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Marvell Technology Group Ltd. Reports Third Quarter of Fiscal Year 2015 Financial Results

SANTA CLARA, Calif., Nov. 20, 2014 /PRNewswire/ -- Marvell Technology Group Ltd. (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the third quarter of fiscal year 2015, ended November 1, 2014.

Marvell is a world leader in the development of storage, communications, and consumer silicon solutions.

Key Third Quarter of Fiscal 2015 Financial Highlights

  • Revenue: Q3 FY 2015, $930 Million
  • GAAP Net Income: Q3 FY 2015, $115 Million
  • GAAP Diluted EPS: Q3 FY 2015, $0.22
  • Non-GAAP Net Income: Q3 FY 2015, $155 Million
  • Non-GAAP Diluted EPS: Q3 FY 2015, $0.29
  • Free Cash Flow: Q3 FY 2015, $167 Million

Fourth Quarter of Fiscal 2015 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 November 19, 2014.


  • Revenue is expected to be in the range of $880 Million to $900 Million.
  • GAAP Gross Margin is expected to be in the range of 50.1% +/- 100 bps. Non-GAAP Gross Margin is expected to be in the range of 50.5% +/- 100 bps.
  • GAAP Operating Expenses are expected to be in the range of $365 Million +/- $10 Million. Non-GAAP Operating Expenses to be in the range of $320 Million +/- $10 Million.
  • GAAP Diluted EPS expected to be in the range of $0.16 +/- $0.02. Non-GAAP Diluted EPS expected to be in the range of $0.24 +/- $0.02.

Third Quarter of Fiscal 2015 Summary

Revenue for the third quarter of fiscal 2015 was $930 million, down approximately 3% from $962 million in the second quarter of fiscal 2015, ended August 2, 2014, and approximately flat from $931 million in the third quarter of fiscal 2014, ended November 2, 2013.  

GAAP net income for the third quarter of fiscal 2015 was $115 million, or $0.22 per share (diluted), compared with GAAP net income of $139 million, or $0.27 per share (diluted), for the second quarter of fiscal 2015, and $103 million, or $0.21 per share (diluted), for the third quarter of fiscal 2014.   

Non-GAAP net income was $155 million, or $0.29 per share (diluted), for the third quarter of fiscal 2015, compared with non-GAAP net income of $181 million, or $0.34 per share (diluted), for the second quarter of fiscal 2015 and $163 million, or $0.32 per share (diluted), for the third quarter of fiscal 2014.

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 November 1, 2014, August 2, 2014 and November 2, 2013 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of share-based compensation, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other exit related costs, litigation settlement, and certain one-time expenses and benefits. 

GAAP gross margin for the third quarter of fiscal 2015 was 51.1 percent, compared to 50.3 percent for the second quarter of fiscal 2015 and 50.1 percent for the third quarter of fiscal 2014.  

Non-GAAP gross margin for the third quarter of fiscal 2015 was 51.0 percent, compared to 50.6 percent for the second quarter of fiscal 2015 and 50.3 percent for the third quarter of fiscal 2014.

Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2015 were 520 million shares, compared with 520 million shares in the second quarter of fiscal 2015 and 501 million shares in the third quarter of fiscal 2014.

Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2015 were 533 million shares, compared with 533 million shares for the second quarter of fiscal 2015 and 514 million shares for the third quarter of fiscal 2014.

Cash flow from operations for the third quarter of fiscal 2015 was $195 million, compared to the $157 million reported in the second quarter of fiscal 2015 and the $177 million reported in the third quarter of fiscal 2014. Free cash flow for the third quarter of fiscal 2015 was $167 million, compared to the $137 million reported in the second quarter of fiscal 2015 and the $157 million reported in the third quarter of fiscal 2014. 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 company's authorized share repurchase program, Marvell repurchased approximately 3.7 million shares for a total of $45 million in the third quarter of fiscal 2015. Marvell paid a quarterly dividend of $0.06 per share on October 2, 2014 to all shareholders of record as of September 11, 2014. Marvell intends to pay its next quarterly dividend of $0.06 per share on December 29, 2014 to all shareholders of record as of December 11, 2014.

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, developments in ongoing litigation, 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, November 20, 2014 at 1:45 p.m. Pacific Time to discuss results for the third quarter of fiscal year 2015. Interested parties may join the conference call by dialing 1- 800-322-2803 or 1-617-614-4925, pass-code 459 797 93.  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 20, 2014.    

Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other exit-related costs, litigation settlement, 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 share-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 provides 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 within the meaning of the federal securities laws that involve risks and uncertainties, including: Marvell's expectations and statements regarding its financial outlook for the fourth quarter of fiscal 2015; its dividend program including the declaration of, timing of, funding of, payment of and quarterly amount of dividends; and its use of non-GAAP financial measures as important supplemental information. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "can," "will" and similar expressions identify such forward-looking statements.  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; seasonality in sales of consumer devices in which Marvell's products are incorporated; Marvell's ability to compete in products and prices in an intensely competitive industry; uncertainty in the worldwide economic conditions; Marvell's ability to recruit and retain skilled personnel; and other risks detailed in Marvell'sSEC filings from time to time. When Marvell files its Quarterly Report on Form 10-Q for the third quarter of fiscal 2015, 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 August 2, 2014 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 (NASDAQ: MRVL) is a global leader in providing complete silicon solutions and Kinoma® software enabling the "Smart Life and Smart Lifestyle." From mobile communications to storage, Internet of Things (IoT), 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.

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)






















Three Months Ended


Nine Months Ended







November 1,


August 2,


November 2,


November 1,


November 2,







2014


2014


2013


2014


2013
















Net revenue




$       930,136


$       961,545


$        931,226


$      2,849,511


$      2,472,651

Cost of goods sold



454,974


477,741


464,981


1,426,575


1,186,478

Gross profit




475,162


483,804


466,245


1,422,936


1,286,173

Operating expenses:













Research and development


288,435


294,764


296,291


878,562


867,985


Selling and marketing



34,410


33,949


37,496


106,717


116,033


General and administrative


33,473


31,333


26,589


95,379


80,104


Amortization and write-off of acquired intangible assets

3,304


3,304


10,645


13,297


31,969



Total operating expenses


359,622


363,350


371,021


1,093,955


1,096,091

Operating income



115,540


120,454


95,224


328,981


190,082

Interest and other income, net


4,764


12,263


1,536


18,952


12,949

Income before income taxes



120,304


132,717


96,760


347,933


203,031

Provision (benefit) for income taxes


5,000


(6,153)


(6,396)


(5,720)


(15,160)

Net income




$       115,304


$       138,870


$        103,156


$         353,653


$         218,191
















Basic net income per share



$             0.22


$             0.27


$              0.21


$               0.69


$               0.44

Diluted net income per share


$             0.22


$             0.27


$              0.21


$               0.68


$               0.43
















Shares used in computing basic earnings per share

513,859


511,821


491,979


510,261


496,151

Shares used in computing diluted earnings per share

519,907


520,269


501,189


520,309


502,401














































 

Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)










































November 1,


February 1,

Assets






2014


2014

Current assets:










Cash, cash equivalents and short-term investments


$        2,402,778


$        1,969,405


Accounts receivable, net




445,050


453,496


Inventories






356,417


347,861


Prepaid expenses and other current assets


82,117


68,458



Total current assets




3,286,362


2,839,220

Property and equipment, net




343,101


356,165

Long-term investments





10,077


16,279

Goodwill and acquired intangible assets, net



2,064,228


2,078,980

Other non-current assets




145,039


160,366



Total assets





$        5,848,807


$        5,451,010












Liabilities and Shareholders' Equity






Current liabilities:









Accounts payable





$           341,431


$           316,389


Accrued liabilities





293,143


273,170


Deferred income





70,834


61,747



Total current liabilities




705,408


651,306

Other non-current liabilities




109,489


123,794



Total liabilities





814,897


775,100












Shareholders' equity:









Common stock





1,022


1,005


Additional paid-in capital




3,041,400


2,941,650


Accumulated other comprehensive income


(2,964)


597


Retained earnings





1,994,452


1,732,658



Total shareholders' equity



5,033,910


4,675,910



Total liabilities and shareholders' equity


$        5,848,807


$        5,451,010












 


Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)













Three Months Ended



Nine Months Ended



November 1,


November 2,



November 1,


November 2,



2014


2013



2014


2013

Cash flows from operating activities:










Net income


$       115,304


$        103,156



$       353,653


$         218,191

Adjustments to reconcile net income to net cash provided










  by operating activities:











Depreciation and amortization


26,515


25,913



79,784


76,576


Share-based compensation


34,294


43,201



99,283


117,805


Amortization and write-off of acquired intangible assets

3,789


10,645



14,752


31,969


Other expense (income), net


(6,034)


1,655



(12,160)


5,994


Excess tax benefits from share-based compensation


(2)


(10)



(78)


(42)


Changes in assets and liabilities:












Accounts receivable


53,434


(35,855)



23,275


(136,491)



Inventories


37,506


(45,157)



(8,793)


(129,450)



Prepaid expenses and other assets


18,536


(4,293)



(8,621)


15,012



Accounts payable


(70,749)


44,442



16,937


128,311



Accrued liabilities and other non-current liabilities


(24,997)


12,584



(22,035)


(20,510)



Accrued employee compensation


19,101


10,013



41,651


13,965



Deferred income


(12,053)


10,905



9,087


26,220




Net cash provided by operating activities


194,644


177,199



586,735


347,550

Cash flows from investing activities:











Purchases of available-for-sale securities


(448,526)


(220,280)



(784,296)


(691,749)


Sales and maturities of available-for-sale securities


205,685


346,826



578,095


845,506


Investments in privately-held companies


(260)


(1,119)



(701)


(1,869)


Cash paid for acquisitions, net






(2,551)


Purchases of technology licenses


(5,105)


(6,383)



(14,514)


(13,993)


Purchases of property and equipment


(16,661)


(14,222)



(48,615)


(53,283)




Net cash provided by (used in) investing activities

(264,867)


104,822



(270,031)


82,061

Cash flows from financing activities:











Repurchase of common stock (a)


(43,774)


(71,477)



(43,774)


(376,285)


Proceeds from employee stock plans


2,934


24,155



71,308


97,276


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

(663)


(518)



(25,586)


 

(10,406)


Dividend payments to shareholders


(30,867)


(29,516)



(91,859)


(89,560)


Payments on technology license obligations


(5,951)




(8,628)


(6,301)


Excess tax benefits from share-based compensation


2


10



78


42




Net cash used in financing activities


(78,319)


(77,346)



(98,461)


(385,234)

Net increase (decrease) in cash and cash equivalents


(148,542)


204,675



218,243


44,377

Cash and cash equivalents at beginning of period


1,332,535


591,655



965,750


751,953

Cash and cash equivalents at end of period


$    1,183,993


$        796,330



$    1,183,993


$         796,330














(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 3.7 million shares repurchased for $45.0 million in the third quarter of fiscal 2015, adjusted for repurchases of $1.2 million made within the final three days of the quarter 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

Nine Months Ended







November 1,


August 2,


November 2,


November 1,


November 2,







2014


2014


2013


2014


2013

















GAAP net income



$       115,304


$       138,870


$ 103,156


$        353,653


$        218,191


Share-based compensation


34,294


35,020


43,201


99,283


117,805


Amortization and write-off of acquired intangible assets

4,229


4,229


10,645


16,072


31,969


Acquisition-related costs (a)


-


-


433


-


(183)


Restructuring and other exit-related costs (b)


1,203


735


5,935


7,026


6,341


Litigation settlement (c)


(2,398)


475


-


77


5,228


Other (d)



2,318


2,155


-


4,473


-


Non-GAAP net income


$       154,950


$       181,484


$ 163,370


$        480,584


$        379,351

















GAAP weighted average shares - diluted


519,907


520,269


501,189


520,309


502,401



Non-GAAP adjustment


12,905


13,201


13,014


11,910


15,042


Non-GAAP weighted average shares diluted (e)


532,812


533,470


514,203


532,219


517,443

















GAAP diluted net income per share


$             0.22


$             0.27


$       0.21


$              0.68


$              0.43


Non-GAAP diluted net income per share 


$             0.29


$             0.34


$       0.32


$              0.90


$              0.73

















GAAP gross profit:



$       475,162


$       483,804


$ 466,245


$     1,422,936


$     1,286,173



Share-based compensation


1,934


1,733


2,531


5,966


6,266



Amortization of acquired intangible assets


925


925


-


2,775


-



Litigation settlement (c)


(3,998)


-


-


(3,998)


4,728


Non-GAAP gross profit


$       474,023


$       486,462


$ 468,776


$     1,427,679


$     1,297,167

















GAAP gross margin



51.1%


50.3%


50.1%


49.9%


52.0%



Share-based compensation


0.2%


0.2%


0.2%


0.2%


0.3%



Amortization of acquired intangible assets


0.1%


0.1%


-


0.1%


-



Litigation settlement (c)


-0.4%


-


-


-0.1%


0.2%


Non-GAAP gross margin


51.0%


50.6%


50.3%


50.1%


52.5%

















GAAP research and development:


$       288,435


$       294,764


$ 296,291


$        878,562


$        867,985



Share-based compensation


(24,198)


(24,276)


(30,084)


(68,842)


(82,345)



Acquisition-related costs (a)


-


-


(414)


-


321



Restructuring and other exit-related costs (b)




(88)


(412)


(4,613)


(5,182)


(4,613)


Non-GAAP research and development


$       264,149


$       270,076


$ 261,180


$        804,538


$        781,348

















GAAP selling and marketing:


$         34,410


$         33,949


$   37,496


$        106,717


$        116,033



Share-based compensation


(2,855)


(2,617)


(3,738)


(8,400)


(10,778)



Acquisition-related costs (a)


-


-


-


-


(79)



Restructuring and other exit-related costs (b)




-


48


(795)


-


(795)



Litigation settlement (c)


(1,600)


-


-


(1,600)


-


Non-GAAP selling and marketing


$         29,955


$         31,380


$   32,963


$          96,717


$        104,381

















GAAP general and administrative:


$         33,473


$         31,333


$   26,589


$          95,379


$          80,104



Share-based compensation


(5,307)


(6,394)


(6,848)


(16,075)


(18,416)



Acquisition-related costs (a)


-


-


(19)


-


(59)



Restructuring and other exit-related costs (b)




(1,115)


(371)


(527)


(1,844)


(933)



Litigation settlement (c)


-


(475)


-


(2,475)


-



Other (d)



(2,318)


(2,155)


-


(4,473)


(500)


Non-GAAP general and administrative


$         24,733


$         21,938


$   19,195


$          70,512


$          60,196





(a) 

Acquisition-related costs include the amortization of retention bonuses required by the terms of an acquisition. 


(b) 

Restructuring and other exit-related costs include costs that qualify under U.S. GAAP as restructuring costs, as well as operating expenses related to assets classified as held-for-sale that did not qualify as discontinued operations.


(c) 

The amounts recorded do not relate to Marvell's litigation with Carnegie Mellon University. 


(d) 

Other includes costs associated with the surety bond to appeal the Carnegie Mellon University judgment.


(e) 

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 share-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)































Q4 FY2015


Note : Amounts represent the midpoint of the expected range


Outlook


















GAAP gross margin



50.1%



Share-based compensation, amortization of intangible assets and other


0.4%


Non-GAAP gross margin



50.5%
















Q4 FY2015








Outlook










GAAP operating expenses



$                 365



Share-based compensation, restructuring,





amortization of intangible assets and other


(45)


Non-GAAP operating expenses


$                 320
















Q4 FY2015








Outlook










GAAP diluted earnings per share


$                0.16



Share-based compensation, restructuring,





amortization of intangible assets and other


0.08


Non-GAAP diluted earnings per share


$                0.24










 

For further information, contact:

John Spencer Ahn

Sue Kim

Investor Relations

Media Relations

408-222-7544

408-222-1942

johnahn@marvell.com

suekim@marvell.com

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SOURCE Marvell Technology Group Ltd.