Marvell Technology Group Ltd. Reports Third Quarter of Fiscal Year 2018 Financial Results
GAAP net income from continuing operations for the third quarter of fiscal 2018 was
"Our strong performance in the third quarter is a direct result of growth in our core businesses and improved execution across the company, enabling us to continue to unlock the earnings power of
Fourth Quarter of Fiscal 2018 Financial Outlook
- Revenue is expected to be
$595 million to $625 million . - GAAP and non-GAAP gross margins are expected to be approximately 62%.
- GAAP operating expenses are expected to be
$240 million to $246 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
$0.23 to $0.29 per share. - Non-GAAP diluted EPS from continuing operations is expected to be in the range of
$0.29 to $0.33 per share.
On
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: the transaction between
About
Marvell Technology Group Ltd. |
||||||||||||||
Condensed Consolidated Statements of Operations (Unaudited) |
||||||||||||||
(In thousands, except per share amounts) |
||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||
October 28, |
July 29, |
October 29, |
October 28, |
October 29, |
||||||||||
Net revenue |
$ |
616,302 |
$ |
604,750 |
$ |
623,651 |
$ |
1,793,761 |
$ |
1,734,630 |
||||
Cost of goods sold |
238,533 |
239,572 |
266,757 |
705,303 |
777,117 |
|||||||||
Gross profit |
377,769 |
365,178 |
356,894 |
1,088,458 |
957,513 |
|||||||||
Operating expenses: |
||||||||||||||
Research and development |
165,477 |
180,871 |
202,416 |
534,444 |
629,767 |
|||||||||
Selling, general and administrative |
59,112 |
55,659 |
60,088 |
169,875 |
192,052 |
|||||||||
Restructuring related charges |
3,284 |
4,285 |
1,164 |
8,455 |
6,326 |
|||||||||
Total operating expenses |
227,873 |
240,815 |
263,668 |
712,774 |
828,145 |
|||||||||
Operating income from continuing operations |
149,896 |
124,363 |
93,226 |
375,684 |
129,368 |
|||||||||
Interest and other income, net |
6,200 |
7,188 |
5,470 |
16,721 |
13,242 |
|||||||||
Income from continuing operations before income taxes |
156,096 |
131,551 |
98,696 |
392,405 |
142,610 |
|||||||||
Provision (benefit) for income taxes |
6,759 |
(3,899) |
15,523 |
8,026 |
4,263 |
|||||||||
Income from continuing operations, net of tax |
149,337 |
135,450 |
83,173 |
384,379 |
138,347 |
|||||||||
Income (loss) from discontinued operations, net of tax |
50,851 |
29,809 |
(10,557) |
87,689 |
(37,105) |
|||||||||
Net income |
$ |
200,188 |
$ |
165,259 |
$ |
72,616 |
$ |
472,068 |
$ |
101,242 |
||||
Net income (loss) per share — Basic: |
||||||||||||||
Continuing operations |
$ |
0.30 |
$ |
0.27 |
$ |
0.16 |
$ |
0.77 |
$ |
0.27 |
||||
Discontinued operations |
$ |
0.11 |
$ |
0.06 |
$ |
(0.02) |
$ |
0.17 |
$ |
(0.07) |
||||
Net income per share - Basic |
$ |
0.41 |
$ |
0.33 |
$ |
0.14 |
$ |
0.94 |
$ |
0.20 |
||||
Net income (loss) per share — Diluted: |
||||||||||||||
Continuing operations |
$ |
0.30 |
$ |
0.26 |
$ |
0.16 |
$ |
0.75 |
$ |
0.27 |
||||
Discontinued operations |
$ |
0.10 |
$ |
0.06 |
$ |
(0.02) |
$ |
0.17 |
$ |
(0.07) |
||||
Net income per share - Diluted |
$ |
0.40 |
$ |
0.32 |
$ |
0.14 |
$ |
0.92 |
$ |
0.20 |
||||
Weighted average shares: |
||||||||||||||
Basic |
494,096 |
500,817 |
511,090 |
499,568 |
510,373 |
|||||||||
Diluted |
504,903 |
510,309 |
522,091 |
510,935 |
516,476 |
Marvell Technology Group Ltd. |
|||||
Condensed Consolidated Balance Sheets (Unaudited) |
|||||
(In thousands) |
|||||
October 28, |
January 28, |
||||
Assets |
|||||
Current assets: |
|||||
Cash and cash equivalents |
$ |
800,099 |
$ |
814,092 |
|
Short-term investments |
931,976 |
854,268 |
|||
Accounts receivable, net |
366,114 |
335,384 |
|||
Inventories |
173,741 |
170,842 |
|||
Prepaid expenses and other current assets |
49,920 |
58,771 |
|||
Assets held for sale |
36,571 |
57,077 |
|||
Total current assets |
2,358,421 |
2,290,434 |
|||
Property and equipment, net |
198,173 |
243,397 |
|||
Goodwill and acquired intangible assets, net |
1,993,668 |
1,996,880 |
|||
Other non-current assets |
131,942 |
117,939 |
|||
Total assets |
$ |
4,682,204 |
$ |
4,648,650 |
|
Liabilities and Shareholders' Equity |
|||||
Current liabilities: |
|||||
Accounts payable |
$ |
166,096 |
$ |
143,484 |
|
Accrued liabilities |
108,007 |
143,491 |
|||
Accrued employee compensation |
129,035 |
139,647 |
|||
Deferred income |
74,943 |
63,976 |
|||
Liabilities held for sale |
— |
5,818 |
|||
Total current liabilities |
478,081 |
496,416 |
|||
Non-current income taxes payable |
56,641 |
60,646 |
|||
Other non-current liabilities |
86,533 |
63,937 |
|||
Total liabilities |
621,255 |
620,999 |
|||
Shareholders' equity: |
|||||
Common stock |
982 |
1,012 |
|||
Additional paid-in capital |
2,669,775 |
3,016,775 |
|||
Accumulated other comprehensive income |
(192) |
23 |
|||
Retained earnings |
1,390,384 |
1,009,841 |
|||
Total shareholders' equity |
4,060,949 |
4,027,651 |
|||
Total liabilities and shareholders' equity |
$ |
4,682,204 |
$ |
4,648,650 |
Marvell Technology Group Ltd. |
|||||||||||
Condensed Consolidated Statements of Cash Flows (Unaudited) |
|||||||||||
(In thousands) |
|||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||
October 28, |
October 29, |
October 28, |
October 29, |
||||||||
Cash flows from operating activities: |
|||||||||||
Net income |
$ |
200,188 |
$ |
72,616 |
$ |
472,068 |
$ |
101,242 |
|||
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|||||||||||
Depreciation and amortization |
21,383 |
27,188 |
62,569 |
81,168 |
|||||||
Share-based compensation |
18,873 |
28,263 |
65,312 |
89,912 |
|||||||
Amortization and write-off of acquired intangible assets |
1,076 |
2,784 |
3,212 |
8,676 |
|||||||
Restructuring related impairment charges |
44 |
1,056 |
(402) |
2,081 |
|||||||
Gain from investments in privately-held companies |
(1,751) |
— |
(2,501) |
— |
|||||||
Amortization (accretion) of premium /discount on available-for-sale securities |
(200) |
(679) |
603 |
1,697 |
|||||||
Other non-cash expense (income), net |
2,755 |
(251) |
1,331 |
(677) |
|||||||
Excess tax benefits from share-based compensation |
— |
(5) |
— |
(10) |
|||||||
Deferred income taxes |
7 |
201 |
2,797 |
(2,222) |
|||||||
Gain on sale of property and equipment |
(190) |
— |
(473) |
— |
|||||||
Gain on sale of discontinued operations |
(46,219) |
— |
(88,406) |
— |
|||||||
Gain on sale of business |
— |
— |
(5,254) |
— |
|||||||
Changes in assets and liabilities: |
|||||||||||
Accounts receivable |
5,583 |
(13,512) |
(30,730) |
(38,895) |
|||||||
Inventories |
(1,327) |
3,710 |
(16,039) |
10,944 |
|||||||
Prepaid expenses and other assets |
5,268 |
6,256 |
13,122 |
(356) |
|||||||
Accounts payable |
16,119 |
(29,818) |
20,087 |
10,541 |
|||||||
Accrued liabilities and other non-current liabilities |
(7,046) |
6,508 |
(40,462) |
(23,735) |
|||||||
Carnegie Mellon University accrued litigation settlement (a) |
— |
— |
— |
(736,000) |
|||||||
Accrued employee compensation |
(2,237) |
25,537 |
(10,612) |
10,419 |
|||||||
Deferred income |
3,865 |
(8,393) |
5,149 |
7,934 |
|||||||
Net cash provided by (used in) operating activities |
216,191 |
121,461 |
451,371 |
(477,281) |
|||||||
Cash flows from investing activities: |
|||||||||||
Purchases of available-for-sale securities |
(296,659) |
(140,087) |
(672,887) |
(343,810) |
|||||||
Sales of available-for-sale securities |
167,451 |
118,649 |
284,151 |
458,744 |
|||||||
Maturities of available-for-sale securities |
136,090 |
51,823 |
305,702 |
198,293 |
|||||||
Return of investment from privately-held companies |
3,701 |
274 |
6,089 |
274 |
|||||||
Purchases of time deposits |
(75,000) |
(75,000) |
(225,000) |
(200,000) |
|||||||
Maturities of time deposits |
75,000 |
50,000 |
225,000 |
50,000 |
|||||||
Purchases of technology licenses |
(3,555) |
(394) |
(5,256) |
(8,439) |
|||||||
Purchases of property and equipment |
(10,613) |
(13,347) |
(25,156) |
(37,724) |
|||||||
Proceeds from sales of property and equipment |
249 |
— |
1,988 |
— |
|||||||
Net proceeds from sale of discontinued operations |
93,735 |
— |
165,940 |
— |
|||||||
Net proceeds from sale of business |
2,402 |
— |
2,402 |
— |
|||||||
Net cash provided by (used in) investing activities |
92,801 |
(8,082) |
62,973 |
117,338 |
|||||||
Cash flows from financing activities: |
|||||||||||
Repurchases of common stock |
(140,017) |
(56,531) |
(527,574) |
(56,531) |
|||||||
Proceeds from employee stock plans |
39,614 |
11,277 |
137,424 |
11,836 |
|||||||
Minimum tax withholding paid on behalf of employees for net share settlement |
(1,120) |
(899) |
(25,934) |
(16,281) |
|||||||
Dividend payments to shareholders |
(29,470) |
(30,699) |
(89,556) |
(91,835) |
|||||||
Payments on technology license obligations |
(8,401) |
(3,696) |
(22,697) |
(13,848) |
|||||||
Excess tax benefits from share-based compensation |
— |
5 |
— |
10 |
|||||||
Net cash used in financing activities |
(139,394) |
(80,543) |
(528,337) |
(166,649) |
|||||||
Net increase (decrease) in cash and cash equivalents |
169,598 |
32,836 |
(13,993) |
(526,592) |
|||||||
Cash and cash equivalents at beginning of period |
630,501 |
718,752 |
814,092 |
1,278,180 |
|||||||
Cash and cash equivalents at end of period |
$ |
800,099 |
$ |
751,588 |
$ |
800,099 |
$ |
751,588 |
(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. |
|||||||||||||||||||
Reconciliations from GAAP to Non-GAAP (Unaudited) |
|||||||||||||||||||
(In thousands, except per share amounts) |
|||||||||||||||||||
Three Months Ended |
Nine Months Ended |
||||||||||||||||||
October 28, |
July 29, |
October 29, |
October 28, |
October 29, |
|||||||||||||||
GAAP gross profit: |
$ |
377,769 |
$ |
365,178 |
$ |
356,894 |
$ |
1,088,458 |
$ |
957,513 |
|||||||||
Special items: |
|||||||||||||||||||
Share-based compensation |
1,747 |
1,810 |
2,189 |
4,983 |
6,693 |
||||||||||||||
Other cost of goods sold (a) |
— |
3,000 |
— |
3,000 |
— |
||||||||||||||
Total special items |
1,747 |
4,810 |
2,189 |
7,983 |
6,693 |
||||||||||||||
Non-GAAP gross profit |
$ |
379,516 |
$ |
369,988 |
$ |
359,083 |
$ |
1,096,441 |
$ |
964,206 |
|||||||||
GAAP gross margin |
61.3 |
% |
60.4 |
% |
57.2 |
% |
60.7 |
% |
55.2 |
% |
|||||||||
Non-GAAP gross margin |
61.6 |
% |
61.2 |
% |
57.6 |
% |
61.1 |
% |
55.6 |
% |
|||||||||
Total GAAP operating expenses |
$ |
227,873 |
$ |
240,815 |
$ |
263,668 |
$ |
712,774 |
$ |
828,145 |
|||||||||
Special items: |
|||||||||||||||||||
Share-based compensation |
(18,892) |
(19,557) |
(23,041) |
(58,762) |
(73,044) |
||||||||||||||
Restructuring related charges (b) |
(3,284) |
(4,285) |
(1,164) |
(8,455) |
(6,326) |
||||||||||||||
Amortization of and write-off acquired intangible assets |
(1,076) |
(1,065) |
(2,299) |
(3,212) |
(6,896) |
||||||||||||||
Other operating expenses (c) |
(120) |
(1,687) |
— |
(4,110) |
(1,229) |
||||||||||||||
Total special items |
(23,372) |
(26,594) |
(26,504) |
(74,539) |
(87,495) |
||||||||||||||
Total non-GAAP operating expenses |
$ |
204,501 |
$ |
214,221 |
$ |
237,164 |
$ |
638,235 |
$ |
740,650 |
|||||||||
GAAP operating margin |
24.3 |
% |
20.6 |
% |
14.9 |
% |
20.9 |
% |
7.5 |
% |
|||||||||
Other cost of goods sold (a) |
— |
% |
0.5 |
% |
— |
% |
0.2 |
% |
— |
% |
|||||||||
Share-based compensation |
3.3 |
% |
3.5 |
% |
4.0 |
% |
3.6 |
% |
4.6 |
% |
|||||||||
Restructuring related charges (b) |
0.5 |
% |
0.7 |
% |
0.2 |
% |
0.5 |
% |
0.4 |
% |
|||||||||
Amortization and write-off of acquired intangible assets |
0.2 |
% |
0.2 |
% |
0.4 |
% |
0.2 |
% |
0.3 |
% |
|||||||||
Other operating expenses (c) |
0.1 |
% |
0.3 |
% |
— |
% |
0.1 |
% |
0.1 |
% |
|||||||||
Non-GAAP operating margin |
28.4 |
% |
25.8 |
% |
19.5 |
% |
25.5 |
% |
12.9 |
% |
|||||||||
GAAP interest and other income, net |
$ |
6,200 |
$ |
7,188 |
$ |
5,470 |
$ |
16,721 |
$ |
13,242 |
|||||||||
Special items: |
|||||||||||||||||||
Restructuring related items (d) |
(2,286) |
(3,085) |
— |
(5,371) |
— |
||||||||||||||
Total special items |
(2,286) |
(3,085) |
— |
(5,371) |
— |
||||||||||||||
Total non-GAAP interest and other income, net |
$ |
3,914 |
$ |
4,103 |
$ |
5,470 |
$ |
11,350 |
$ |
13,242 |
|||||||||
GAAP net income |
$ |
200,188 |
$ |
165,259 |
$ |
72,616 |
$ |
472,068 |
$ |
101,242 |
|||||||||
Less: Income (loss) from discontinued operations, net of tax |
50,851 |
29,809 |
(10,557) |
87,689 |
(37,105) |
||||||||||||||
GAAP net income from continuing operations |
149,337 |
135,450 |
83,173 |
384,379 |
138,347 |
||||||||||||||
Special items: |
|||||||||||||||||||
Other cost of goods sold (a) |
— |
3,000 |
— |
3,000 |
— |
||||||||||||||
Share-based compensation |
20,639 |
21,367 |
25,230 |
63,745 |
79,737 |
||||||||||||||
Restructuring related charges (b) |
998 |
1,200 |
1,164 |
3,084 |
6,326 |
||||||||||||||
Amortization of and write-off acquired intangible assets |
1,076 |
1,065 |
2,299 |
3,212 |
6,896 |
||||||||||||||
Other operating expenses (c) |
120 |
1,687 |
— |
4,110 |
1,229 |
||||||||||||||
Pre-tax total special items |
22,833 |
28,319 |
28,693 |
77,151 |
94,188 |
||||||||||||||
Other income tax effects and adjustments (e) |
(398) |
(10,298) |
— |
(10,760) |
(1,071) |
||||||||||||||
Non-GAAP net income from continuing operations |
$ |
171,772 |
$ |
153,471 |
$ |
111,866 |
$ |
450,770 |
$ |
231,464 |
|||||||||
Weighted average shares — basic |
494,096 |
500,817 |
511,090 |
499,568 |
510,373 |
||||||||||||||
Weighted average shares — diluted |
504,903 |
510,309 |
522,091 |
510,935 |
516,476 |
||||||||||||||
Non-GAAP weighted average shares — diluted (f) |
512,676 |
519,438 |
531,831 |
518,423 |
526,883 |
||||||||||||||
GAAP diluted net income (loss) per share from continuing operations |
$ |
0.30 |
$ |
0.26 |
$ |
0.16 |
$ |
0.75 |
$ |
0.27 |
|||||||||
Non-GAAP diluted net income per share from continuing operations |
$ |
0.34 |
$ |
0.30 |
$ |
0.21 |
$ |
0.87 |
$ |
0.44 |
(a) |
Other costs of goods sold in the three months ended July 29, 2017 and the nine months ended October 28, 2017 include charges for past intellectual property licensing matters. |
(b) |
Restructuring related charges include costs that are a direct result of restructuring. Such charges include employee severance, facilities related costs, contract cancellation charges and impairment of equipment. |
(c) |
Other operating expenses include costs of retention bonuses offered to employees who remained through the ramp down of certain operations due to the restructuring actions. |
(d) |
Interest and other income, net includes restructuring related items such as gain on sale of a business and foreign currency remeasurement related to restructuring related accruals. |
(e) |
Other income tax effects and adjustments in the three months ended October 28, 2017 and July 29, 2017 include adjustment to the tax provision based on a non-GAAP tax rate of 4%. Other income tax effects and adjustments in the nine months ended October 28, 2017 includes adjustment to the tax provision based on a non-GAAP tax rate of 4%. |
(f) |
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 (Unaudited) |
||||||||||||||
(In thousands) |
||||||||||||||
Three Months Ended |
% Change |
|||||||||||||
October 28, 2017 |
July 29, 2017 |
October 29, 2016 |
YoY |
QoQ |
||||||||||
Storage (1) |
$ |
315,338 |
$ |
311,501 |
$ |
328,960 |
(4) |
% |
1 |
% |
||||
Networking (2) |
150,497 |
147,250 |
146,752 |
3 |
% |
2 |
% |
|||||||
Connectivity (3) |
102,662 |
98,571 |
86,424 |
19 |
% |
4 |
% |
|||||||
Total Core |
568,497 |
557,322 |
562,136 |
1 |
% |
2 |
% |
|||||||
Other (4) |
47,805 |
47,428 |
61,515 |
(22) |
% |
1 |
% |
|||||||
Total Revenue (5) |
$ |
616,302 |
$ |
604,750 |
$ |
623,651 |
(1) |
% |
2 |
% |
Three Months Ended |
||||||||
% of Total |
October 28, 2017 |
July 29, 2017 |
October 29, 2016 |
|||||
Storage (1) |
51 |
% |
52 |
% |
53 |
% |
||
Networking (2) |
24 |
% |
24 |
% |
24 |
% |
||
Connectivity (3) |
17 |
% |
16 |
% |
14 |
% |
||
Total Core |
92 |
% |
92 |
% |
91 |
% |
||
Other (4) |
8 |
% |
8 |
% |
9 |
% |
||
Total Revenue |
100 |
% |
100 |
% |
100 |
% |
(1) Storage products are comprised primarily of HDD, SSD Controllers and Data Center 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 revenue for several years. |
(3) 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 and others. |
(5) Excludes the revenue of certain non-strategic businesses that were classified as discontinued operations. |
For further information, contact:
Vice President, Treasury and Investor Relations
408-222-0777
ir@marvell.com
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