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Press release from PR Newswire

Marvell Technology Group Ltd. Reports Second Quarter of Fiscal Year 2014 Financial Results

Thursday, August 22, 2013

Marvell Technology Group Ltd. Reports Second Quarter of Fiscal Year 2014 Financial Results

16:03 EDT Thursday, August 22, 2013

SANTA CLARA, Calif., Aug. 22, 2013 /PRNewswire/ -- Marvell (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the second quarter of fiscal year 2014, ended August 3, 2013.

(Logo: http://photos.prnewswire.com/prnh/20100719/SF36559LOGO-b)

Key 2Q FY2014 Financial Highlights

  • Revenue: $807 Million
  • GAAP Net Income: $62 Million
  • GAAP EPS: $0.12
  • Non-GAAP Net Income: $118 Million
  • Non-GAAP EPS: $0.23
  • Free Cash Flow: $65 Million

3Q FY2014 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 August 21, 2013.

  • Revenue is expected to be in the range of $850 to $890 Million.
  • GAAP Gross Margin is expected to be in the range of 50.7% +/- 100 bps. Non-GAAP Gross Margin is expected to be in the range of 51% +/- 100 bps.
  • GAAP Operating Expenses are expected to be in the range of $370 Million +/- $10 Million. Non-GAAP Operating Expenses to be in the range of $315 Million +/- $10 Million.
  • GAAP EPS expected to be in the range of $0.15 +/- $0.02. Non-GAAP EPS expected to be in the range of $0.25 +/- $0.02.

2Q FY2014 Summary

Revenue for the second quarter of fiscal 2014 was $807 million, a 10 percent sequential increase from $734 million in the first quarter of fiscal 2014, ended May 4, 2013, and a 1 percent decrease from revenue of $816 million in the second quarter of fiscal 2013, ended July 28, 2012.  

GAAP net income for the second quarter of fiscal 2014 was $62 million, or $0.12 per share (diluted), compared with GAAP net income of $53 million, or $0.11 per share (diluted), for the first quarter of fiscal 2014, and $93 million, or $0.16 per share (diluted), for the second quarter of fiscal 2013.   

Non-GAAP net income was $118 million, or $0.23 per share (diluted), for the second quarter of fiscal 2014, compared with non-GAAP net income of $98 million, or $0.19 per share (diluted), for the first quarter of fiscal 2014, and $142 million, or $0.24 per share (diluted), for the second quarter of fiscal 2013.

"Our results in the second quarter were at the high-end of our guidance mainly due to better demand and share gains in our storage end market and strong double digit growth in our mobile and wireless end markets," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "Many of our customers are introducing new devices using our innovative solutions, which should drive continued success across all of our end markets. We expect growth to be driven by increased traction in areas such as mobile handsets, tablets, connectivity, smart home devices and SSDs."

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 August 3, 2013, May 4, 2013 and July 28, 2012 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, and certain one-time expenses and benefits. 

GAAP gross margin for the second quarter of fiscal 2014 was 52.2 percent, compared to 54.3 percent for the first quarter of fiscal 2014 and 53.2 percent for the second quarter of fiscal 2013.

Non-GAAP gross margin for the second quarter of fiscal 2014 was 53.0 percent, compared to 54.6 percent for the first quarter of fiscal 2014 and 53.6 percent for the second quarter of fiscal 2013.

Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2014 were 501 million shares, compared with 505 million shares in the first quarter of fiscal 2014 and 570 million shares in the second quarter of fiscal 2013. Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2014 were 516 million shares, compared with 522 million shares for the first quarter of fiscal 2014 and 587 million shares for the second quarter of fiscal 2013. The decrease in shares used to compute both Marvell's GAAP and non-GAAP net income per diluted share was primarily due to Marvell's share repurchase program.

Cash flow from operations for the second quarter of fiscal 2014 was $86 million, compared to the $84 million reported in the first quarter of fiscal 2014 and the $189 million reported in the second quarter of fiscal 2013. Free cash flow for the second quarter of fiscal 2014 was $65 million, compared to the $53 million reported in the first quarter of fiscal 2014 and the $174 million reported in the second quarter of fiscal 2013. 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 share repurchase program, Marvell repurchased approximately 7.2 million shares for a total of $83 million in the second quarter of fiscal 2014. Over the past 12 quarters, Marvell has repurchased and retired approximately 211 million shares, or about 30 percent of its outstanding shares.

Marvell also paid a quarterly dividend of $0.06 per share on July 3, 2013 to all shareholders of record as of June 13, 2013. Marvell intends to pay its next quarterly dividend of $0.06 per share on October 3, 2013 to all shareholders of record as of September 12, 2013.

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, statutory requirements of Bermuda law, and other factors that the board of directors may deem relevant.

Conference CallMarvell will be conducting a conference call on Thursday, August 22, 2013 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal 2014. Interested parties may join the conference call by dialing 1-866-700-6293 or 1-617-213-8835, pass-code 40320337.  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 22, 2013.    

Discussion of Non-GAAP Financial MeasuresNon-GAAP financial measures exclude the effect of stock-based compensation expense, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, 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 stock-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 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.

Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995This press release contains forward-looking statements that involve risks and uncertainties, including Marvell's: expectations and statements regarding: its financial outlook for the third quarter of fiscal 2014; its innovative solutions driving continued success across all of our end markets; increased traction in areas such as mobile handsets, tablets, connectivity, smart home devices and SSDs; its dividend program including the declaration of, timing of, funding of and quarterly amount of dividends; and its 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 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; uncertainty in the worldwide economic conditions; seasonality in sales of consumer devices in which our products are incorporated; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's ability to recruit and retain skilled personnel; Marvell's ability to generate cash flows; and other risks detailed in Marvell's SEC filings from time to time. When Marvell files its Quarterly Report on Form 10-Q for the quarter ended August 3, 2013, 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 May 4, 2013 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 is a global leader in providing complete silicon solutions enabling the digital connected lifestyle. From mobile communications to storage, 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.

For further information, contact:

Sukhi Nagesh

Holly Zheng

Investor Relations

Media Relations

408-222-8373

408-222-9202

sukhi@marvell.com 

hollyz@marvell.com

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

August 3,

May 4,

July 28,

August 3,

July 28,

2013

2013

2012

2013

2012

Net revenue

$ 807,056

$ 734,369

$ 816,104

$ 1,541,425

$ 1,612,455

Cost of goods sold

386,059

335,438

381,839

721,497

748,161

Gross profit

420,997

398,931

434,265

819,928

864,294

Operating expenses:

Research and development

292,642

279,052

264,175

571,694

520,145

Selling and marketing

38,548

39,989

41,034

78,537

81,100

General and administrative

27,192

26,323

25,718

53,515

51,423

Amortization and write-off of acquired intangible assets

10,638

10,686

13,023

21,324

27,378

Total operating expenses

369,020

356,050

343,950

725,070

680,046

Operating income

51,977

42,881

90,315

94,858

184,248

Interest and other income, net

8,253

3,160

5,864

11,413

6,921

Income before income taxes

60,230

46,041

96,179

106,271

191,169

Provision (benefit) for income taxes

(1,596)

(7,168)

3,105

(8,764)

3,552

Net income

$   61,826

$   53,209

$   93,074

$    115,035

$    187,617

Basic net income per share

$       0.13

$       0.11

$       0.17

$          0.23

$          0.33

Diluted net income per share

$       0.12

$       0.11

$       0.16

$          0.23

$          0.32

Shares used in computing basic earnings per share

494,293

502,180

562,362

498,237

571,193

Shares used in computing diluted earnings per share

500,625

505,387

570,325

503,006

582,532

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

August 3,

February 2,

Assets

2013

2013

Current assets:

Cash, cash equivalents, and short-term investments

$ 1,726,198

$  1,918,990

Accounts receivable, net

430,874

330,238

Inventories

335,320

250,420

Prepaid expenses and other current assets

66,238

85,698

Total current assets

2,558,630

2,585,346

Property and equipment, net

363,486

372,971

Long-term investments

16,299

16,769

Goodwill and acquired intangible assets, net

2,104,255

2,121,793

Other non-current assets

161,574

164,885

Total assets

$ 5,204,244

$  5,261,764

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$    355,164

$     286,552

Accrued liabilities

242,953

261,186

Deferred income

75,465

60,150

Total current liabilities

673,582

607,888

Other non-current liabilities

138,152

169,281

Total liabilities

811,734

777,169

Shareholders' equity:

Common stock

988

1,017

Additional paid-in capital

2,801,316

2,945,643

Accumulated other comprehensive income

(1,572)

1,148

Retained earnings

1,591,778

1,536,787

Total shareholders' equity

4,392,510

4,484,595

Total liabilities and shareholders' equity

$ 5,204,244

$  5,261,764

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Three Months Ended

Six Months Ended

August 3,

July 28,

August 3,

July 28,

2013

2012

2013

2012

Cash flows from operating activities:

Net income

$   61,826

$   93,074

$ 115,035

$ 187,617

Adjustments to reconcile net income to net cash provided by operating activities:

Depreciation and amortization

25,697

21,285

50,663

42,484

Stock-based compensation

41,091

33,228

74,604

60,420

Amortization of acquired intangible assets

10,638

13,023

21,324

27,378

Other expense, net

1,816

2,272

4,339

5,175

Excess tax benefits from stock-based compensation

(25)

(3)

(32)

(44)

Changes in assets and liabilities:

Accounts receivable

(60,524)

26,610

(100,636)

16,491

Inventories

(64,170)

7,832

(84,293)

8,033

Prepaid expenses and other assets

12,503

11,393

19,305

15,635

Accounts payable

54,933

6,288

83,869

27,537

Accrued liabilities and other non-current liabilities

(13,013)

(4,204)

(33,094)

13,939

Accrued employee compensation

(471)

(24,033)

3,952

(24,681)

Deferred income

16,195

2,427

15,315

7,881

Net cash provided by operating activities

86,496

189,192

170,351

387,865

Cash flows from investing activities:

Purchases of available-for-sale securities

(164,631)

(225,255)

(471,469)

(646,907)

Sales and maturities of available-for-sale securities

162,909

322,532

498,680

881,309

Investments in privately-held companies

(750)

(750)

(750)

(5,750)

Cash paid for acquisitions, net

?

?

(2,551)

?

Purchases of technology licenses

(1,750)

(4,407)

(7,610)

(6,452)

Purchases of property and equipment

(18,981)

(10,830)

(39,061)

(29,734)

Net cash (used in) provided by investing activities

(23,203)

81,290

(22,761)

192,466

Cash flows from financing activities:

Repurchase of common stock (a)

(88,114)

(250,327)

(304,808)

(473,484)

Proceeds from employee stock plans

53,316

39,526

73,121

57,329

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

(510)

(598)

(9,888)

(9,477)

Dividend payment to shareholders

(29,791)

(33,537)

(60,044)

(33,537)

Payment on technology license obligations

(984)

?

(6,301)

?

Excess tax benefits from stock-based compensation

25

3

32

44

Net cash used in financing activities

(66,058)

(244,933)

(307,888)

(459,125)

Net (decrease) increase in cash and cash equivalents

(2,765)

25,549

(160,298)

121,206

Cash and cash equivalents at beginning of period

594,420

880,559

751,953

784,902

Cash and cash equivalents at end of period

$ 591,655

$ 906,108

$ 591,655

$ 906,108

(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 7.1 million shares repurchased for $82.6 million in the second quarter of fiscal 2014, adjusted for repurchases made within the final three day     s of the current and previous quarters 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

Six Months Ended

August 3,

May 4,

July 28,

August 3,

July 28,

2013

2013

2012

2013

2012

GAAP net income

$   61,826

$   53,209

$   93,074

$ 115,035

$ 187,617

Stock-based compensation

41,091

33,513

33,228

74,604

60,420

Amortization of acquired intangible assets

10,638

10,686

13,023

21,324

27,378

Acquisition-related costs (a)

(1,081)

465

1,577

(616)

4,033

Restructuring

178

228

859

406

974

Legal/Tax related matters(b)

5,228

-

250

5,228

250

Non-GAAP net income

$ 117,880

$   98,101

$ 142,011

$ 215,981

$ 280,672

GAAP weighted average shares - diluted

500,625

505,387

570,325

503,006

582,532

Non-GAAP adjustment

15,021

17,094

16,302

16,058

13,558

Non-GAAP weighted average shares diluted (c)

515,646

522,481

586,627

519,064

596,090

GAAP diluted net income per share

$       0.12

$       0.11

$       0.16

$       0.23

$       0.32

Non-GAAP diluted net income per share 

$       0.23

$       0.19

$       0.24

$       0.42

$       0.47

GAAP gross profit:

$ 420,997

$ 398,931

$ 434,265

$ 819,928

$ 864,294

Stock-based compensation

1,868

1,867

1,775

3,735

3,898

Acquisition-related costs (a)

-

-

1,054

-

2,983

Legal/Tax related matters(b)

4,728

-

-

4,728

-

Non-GAAP gross profit

$ 427,593

$ 400,798

$ 437,094

$ 828,391

$ 871,175

GAAP gross margin

52.2%

54.3%

53.2%

53.2%

53.6%

Stock-based compensation

0.2%

0.3%

0.2%

0.2%

0.2%

Acquisition-related costs (a)

-

-

0.2%

-

0.2%

Legal/Tax related matters(b)

0.6%

-

-

0.3%

-

Non-GAAP gross margin

53.0%

54.6%

53.6%

53.7%

54.0%

GAAP research and development:

$ 292,642

$ 279,052

$ 264,175

$ 571,694

$ 520,145

Stock-based compensation

(28,982)

(23,279)

(22,413)

(52,261)

(39,587)

Acquisition-related costs (a)

1,135

(400)

(466)

735

(908)

Restructuring

-

-

(42)

-

(44)

Non-GAAP research and development

$ 264,795

$ 255,373

$ 241,254

$ 520,168

$ 479,606

GAAP selling and marketing:

$   38,548

$   39,989

$   41,034

$   78,537

$   81,100

Stock-based compensation

(3,648)

(3,392)

(3,458)

(7,040)

(6,494)

Acquisition-related costs (a)

(34)

(45)

(50)

(79)

(96)

Restructuring

-

-

(7)

-

-

Non-GAAP selling and marketing

$   34,866

$   36,552

$   37,519

$   71,418

$   74,510

GAAP general and administrative:

$   27,192

$   26,323

$   25,718

$   53,515

$   51,423

Stock-based compensation

(6,593)

(4,975)

(5,582)

(11,568)

(10,441)

Acquisition-related costs (a)

(20)

(20)

(7)

(40)

(46)

Restructuring

(178)

(228)

(810)

(406)

(930)

Legal/Tax related matters(b)

(500)

-

(250)

(500)

(250)

Non-GAAP general and administrative

$   19,901

$   21,100

$   19,069

$   41,001

$   39,756

(a) 

Acquisition-related costs include the step-up in fair value of acquired inventory that was sold during the period, the amortization of retention bonuses required by the terms of the acquisition and an adjustment for a contingent milestone which is not expected to be met.

(b) 

Legal/Tax related matters during the three and six months ended August 3, 2013 includes estimated settlement fees related to ongoing litigation matters. The amounts recorded do not relate to Marvell's litigation with Carnegie Mellon University (CMU). 

(c) 

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 stock-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)

Q3 FY2014

Note : Amounts represent the midpoint of the expected range

Outlook

GAAP gross margin

50.7%

Stock-based compensation, acquisition related costs, and other

0.3%

Non-GAAP gross margin

51.0%

Q3 FY2014

Outlook

GAAP operating expenses

$          370

Stock-based compensation, acquisition-related costs, restructuring,

amortization of intangible assets and other

(55)

Non-GAAP operating expenses

$          315

Q3 FY2014

Outlook

GAAP diluted earnings per share

$         0.15

Stock-based compensation, acquisition-related costs, restructuring,

amortization of intangible assets and other

0.10

Non-GAAP earnings per share

$         0.25

SOURCE Marvell

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