Marvell Technology Group Ltd. Reports First Quarter of Fiscal Year 2018 Financial Results
- Q1 Revenue:
$579 million - Q1 Gross Margin: 60.2% GAAP gross margin; 60.4% non-GAAP gross margin
- Q1 Diluted earnings per share:
$0.19 GAAP diluted earnings per share from continuing operations;$0.24 non-GAAP diluted earnings per share from continuing operations - Cash and short-term investments:
$1.65 billion
GAAP net income from continuing operations for the first quarter of fiscal 2018 was
Subsequent to the close of
"
Second Quarter of Fiscal 2018 Financial Outlook
- Revenue is expected to be
$585 to $615 million . This range excludes approximately$5 million in revenue associated with sale of LTE thin-modem business. - GAAP and non-GAAP gross margins are expected to be approximately 61%.
- GAAP operating expenses are expected to be
$237 million to $247 million . - Non-GAAP operating expenses are expected to be
$215 million to $220 million . - GAAP diluted EPS from continuing operations is expected to be in the range of
$0.21 to $0.27 . - Non-GAAP diluted EPS from continuing operations is expected to be in the range of
$0.26 to $0.30 .
Discontinued Operations
The Company's financial results for prior periods presented herein have been recast to reflect certain businesses that were classified as discontinued operations during the fourth quarter of fiscal year 2017.
Conference Call
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 related charges, litigation settlement, and certain expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to
In fiscal 2018,
Non-GAAP diluted net income per share from continuing operations is calculated by dividing non-GAAP net income from continuing operations by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP diluted 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 additional proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.
Externally, management believes that investors may find
- 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
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:
About
Marvell Technology Group Ltd. |
||||||||||||
Three Months Ended |
||||||||||||
April 29, 2017 |
January 28, 2017 |
April 30, 2016 |
||||||||||
Net revenue |
$ |
579,180 |
$ |
571,400 |
$ |
519,383 |
||||||
Cost of goods sold |
230,549 |
243,883 |
244,354 |
|||||||||
Gross profit |
348,631 |
327,517 |
275,029 |
|||||||||
Operating expenses: |
||||||||||||
Research and development |
193,027 |
181,557 |
226,541 |
|||||||||
Selling, general and administrative |
55,211 |
59,233 |
64,163 |
|||||||||
Restructuring related charges |
1,505 |
98,860 |
4,441 |
|||||||||
Total operating expenses |
249,743 |
339,650 |
295,145 |
|||||||||
Operating income (loss) |
98,888 |
(12,133) |
(20,116) |
|||||||||
Interest and other income, net |
3,333 |
3,780 |
1,488 |
|||||||||
Income (loss) from continuing operations before income taxes |
102,221 |
(8,353) |
(18,628) |
|||||||||
Provision (benefit) for income taxes |
5,251 |
68,524 |
(5,357) |
|||||||||
Income (loss) from continuing operations |
96,970 |
$ |
(76,877) |
(13,271) |
||||||||
Income (loss) from discontinued operations, net of tax |
9,651 |
(3,214) |
(9,408) |
|||||||||
Net income (loss) |
$ |
106,621 |
$ |
(80,091) |
$ |
(22,679) |
||||||
Net income (loss) per share — Basic: |
||||||||||||
Continuing operations |
$ |
0.19 |
$ |
(0.15) |
$ |
(0.03) |
||||||
Discontinued operations |
$ |
0.02 |
$ |
(0.01) |
$ |
(0.02) |
||||||
Net income (loss) per share - basic |
$ |
0.21 |
$ |
(0.16) |
$ |
(0.04) |
||||||
Net income (loss) per share — Diluted: |
||||||||||||
Continuing operations |
$ |
0.19 |
$ |
(0.15) |
$ |
(0.03) |
||||||
Discontinued operations |
$ |
0.02 |
$ |
(0.01) |
$ |
(0.02) |
||||||
Net income (loss) per share - diluted |
$ |
0.21 |
$ |
(0.16) |
$ |
(0.04) |
||||||
Weighted average shares: |
||||||||||||
Basic |
503,790 |
507,834 |
508,794 |
|||||||||
Diluted |
517,592 |
507,834 |
508,794 |
Marvell Technology Group Ltd. |
||||||||
April 29, |
January 28, |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
725,962 |
$ |
814,092 |
||||
Short-term investments |
923,449 |
854,268 |
||||||
Accounts receivable, net |
357,147 |
335,384 |
||||||
Inventories |
178,145 |
171,969 |
||||||
Prepaid expenses and other current assets |
44,577 |
58,771 |
||||||
Assets held for sale |
39,708 |
45,846 |
||||||
Total current assets |
2,268,988 |
2,280,330 |
||||||
Property and equipment, net |
239,358 |
243,397 |
||||||
Goodwill and acquired intangible assets, net |
2,005,912 |
2,006,984 |
||||||
Other non-current assets |
121,979 |
117,939 |
||||||
Total assets |
$ |
4,636,237 |
$ |
4,648,650 |
||||
Liabilities and Shareholders' Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ |
179,017 |
$ |
143,484 |
||||
Accrued liabilities |
154,315 |
143,491 |
||||||
Accrued employee compensation |
132,118 |
139,647 |
||||||
Deferred income |
74,064 |
68,124 |
||||||
Liabilities held for sale |
746 |
1,670 |
||||||
Total current liabilities |
540,260 |
496,416 |
||||||
Non-current income taxes payable |
62,720 |
60,646 |
||||||
Other non-current liabilities |
71,411 |
63,937 |
||||||
Total liabilities |
674,391 |
620,999 |
||||||
Shareholders' equity: |
||||||||
Common stock |
1,001 |
1,012 |
||||||
Additional paid-in capital |
2,876,507 |
3,016,775 |
||||||
Accumulated other comprehensive income (loss) |
(164) |
23 |
||||||
Retained earnings |
1,084,502 |
1,009,841 |
||||||
Total shareholders' equity |
3,961,846 |
4,027,651 |
||||||
Total liabilities and shareholders' equity |
$ |
4,636,237 |
$ |
4,648,650 |
Marvell Technology Group Ltd. |
|||||||||
Three Months Ended |
|||||||||
April 29, |
April 30, |
||||||||
Cash flows from operating activities: |
|||||||||
Net income (loss) |
$ |
106,621 |
$ |
(22,679) |
|||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: |
|||||||||
Depreciation and amortization |
20,742 |
27,114 |
|||||||
Share-based compensation |
24,017 |
24,453 |
|||||||
Amortization and write-off of acquired intangible assets |
1,071 |
2,946 |
|||||||
Restructuring related charges |
(516) |
896 |
|||||||
Deferred income taxes and other |
(11,109) |
(1,115) |
|||||||
Gain on sale of a business |
(8,155) |
— |
|||||||
Changes in assets and liabilities: |
|||||||||
Accounts receivable |
(21,763) |
42,642 |
|||||||
Inventories |
(11,542) |
13,598 |
|||||||
Prepaid expenses and other assets |
6,422 |
(13,217) |
|||||||
Accounts payable |
31,423 |
19,922 |
|||||||
Accrued liabilities and other non-current liabilities |
448 |
(22,502) |
|||||||
Carnegie Mellon University accrued litigation settlement (a) |
— |
(736,000) |
|||||||
Accrued employee compensation |
(7,529) |
7,152 |
|||||||
Deferred income |
5,016 |
(1,234) |
|||||||
Net cash provided by (used in) operating activities |
135,146 |
(658,024) |
|||||||
Cash flows from investing activities: |
|||||||||
Purchases of available-for-sale securities |
(198,416) |
(93,365) |
|||||||
Sales of available-for-sale securities |
78,764 |
272,271 |
|||||||
Maturities of available-for-sale securities |
82,235 |
97,788 |
|||||||
Purchase of time deposits |
(75,000) |
(50,000) |
|||||||
Maturities of time deposits |
75,000 |
— |
|||||||
Purchases of technology licenses |
(1,093) |
(4,050) |
|||||||
Purchases of property and equipment |
(10,026) |
(11,868) |
|||||||
Net proceeds from sale of a business |
22,954 |
— |
|||||||
Other |
7,275 |
— |
|||||||
Net cash provided by (used in) investing activities |
(18,307) |
210,776 |
|||||||
Cash flows from financing activities: |
|||||||||
Repurchases of common stock |
(166,293) |
— |
|||||||
Proceeds from employee stock plans |
19,939 |
315 |
|||||||
Minimum tax withholding paid on behalf of employees for net share settlement |
(21,809) |
(15,270) |
|||||||
Dividend payments to shareholders |
(29,991) |
(30,461) |
|||||||
Payments on technology license obligations |
(6,815) |
(5,294) |
|||||||
Net cash used in financing activities |
(204,969) |
(50,710) |
|||||||
Net decrease in cash and cash equivalents |
(88,130) |
(497,958) |
|||||||
Cash and cash equivalents at beginning of period |
814,092 |
1,278,180 |
|||||||
Cash and cash equivalents at end of period |
$ |
725,962 |
$ |
780,222 |
(a) |
The Company paid $750.0 million to Carnegie Mellon University in connection with a litigation settlement agreement reached in February 2016. |
Marvell Technology Group Ltd. |
||||||||||||
Three Months Ended |
||||||||||||
April 29, |
January 28, |
April 30, |
||||||||||
GAAP gross profit: |
$ |
348,631 |
$ |
327,517 |
$ |
275,029 |
||||||
Special items: |
||||||||||||
Share-based compensation |
1,426 |
1,641 |
1,784 |
|||||||||
Non-GAAP gross profit |
$ |
350,057 |
$ |
329,158 |
$ |
276,813 |
||||||
GAAP gross margin |
60.2 |
% |
57.3 |
% |
53.0 |
% |
||||||
Non-GAAP gross margin |
60.4 |
% |
57.6 |
% |
53.3 |
% |
||||||
Total GAAP operating expenses |
$ |
249,743 |
$ |
339,650 |
$ |
295,145 |
||||||
Special items: |
||||||||||||
Share-based compensation |
(20,941) |
(20,764) |
(20,396) |
|||||||||
Restructuring related charges (a) |
(1,505) |
(98,860) |
(4,441) |
|||||||||
Amortization of and write-off acquired intangible assets |
(1,071) |
(1,480) |
(2,298) |
|||||||||
Other operating expenses (b) |
(2,304) |
(315) |
(1,242) |
|||||||||
Total special items |
(25,821) |
(121,419) |
(28,377) |
|||||||||
Total non-GAAP operating expenses |
$ |
223,922 |
$ |
218,231 |
$ |
266,768 |
||||||
GAAP operating margin |
17.1 |
% |
(2.1)% |
(3.9)% |
||||||||
Share-based compensation |
3.9 |
% |
3.9 |
% |
4.3 |
% |
||||||
Restructuring related charges (a) |
0.3 |
% |
17.3 |
% |
0.9 |
% |
||||||
Amortization of and write-off acquired intangible assets |
0.2 |
% |
0.3 |
% |
0.4 |
% |
||||||
Other operating expenses (b) |
0.3 |
% |
— |
% |
0.2 |
% |
||||||
Non-GAAP operating margin |
21.8 |
% |
19.4 |
% |
1.9 |
% |
||||||
GAAP net income (loss) |
$ |
106,621 |
$ |
(80,091) |
$ |
(22,679) |
||||||
Loss (income) from discontinued operations, net of tax |
(9,651) |
3,214 |
9,408 |
|||||||||
GAAP net income (loss) from continuing operations |
96,970 |
(76,877) |
(13,271) |
|||||||||
Special items: |
||||||||||||
Share-based compensation |
22,367 |
22,405 |
22,180 |
|||||||||
Restructuring related charges (a) |
1,505 |
98,860 |
4,441 |
|||||||||
Amortization of and write-off acquired intangible assets |
1,071 |
1,480 |
2,298 |
|||||||||
Other operating expenses (b) |
2,304 |
315 |
1,242 |
|||||||||
Pre-tax total special items |
27,247 |
123,060 |
30,161 |
|||||||||
Non-GAAP income before income taxes |
124,217 |
46,183 |
16,890 |
|||||||||
Other income tax effects and adjustments (c) |
72 |
67,989 |
(1,071) |
|||||||||
Non-GAAP net income from continuing operations |
$ |
124,289 |
$ |
114,172 |
$ |
15,819 |
||||||
Weighted average shares — basic |
503,790 |
507,834 |
508,794 |
|||||||||
Weighted average shares — diluted |
517,592 |
507,834 |
508,794 |
|||||||||
Non-GAAP weighted average shares — diluted (d) |
523,154 |
528,141 |
522,363 |
|||||||||
GAAP diluted net income (loss) per share from continuing operations |
$ |
0.19 |
$ |
(0.15) |
$ |
(0.03) |
||||||
Non-GAAP diluted net income per share from continuing operations |
$ |
0.24 |
$ |
0.22 |
$ |
0.03 |
(a) |
Restructuring related charges include costs that qualify under U.S. GAAP as restructuring costs and other incremental charges that are a direct result of restructuring. Examples of other incremental charges include impairment of equipment specifically identified as part of the restructuring action. |
|||
(b) |
Other operating expenses in the three months ended April 29, 2017 include costs of retention bonuses offered to employees who remained through the ramp down of certain operations due to the restructuring action announced in November 2016. |
|||
(c) |
Other income tax effects and adjustments in the three months ended April 29, 2017 includes adjustment to the tax provision based on a non-GAAP tax rate of 4%. Other income tax effects and adjustments in the three months ended January 28, 2017 included $68.0 million of tax expense related to restructuring actions. |
|||
(d) |
Non-GAAP diluted share count excludes the impact of share-based compensation expense expected to be incurred in future periods and not yet recognized in the Company's financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. |
Quarterly Revenue Trend |
|||||||||||||||||
Total Revenue (In thousands) |
% Change |
||||||||||||||||
Three Months Ended |
|||||||||||||||||
April 29, 2017 |
January 28, 2017 |
April 30, 2016 |
YoY |
QoQ |
|||||||||||||
Storage (1) |
$ |
303,808 |
$ |
310,771 |
$ |
242,638 |
25 |
% |
(2) |
% |
|||||||
Networking (2) |
144,815 |
148,090 |
138,343 |
5 |
% |
(2) |
% |
||||||||||
Connectivity (3) |
76,091 |
65,638 |
73,549 |
3 |
% |
16 |
% |
||||||||||
Total Core |
524,714 |
524,499 |
454,530 |
15 |
% |
— |
% |
||||||||||
Other (4) |
54,466 |
46,901 |
64,853 |
(16)% |
16 |
% |
|||||||||||
Total Revenue (5) |
$ |
579,180 |
$ |
571,400 |
$ |
519,383 |
12 |
% |
1 |
% |
Three Months Ended |
||||||||
% of Total |
April 29, |
January 28, |
April 30, |
|||||
Storage (1) |
52 |
% |
54 |
% |
47 |
% |
||
Networking (2) |
25 |
% |
26 |
% |
27 |
% |
||
Connectivity (3) |
13 |
% |
12 |
% |
14 |
% |
||
Total Core |
90 |
% |
92 |
% |
88 |
% |
||
Other (4) |
10 |
% |
8 |
% |
12 |
% |
||
Total Revenue |
100 |
% |
100 |
% |
100 |
% |
(1) Storage products are comprised primarily of HDD, SSD Controllers and Enterprise Storage Solutions. |
(2) Networking products are comprised primarily of Ethernet Switches, Ethernet Transceivers, Embedded ARM Processors and Automotive Ethernet, as well as a few legacy product lines in which we no longer invest, but will generate a long tail of revenue for several years. |
(3) Wireless Connectivity products are comprised primarily of WiFi solutions including WiFi only, WiFi/Bluetooth combos and WiFi Microcontroller combos. |
(4) Other products are comprised primarily of Printer Solutions, Application Processors, Communication Processors, and others. |
(5) Excludes the revenue of certain non-strategic businesses that were classified as discontinued operations. |
For further information, contact:
Vice President, Investor Relations
408-222-0777
ir@marvell.com
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