web at www.marvell.com. Please visit the Investor Events section. Replay on the Internet will be available until March 6, 2009.
Discussion of Non-GAAP Financial Measures
Non-GAAP net income consists of net income (loss) excluding stock-based compensation expense as well as charges related to acquisitions and other charges and gains that are driven primarily by discrete events that management does not consider to be directly related to the company's core operating performance. Non-GAAP net income per share is calculated by dividing non-GAAP net income by adjusted GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP net income per share, the calculation of GAAP weighted average shares outstanding (diluted) is adjusted to exclude the benefits of compensation costs attributable to future services and not yet recognized in the financial statements that are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also includes the dilutive/antidilutive effects of warrants, common stock options and restricted stock.
Marvell believes that the presentation of non-GAAP net income and non-GAAP net income per share provides important supplemental information to management and investors regarding financial and business trends relating to the company'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 the company's Current Report on Form 8-K filed today with the SEC. The Form 8-K is available on the SEC's website at http://www.sec.gov as well as on the Marvell website in the Investors Relations section at http://www.marvell.com.
About Marvell
Marvell (NASDAQ: MRVL) is a leader in storage, communications and consumer silicon solutions. The Company'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 terms "Company" and "Marvell" refer to Marvell Technology Group Ltd. and its subsidiaries, including Marvell Semiconductor, Inc. (MSI), Marvell Asia Pte Ltd (MAPL), Marvell Japan K.K., Marvell Taiwan Ltd., Marvell International Ltd. (MIL), Marvell U.K. Limited, Marvell Semiconductor Israel Ltd. (MSIL), Marvell Software Solutions Israel, Ltd., and Marvell Semiconductor Germany GmbH. MSI is headquartered in Santa Clara, Calif., and designs, develops and markets products on behalf of MIL and MAPL. MSI may be contacted at (408) 222-2500 or at http://www.marvell.com.
Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995:
This release contains forward-looking statements based on projections and assumptions about our products and our markets. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "may," "will," "should," and their variations identify forward-looking statements. Statements that refer to, or are based on projections, uncertain events or assumptions also identify forward-looking statements. These statements include statements regarding our annual run rate, our ability to monetize our investments, our ability to efficiently integrate technologies, and our anticipated settlement with the plaintiffs in the previously disclosed federal derivative lawsuits related to historical stock option practices. These statements are not guarantees of results and are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. When Marvell files its Form 10-K for the fourth quarter of fiscal 2008, 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. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in the Marvell's latest Annual Report on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, as filed with the Securities and Exchange Commission and other factors detailed from time to time in Marvell's filings with the Securities and Exchange Commission. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.
Marvell(R) and the Marvell logo are trademarks of Marvell.
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Year Ended
February October January February January
2, 27, 27, 2, 27,
2008 2007 2007 2008 2007
Net revenue $844,686 $758,246 $621,974 $2,894,693 $2,237,553
Cost of
goods sold 438,640 396,209 324,843 1,497,796 1,100,241
Gross profit 406,046 362,037 297,131 1,396,897 1,137,312
Operating
expenses:
Research and
development
and other 266,464 252,205 223,399 988,996 658,211
Selling and
marketing 60,504 46,423 60,099 211,261 176,103
General and
admini-
strative 48,340 32,537 35,480 138,640 114,154
Amortization
and
write-off
of acquired
intangible
assets (a) 43,810 37,311 37,826 155,734 109,987
Acquired
in-process
research and
development - - 77,800 - 77,800
Restructuring 7,856 - - 7,856 -
Total
operating
expenses 426,974 368,476 434,604 1,502,487 1,136,255
Operating
(loss)
income (20,928) (6,439) (137,473) (105,590) 1,057
Interest and
other income
(expense),
net (b) 18,864 (6,048) (2,003) (2,654) 13,549
(Loss) income
before income
taxes (2,064) (12,487) (139,476) (108,244) 14,606
(Benefit)
provision
benefit for
income
taxes (3,357) (6,051) 1,109 6,183 35,547
Income (loss)
before change
in accounting
principle 1,293 (6,436) (140,585) (114,427) (20,941)
Cumulative
effect of
change in
accounting
principle, net
of tax effect - - - - 8,846
Net income
(loss) $1,293 $(6,436) $(140,585) $(114,427) $(12,095)
Basic net
income (loss)
per share:
Income
(loss)
before
change in
accounting
principle,
net of tax
effect $0.00 $(0.01) $(0.24) $(0.19) $(0.04)
Cumulative
effect of
change in
accounting
principle,
net of tax
effect - - - - 0.02
Basic net income
(loss) per
share $0.00 $(0.01) $(0.24) $(0.19) $(0.02)
Shares used in
basic per
share
computation 595,512 590,759 587,424 590,308 586,152
Diluted net
income (loss)
per share:
Income
(loss)
before
change in
accounting
principle,
net of tax
effect $0.00 $(0.01) $(0.24) $(0.19) $(0.04)
Cumulative
effect of
change in
accounting
principle,
net of tax
effect - - - - 0.02
Diluted net
income (loss)
per share $0.00 $(0.01) $(0.24) $(0.19) $(0.02)
Shares used in
diluted per
share
computation 626,699 590,759 587,424 590,308 586,152
(a) Write-off
of acquired
intangible
assets $7,232 $- $- $7,232 $-
(b) Consists of:
Interest
expense
on term
loan and
capital
lease $(8,898) $(8,873) $(8,253) $(34,666) $(10,207)
Interest
expense
on supply
agreement (1,165) (1,645) - (5,833) -
Interest
income,
foreign
exchange
and other 28,927 4,470 6,250 37,845 23,756
$18,864 $(6,048) $(2,003) $(2,654) $13,549
Marvell Technology Group Ltd.
Reconciliation of Non-GAAP Adjustments
(Unaudited)
(In thousands, except per share amounts)
Reconciliation of GAAP net income (loss) to non-GAAP net income:
Three Months Ended Year Ended
February October January February January
2, 27, 27, 2, 27,
2008 2007 2007 2008 2007
GAAP net income (loss) $1,293 $(6,436) $(140,585) $(114,427) $(12,095)
Stock-based
compensation included
in:
Cost of goods sold 4,911 4,326 2,842 15,530 11,339
Research and
development and
other 45,627 39,989 28,478 152,249 121,481
Selling and
marketing 13,925 6,949 7,254 39,022 30,452
General and
administrative 5,497 4,092 7,053 24,179 28,849
Amortization and
write-off of acquired
intangible assets 43,810 37,311 37,826 155,734 109,987
Acquired in-process
research and
development - - 77,800 - 77,800
Restructuring 7,856 - - 7,856 -
Cumulative effect of
change in accounting
principle - - - - (8,846)
Non-GAAP net income $122,919 $86,231 $20,668 $280,143 $358,967
GAAP weighted average
shares - diluted 626,699 590,759 587,424 590,308 586,152
Non-GAAP adjustment 542 39,854 46,506 40,160 51,507
Non-GAAP weighted
average shares
diluted (b) 627,241 630,613 633,930 630,468 637,659
GAAP diluted net
income (loss) per
share $0.00 $(0.01) $(0.24) $(0.19) $(0.02)
Non-GAAP diluted net
income per share (a) $0.20 $0.14 $0.03 $0.44 $0.56
GAAP gross margin 48.1% 47.7% 47.8% 48.3% 50.8%
Non-GAAP gross
margin 48.7% 48.3% 48.2% 48.8% 51.3%
(a) Non GAAP net income per share is calculated by dividing non-GAAP net
income by non-GAAP weighted average shares diluted.
(b) For purposes of calculating non-GAAP net income per share, the GAAP
diluted weighted average shares outstanding is adjusted to exclude the
benefits of SFAS 123R compensation costs attributable to future
services and not yet recognized in the financial that are treated as
proceeds assumed to be used to repurchase shares under the GAAP
treasury method and also includes the dilutive/antidilutive effects of
warrants, common stock options and restricted stock.
Marvell Technology Group Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
February 2, January 27,
Assets 2008 2007
Current assets:
Cash, cash equivalents and short-
term investments $630,903 $596,380
Accounts receivable, net 332,020 328,283
Inventory 419,493 247,403
Prepaid expenses and other current
assets 121,325 175,969
Total current assets 1,503,741 1,348,035
Property and equipment, net 416,241 440,943
Long-term investments 45,628 -
Goodwill and acquired intangible
assets 2,427,877 2,558,363
Other non current assets 157,107 180,359
Total assets $4,550,594 $4,527,700
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $231,135 $240,497
Accrued liabilities 241,062 377,744
Income taxes payable 39,132 29,078
Deferred income 69,420 46,459
Current portion of capital lease
obligations 2,463 17,408
Total current liabilities 583,212 711,186
Capital lease obligations 4,238 17,096
Term loan obligations 390,750 394,750
Other long-term liabilities 160,875 177,484
Total liabilities 1,139,075 1,300,516
Shareholders' equity:
Common stock 1,200 1,175
Additional paid-in capital 4,100,659 3,802,509
Accumulated other comprehensive
income 615 28
Accumulated deficit (690,955) (576,528)
Total shareholders' equity 3,411,519 3,227,184
Total liabilities and
shareholders' equity $4,550,594 $4,527,700
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Year Ended
February October January February January
2, 27, 27, 2, 27,
2008 2007 2007 2008 2007
Cash flows from
operating activities:
Net income (loss) $1,293 $(6,436) $(140,585) $(114,427) $(12,095)
Adjustments to
reconcile net income
(loss) to net cash
provided by operating
activities:
Cumulative effect of
change in
accounting
principle, net - - - - (8,846)
Depreciation and
amortization 27,008 26,384 24,641 105,812 77,160
Stock-based
compensation 69,960 55,356 45,627 230,980 192,121
Amortization and
write-off of
acquired intangible
assets 43,810 37,311 37,826 155,734 109,987
Acquired in-process
research and
development - - 77,800 - 77,800
Loss (gain) from
disposal of assets 3,300 - - (1,822) -
Fair market value
adjustment to cost
of goods sold from
supply contract (5,348) (26,273) (37,593) (109,262) (37,593)
Termination of
supply agreement (22,069) - - (22,069) -
Interest expense
related to supply
contract 1,165 1,645 - 5,833 -
Deferred tax
provision (16,778) - (2,224) (16,778) (2,224)
Excess tax benefits
from stock-based
compensation (199) (65) - (499) (889)
Changes in assets
and liabilities,
net of
acquisitions: -
Accounts
receivable 55,169 (28,230) (34,048) (1,763) (83,100)
Inventories (43,441) (70,086) (26,214) (202,275) (15,908)
Prepaid expenses
and other asset 8,798 45,531 (61,369) 108,321 (113,159)
Accounts payable 22,920 (53,441) 40,820 (8,187) 43,891
Accrued
liabilities and
other 17,134 19,945 16,603 10,880 30,375
Accrued employee
compensation (1,645) 9,642 34,251 8,852 33,484
Accrued facilities
charge - - (571) - (571)
Income taxes
payable 9,032 (8,120) 1,100 4,840 30,192
Deferred income (6,872) 21,515 14,787 22,961 16,686
Net cash provided
by (used in)
operating
activities 163,237 24,678 (9,149) 177,131 337,311
Cash flows from
investing activities:
Cash paid in
acquisitions, net (12,846) - (609,889) (19,987) (892,867)
Purchases of short-
term and long-term
investments (96,979) (52,256) - (262,886) (266,938)
Sales and maturities
of short-term and
long-term
investments 110,390 70,495 7,929 230,906 812,831
Acquisition costs (132) (70) (4,799) (1,340) (9,032)
Purchases of
investments - (323) - (323) -
Purchases of
property and
equipment (32,327) (16,622) (59,284) (113,462) (180,696)
Proceeds from sale
of asset under
construction - - - 5,122 -
Purchases of
technology licenses (3,650) (2,675) - (23,175) (8,029)
Net cash used in
investing
activities (35,544) (1,451) (666,043) (185,145) (544,731)
Cash flows from
financing activities:
Proceeds from the
issuance of common
stock and other 33,614 29,608 9,609 65,903 45,645
Proceeds from term
loan obligations - - 400,000 - 400,000
Principal payments
on capital lease
and debt
obligations (1,159) (1,778) (5,850) (10,748) (19,537)
Excess tax benefits
from stock-based
compensation 199 65 - 499 889
Net cash provided
by financing
activities 32,654 27,895 403,759 55,654 426,997
Net increase
(decrease) in cash
and cash equivalents 160,347 51,122 (271,433) 47,640 219,577
Cash and cash
equivalents at
beginning of period 455,301 404,179 839,441 568,008 348,431
Cash and cash
equivalents at end of
period $615,648 $455,301 $568,008 $615,648 $568,008
For further information, contact:
Jeff Palmer Diane Vanasse
Investor Relations Public Relations
408-222-8373 408-242-0027
jpalmer@marvell.com dvanasse@marvell.com
SOURCE Marvell Technology Group Ltd.
Released March 6, 2008
