Exhibit 99.1

 

Marvell Technology Group Ltd. Reports Second Quarter of Fiscal Year 2021

Financial Results

 

•Q2 Revenue: $727 million

•Q2 Gross Margin: 49.4% GAAP gross margin; 63.3% non-GAAP gross margin

•Q2 Diluted income (loss) per share: $(0.24) GAAP diluted loss per share; $0.21 non-GAAP diluted income per share

•Cash and short-term investments: $832 million

Santa Clara, Calif. (August 27, 2020) - Marvell Technology Group Ltd. (NASDAQ: MRVL), a leader in infrastructure semiconductor solutions, today reported financial results for the second quarter of fiscal year 2021.

Revenue for the second quarter of fiscal 2021 was $727 million, which exceeded the midpoint of the Company's guidance provided on May 28, 2020. GAAP net loss for the second quarter of fiscal 2021 was $(158) million, or $(0.24) per diluted share. Non-GAAP net income for the second quarter of fiscal 2021 was $140 million, or $0.21 per diluted share. Cash flow from operations for the second quarter was $226 million.

“Marvell delivered strong second quarter financial results with revenue above the mid-point of guidance, growing 11% year on year and 5% sequentially. We are expecting revenue growth to continue in the third quarter, driven primarily from 5G wireless infrastructure and cloud datacenter end markets” said Matt Murphy, Marvell’s President and CEO. “We also announced the extension of our long-term collaboration with TSMC to deliver a comprehensive silicon portfolio for the data infrastructure market leveraging the industry’s most advanced 5 nanometer (nm) process technology. While we continue to invest in advanced technologies for future growth, our team also remains focused on driving operational excellence. Through successful integration execution and continued operational discipline, we expect to drive earnings expansion in the third quarter.”

Marvell's third quarter guidance takes into account the U.S. Government's export restrictions on certain Chinese customers. Given the ongoing uncertainty associated with COVID-19 and related public health measures, we also have temporarily widened the guidance range on revenue.

Third Quarter of Fiscal 2021 Financial Outlook

 

•Revenue is expected to be $750 million +/- 5%.

•GAAP gross margin is expected to be approximately 51.4%.

•Non-GAAP gross margin is expected to be approximately 63%.

•GAAP operating expenses are expected to be approximately $368 million.

•Non-GAAP operating expenses are expected to be approximately $280 million.

•GAAP diluted income (loss) per share is expected to be $(0.04) to $0.04 per share.

•Non-GAAP diluted income per share is expected to be $0.22 to $0.28 per share.

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Conference Call

Marvell will conduct a conference call on Thursday, August 27, 2020 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal 2021. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 9776144. The call will be webcast and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until Thursday, September 3, 2020.

Discussion of Non-GAAP Financial Measures

Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization of the inventory fair value adjustment associated with the Aquantia and Avera acquisitions, amortization of acquired intangible assets, acquisition and divestiture-related costs, restructuring and other related charges (including, but not limited to, asset impairment charges, employee severance costs, and facilities related charges), resolution of legal matters, and certain expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core business.

Marvell uses a non-GAAP tax rate to compute the non-GAAP tax provision. This non-GAAP tax rate is based on Marvell's estimated annual GAAP income tax forecast, adjusted to account for items excluded from GAAP income in calculating Marvell's non-GAAP income, as well as the effects of significant non-recurring and period specific tax items which vary in size and frequency. Marvell's non-GAAP tax rate is determined on an annual basis and may be adjusted during the year to take into account events that may materially affect the non-GAAP tax rate such as tax law changes; significant changes in Marvell's geographic mix of revenue and expenses; or changes to Marvell's corporate structure. For the second quarter of fiscal 2021, a non-GAAP tax rate of 5.0% has been applied to the non-GAAP financial results.

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, financial measures calculated in accordance with GAAP. 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.

Externally, management believes that investors may find Marvell's non-GAAP financial measures useful in their assessment of Marvell's operating performance and the valuation of Marvell. Internally, Marvell's non-GAAP financial measures are used in the following areas:

•Management’s evaluation of Marvell’s operating performance;

•Management’s establishment of internal operating budgets;

•Management’s performance comparisons with internal forecasts and targeted business models; and

•Management’s determination of the achievement and measurement of certain performance-based equity awards (adjustments may vary from award to award).

 

Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Marvell's business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Marvell's results as reported under GAAP. The exclusion of the above items from our GAAP financial metrics does not necessarily mean that these costs are unusual or infrequent.

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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. Words such as “anticipates,” “expects,” “intends,” “plans,” “projects,” “believes,” “seeks,” “estimates,” “can,” “may,” “will,” “would” 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, but not limited to: risks related to the impact on our business of the novel coronavirus (COVID-19) pandemic which have impacted, and may continue to impact, our workforce and operations and the transportation and manufacturing of our products; risks related to the impact of the COVID-19 pandemic which have impacted, and may continue to impact the operations of our customers, distributors, vendors, suppliers, and partners; increased disruption and volatility in the capital markets and credit markets as a result of COVID-19, which could adversely affect our liquidity and capital resources; the impact of COVID-19, or other future pandemics, on the U.S. and global economies; disruptions caused by COVID-19 resulting in worker absenteeism, quarantines and restrictions on our employees’ ability to work, innovate, collaborate, and travel; the effects that the current credit and market conditions caused by, or resulting from, COVID-19 could have on the liquidity and financial condition of our customers and suppliers, including any impact on their ability to meet their contractual obligations; the impact of international conflict and economic volatility in either domestic or foreign markets including risks related to trade conflicts, regulations, and tariffs, including but not limited to, restrictions imposed on our Chinese customers; the risks associated with manufacturing and selling products and customers’ products outside of the United States; Marvell's ability to define, design and develop products for the 5G market; Marvell's ability to market its 5G products to Tier 1 infrastructure customers; extension of lead time due to supply chain disruptions or component shortages that may impact the production of our products and any constrained availability from other electronic suppliers impacting our customers' ability to ship their products, which in turn may adversely impact our sales to those customers; Marvell’s reliance on independent foundries and subcontractors for the manufacture, assembly and testing of our products; cancellations, rescheduling or deferrals of significant customer orders or shipments, as well as the ability of our customers to manage inventory; our ability to realize the expected benefits from restructuring activities; the effects of transitioning to smaller geometry process technologies; the impact of any change in the income tax laws in jurisdictions where Marvell operates and the loss of any beneficial tax treatment that Marvell currently enjoys; the risk of downturns in the highly cyclical semiconductor industry; the risk that the company may not realize the anticipated benefits of the acquisitions of Aquantia Corp. and the Application Specific Integrated Circuit (ASIC) business of GLOBALFOUNDRIES and the divestiture to NXP (collectively, the “Transactions”); the effect of the consummation of the Transactions on the company's business relationships, operating results, and business generally; potential difficulties in employee retention as a result of the Transactions; the ability of Marvell to implement its plans, forecasts, and other expectations with respect to the Transactions and realize the anticipated synergies and cost savings in the time frame anticipated; Marvell’s dependence upon the storage and networking markets, which are highly cyclical and intensely competitive; the outcome of pending or future litigation and legal and regulatory proceedings; Marvell’s dependence on a small number of customers; the impact and costs associated with changes in international financial and regulatory conditions; Marvell’s ability and the ability of its customers to successfully compete in the markets in which it serves; Marvell’s ability and its customers’ ability to develop new and enhanced products and the adoption of those products in the market; decreases in gross margin and results of operations in the future due to a number of factors; Marvell’s ability to estimate customer demand and future sales accurately; Marvell’s ability to scale its operations in response to changes in demand for existing or new products and services; risks associated with acquisition and consolidation activity in the semiconductor industry; the effects of any other potential acquisitions, divestitures or investments; Marvell’s ability to protect its intellectual property; Marvell’s maintenance of an effective system of internal controls; severe financial hardship or bankruptcy of one or more of Marvell’s major customers; and other risks detailed in Marvell’s SEC filings from time to time. For other factors that could cause Marvell’s results to vary from expectations, please see the risk factors identified in Marvell’s Annual Report on Form 10-K for the fiscal year ended February 1, 2020 as filed with the SEC on March 23, 2020, Marvell’s Quarterly Report on Form 10-Q for the fiscal quarter ended May 2, 2020 as filed with the SEC on May 29, 2020, and other factors detailed from time to time in Marvell’s filings with the SEC. Marvell undertakes no obligation to revise or publicly update any forward-looking statements.

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About Marvell

Marvell first revolutionized the digital storage industry by moving information at speeds never thought possible. Today, that same breakthrough innovation remains at the heart of the Company’s storage, processing, networking, security and connectivity solutions. With leading intellectual property and deep system-level knowledge, Marvell’s semiconductor solutions continue to transform the enterprise, cloud, automotive, industrial, and consumer markets. To learn more, visit: www.marvell.com.

Marvell^® and the Marvell logo are registered trademarks of Marvell and/or its affiliates.

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Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations (Unaudited)

(In thousands, except per share amounts)

 

						Three Months Ended																														Six Months Ended
						August 1, 2020						May 2, 2020						August 3, 2019						August 1, 2020						August 3, 2019
Net revenue						$	727,297					$	693,641					$	656,568					$	1,420,938					$	1,319,020
Cost of goods sold						368,041						366,739						305,866						734,780						606,890
Gross profit						359,256						326,902						350,702						686,158						712,130
Operating expenses:
Research and development						277,139						279,584						266,354						556,723						533,221
Selling, general and administrative						112,794						122,027						113,990						234,821						223,995
Restructuring related charges						120,590						21,287						16,586						141,877						22,268
Total operating expenses						510,523						422,898						396,930						933,421						779,484
Operating loss						(151,267)						(95,996)						(46,228)						(247,263)						(67,354)
Interest income						577						1,058						1,077						1,635						2,345
Interest expense						(15,635)						(16,830)						(20,531)						(32,465)						(41,734)
Other income (loss), net						(440)						3,754						(2,197)						3,314						(2,313)
Interest and other income (loss), net						(15,498)						(12,018)						(21,651)						(27,516)						(41,702)
Loss before income taxes						(166,765)						(108,014)						(67,879)						(274,779)						(109,056)
Provision (benefit) for income taxes						(8,872)						5,019						(10,548)						(3,853)						(3,275)
Net loss						$	(157,893)					$	(113,033)					$	(57,331)					$	(270,926)					$	(105,781)
Net loss per share — basic:						$	(0.24)					$	(0.17)					$	(0.09)					$	(0.41)					$	(0.16)
Net loss per share — diluted:						$	(0.24)					$	(0.17)					$	(0.09)					$	(0.41)					$	(0.16)
Weighted average shares:
Basic						667,574						663,547						663,603						665,541						661,280
Diluted						667,574						663,547						663,603						665,541						661,280

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Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets (Unaudited)

(In thousands)

						August 1, 2020						February 1, 2020
Assets
Current assets:
Cash and cash equivalents						$	831,534					$	647,604
Accounts receivable, net						483,542						492,346
Inventories						262,875						322,980
Prepaid expenses and other current assets						54,136						74,567
Total current assets						1,632,087						1,537,497
Property and equipment, net						335,035						357,092
Goodwill						5,337,405						5,337,405
Acquired intangible assets, net						2,489,815						2,764,600
Deferred tax assets						645,633						639,791
Other non-current assets						486,507						496,850
Total assets						$	10,926,482					$	11,133,235
Liabilities and Shareholders’ Equity
Current liabilities:
Accounts payable						$	238,537					$	213,747
Accrued liabilities						406,804						346,639
Accrued employee compensation						131,241						149,780
Short-term debt						448,248						—
Total current liabilities						1,224,830						710,166
Long-term debt						992,436						1,439,024
Other non-current liabilities						291,679						305,465
Total liabilities						2,508,945						2,454,655
Shareholders’ equity:
Common shares						1,340						1,328
Additional paid-in capital						6,225,242						6,135,939
Accumulated other comprehensive income						450						—
Retained earnings						2,190,505						2,541,313
Total shareholders’ equity						8,417,537						8,678,580
Total liabilities and shareholders’ equity						$	10,926,482					$	11,133,235

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Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In thousands)

						Three Months Ended																		Six Months Ended
						August 1, 2020						August 3, 2019						August 1, 2020						August 3, 2019
Cash flows from operating activities:
Net loss						$	(157,893)					$	(57,331)					$	(270,926)					$	(105,781)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization						51,605						37,926						102,088						76,580
Share-based compensation						62,586						63,676						122,273						122,274
Amortization of acquired intangible assets						111,579						80,967						224,501						160,707
Amortization of inventory fair value adjustment associated with acquisitions						—						—						17,284						—
Restructuring related impairment charges						114,723						6,281						117,546						10,097
Other expense, net						6,282						5,773						14,910						14,534
Deferred income taxes						(2,816)						(1,982)						(444)						2,374
Changes in assets and liabilities:
Accounts receivable						(14,782)						17,601						8,804						40,376
Inventories						(33)						(7,174)						35,801						8,674
Prepaid expenses and other assets						3,679						(15,997)						(3,015)						(7,993)
Accounts payable						33,204						24,370						29,647						22,497
Accrued liabilities and other non-current liabilities						10,732						(49,188)						21,528						(80,117)
Accrued employee compensation						6,964						(31,782)						(18,539)						(25,266)
Net cash provided by operating activities						225,830						73,140						401,458						238,956
Cash flows from investing activities:
Purchases of technology licenses						(3,080)						(38)						(6,764)						(1,522)
Purchases of property and equipment						(17,540)						(23,010)						(52,883)						(42,193)
Other, net						34						(47)						699						(389)
Net cash used in investing activities						(20,586)						(23,095)						(58,948)						(44,104)
Cash flows from financing activities:
Repurchases of common stock						—						(16,250)						(25,202)						(64,272)
Proceeds from employee stock plans						42,776						50,230						48,234						81,314
Tax withholding paid on behalf of employees for net share settlement						(25,213)						(32,884)						(56,714)						(61,642)
Dividend payments to shareholders						(40,119)						(39,889)						(79,882)						(79,356)
Payments on technology license obligations						(18,702)						(13,056)						(42,509)						(28,324)
Principal payments of debt						—						—						—						(50,000)
Other, net						—						3,407						(2,507)						(1,486)
Net cash used in financing activities						(41,258)						(48,442)						(158,580)						(203,766)
Net increase (decrease) in cash and cash equivalents						163,986						1,603						183,930						(8,914)
Cash and cash equivalents at beginning of period						667,548						571,893						647,604						582,410
Cash and cash equivalents at end of period						$	831,534					$	573,496					$	831,534					$	573,496

 

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Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In thousands, except per share amounts)
						Three Months Ended																														Six Months Ended
						August 1, 2020						May 2, 2020						August 3, 2019						August 1, 2020						August 3, 2019
GAAP gross profit:						$	359,256					$	326,902					$	350,702					$	686,158					$	712,130
Special items:
Share-based compensation						4,082						3,538						3,662						7,620						6,588
Amortization of acquired intangible assets						85,225						86,567						61,132						171,792						121,038
Other cost of goods sold (a)						11,630						18,562						—						30,192						450
Total special items						100,937						108,667						64,794						209,604						128,076
Non-GAAP gross profit						$	460,193					$	435,569					$	415,496					$	895,762					$	840,206
GAAP gross margin						49.4		%				47.1		%				53.4		%				48.3		%				54.0		%
Non-GAAP gross margin						63.3		%				62.8		%				63.3		%				63.0		%				63.7		%
Total GAAP operating expenses						$	510,523					$	422,898					$	396,930					$	933,421					$	779,484
Special items:
Share-based compensation						(58,504)						(56,149)						(60,014)						(114,653)						(115,686)
Restructuring related charges (b)						(120,590)						(21,287)						(16,586)						(141,877)						(22,268)
Amortization of acquired intangible assets						(26,354)						(26,355)						(19,835)						(52,709)						(39,669)
Other operating expenses (c)						(8,125)						(19,403)						(20,676)						(27,528)						(27,245)
Total special items						(213,573)						(123,194)						(117,111)						(336,767)						(204,868)
Total non-GAAP operating expenses						$	296,950					$	299,704					$	279,819					$	596,654					$	574,616
GAAP operating margin						(20.8)		%				(13.8)		%				(7.0)		%				(17.4)		%				(5.1)		%
Other cost of goods sold (a)						1.6		%				2.7		%				—		%				2.1		%				—		%
Share-based compensation						8.6		%				8.6		%				9.7		%				8.6		%				9.3		%
Restructuring related charges (b)						16.6		%				3.1		%				2.5		%				10.0		%				1.7		%
Amortization of acquired intangible assets						15.3		%				16.3		%				12.3		%				15.8		%				12.2		%
Other operating expenses (c)						1.1		%				2.7		%				3.2		%				2.0		%				2.0		%
Non-GAAP operating margin						22.4		%				19.6		%				20.7		%				21.1		%				20.1		%

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Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In thousands, except per share amounts)
						Three Months Ended																														Six Months Ended
						August 1, 2020						May 2, 2020						August 3, 2019						August 1, 2020						August 3, 2019
GAAP interest and other income (loss), net						$	(15,498)					$	(12,018)					$	(21,651)					$	(27,516)					$	(41,702)
Special items:
Restructuring and other related items (d)						—						434						75						434						(263)
Write-off of debt issuance costs (e)						—						—						—						—						458
Deal costs (f)						—						—						1,009						—						1,009
Total special items						—						434						1,084						434						1,204
Total non-GAAP interest and other income (loss), net						$	(15,498)					$	(11,584)					$	(20,567)					$	(27,082)					$	(40,498)
GAAP net loss						$	(157,893)					$	(113,033)					$	(57,331)					$	(270,926)					$	(105,781)
Special items:
Other cost of goods sold (a)						11,630						18,562						—						30,192						450
Share-based compensation						62,586						59,687						63,676						122,273						122,274
Restructuring related charges in operating expenses (b)						120,590						21,287						16,586						141,877						22,268
Other operating expenses (c)						8,125						19,403						20,676						27,528						27,245
Restructuring and other related items in interest and other income, net (d)						—						434						75						434						(263)
Amortization of acquired intangible assets						111,579						112,922						80,967						224,501						160,707
Write-off of debt issuance costs (e)						—						—						—						—						458
Transaction costs included in interest and other income, net (f)						—						—						1,009						—						1,009
Pre-tax total special items						314,510						232,295						182,989						546,805						334,148
Other income tax effects and adjustments (g)						(16,226)						(1,229)						(15,728)						(17,455)						(13,404)
Non-GAAP net income						$	140,391					$	118,033					$	109,930					$	258,424					$	214,963
GAAP weighted average shares — basic						667,574						663,547						663,603						665,541						661,280
GAAP weighted average shares — diluted						667,574						663,547						663,603						665,541						661,280
Non-GAAP weighted average shares — diluted (h)						678,304						670,841						675,755						674,553						673,399

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Marvell Technology Group Ltd.
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In thousands, except per share amounts)
						Three Months Ended																														Six Months Ended
						August 1, 2020						May 2, 2020						August 3, 2019						August 1, 2020						August 3, 2019
GAAP diluted net loss per share						$	(0.24)					$	(0.17)					$	(0.09)					$	(0.41)					$	(0.16)
Non-GAAP diluted net income per share						$	0.21					$	0.18					$	0.16					$	0.38					$	0.32

 

(a)			Other costs of goods sold includes inventory write-downs and amortization of acquired inventory fair value adjustments.

(b)			Restructuring related charges include asset impairment charges (including asset impairment charges due to changes to the scope of the server processor product line), employee severance costs, facilities related charges, and other.

(c)			Other operating expenses include integration costs associated with recent acquisitions.

(d)			Interest and other income (loss), net, includes restructuring and other related items such as foreign currency remeasurement associated with restructuring related accruals.

(e)			Write-off of debt issuance costs is associated with partial term loan repayment.

(f)			Deal costs include transaction costs incurred in connection with divestiture of the Wi-Fi Connectivity business.

(g)			Other income tax effects and adjustments relate to tax provision based on a non-GAAP income tax rate of 5.0% for the three and six months ended August 1, 2020 and three months ended May 2, 2020. Other income tax effects and adjustments relate to tax provision based on a non-GAAP income tax rate of 4.5% for the three and six months ended August 3, 2019.

(h)			Non-GAAP diluted weighted average shares differs from GAAP diluted weighted average shares due to the non-GAAP net income reported.

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Marvell Technology Group Ltd.
Outlook for the Third Quarter of Fiscal Year 2021
Reconciliations from GAAP to Non-GAAP (Unaudited)
(In millions, except per share amounts)
			Outlook for Three Months Ended October 31, 2020
GAAP revenue			$750 +/- 5%
Special items:			—
Non-GAAP revenue			$750 +/- 5%
GAAP gross margin			~51.4%
Special items:
Share-based compensation			0.5%
Amortization of acquired intangible assets			11.1%
Non-GAAP gross margin			~63%
Total GAAP operating expenses			~$368
Special items:
Share-based compensation			56
Amortization of acquired intangible assets			26
Restructuring related charges			2
Other operating expenses			4
Total non-GAAP operating expenses			~$280
GAAP diluted net income (loss) per share			$(0.04) - $0.04
Special items:
Share-based compensation			0.09
Amortization of acquired intangible assets			0.16
Other operating expenses			0.01
Other income tax effects and adjustments			(0.01)
Non-GAAP diluted net income per share			$0.22 - $0.28

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Quarterly Revenue Trend (Unaudited)

(In thousands)

			Three Months Ended																														% Change
			August 1, 2020						May 2, 2020						August 3, 2019						YoY						QoQ
Networking (1)			$	406,008					$	393,920					$	329,605					23		%				3		%
Storage (2)			290,495						258,688						274,905						6		%				12		%
Total Core			696,503						652,608						604,510						15		%				7		%
Other (3)			30,794						41,033						52,058						(41)		%				(25)		%
Total Revenue			$	727,297					$	693,641					$	656,568					11		%				5		%

			Three Months Ended
% of Total			August 1, 2020						May 2, 2020						August 3, 2019
Networking (1)			56		%				57		%				50		%
Storage (2)			40		%				37		%				42		%
Total Core			96		%				94		%				92		%
Other (3)			4		%				6		%				8		%
Total Revenue			100		%				100		%				100		%

(1) Networking products are comprised primarily of Ethernet Solutions, Embedded Processors and Custom ASICs.
(2) Storage products are comprised primarily of Storage Controllers and Fibre Channel Adapters.
(3) Other products are comprised primarily of Printer Solutions.

For further information, contact:

Ashish Saran

Vice President, Investor Relations

408-222-0777

ir@marvell.com