Marvell Technology Group Ltd. Reports Third Quarter of Fiscal Year 2020 Financial Results
Subsequent to
Revenue for the third quarter of fiscal 2020 was
"
Fourth Quarter of Fiscal 2020 Financial Outlook
- Revenue is expected to be
$750 million +/- 3%. - GAAP gross margin is expected to be approximately 45.5%.
- Non-GAAP gross margin is expected to be approximately 62%.
- GAAP operating expenses are expected to be
$445 million to $455 million . - Non-GAAP operating expenses are expected to be
$315 million to $320 million . - GAAP diluted loss per share is expected to be
$(0.23) to $(0.17) per share. - Non-GAAP diluted income per share is expected to be
$0.15 to $0.19 per share.
Conference Call
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 acquisition, amortization of acquired intangible assets, acquisition and divestiture-related costs, restructuring and other 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
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. 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: the risk that the proposed divestiture of
About
Marvell Technology Group Ltd. |
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Condensed Consolidated Statements of Operations (Unaudited) |
||||||||||||||||||||
(In thousands, except per share amounts) |
||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
November 2, |
August 3, |
November 3, |
November 2, |
November 3, |
||||||||||||||||
Net revenue |
$ |
662,470 |
$ |
656,568 |
$ |
851,051 |
$ |
1,981,490 |
$ |
2,120,992 |
||||||||||
Cost of goods sold |
322,403 |
305,866 |
467,464 |
929,293 |
984,602 |
|||||||||||||||
Gross profit |
340,067 |
350,702 |
383,587 |
1,052,197 |
1,136,390 |
|||||||||||||||
Operating expenses: |
||||||||||||||||||||
Research and development |
267,781 |
266,354 |
264,888 |
801,002 |
657,907 |
|||||||||||||||
Selling, general and administrative |
118,993 |
113,990 |
112,178 |
342,988 |
318,192 |
|||||||||||||||
Restructuring related charges |
14,802 |
16,586 |
27,031 |
37,070 |
64,013 |
|||||||||||||||
Total operating expenses |
401,576 |
396,930 |
404,097 |
1,181,060 |
1,040,112 |
|||||||||||||||
Operating income (loss) |
(61,509) |
(46,228) |
(20,510) |
(128,863) |
96,278 |
|||||||||||||||
Interest income |
1,092 |
1,077 |
1,046 |
3,437 |
10,690 |
|||||||||||||||
Interest expense |
(21,241) |
(20,531) |
(22,370) |
(62,975) |
(38,409) |
|||||||||||||||
Other income (loss), net |
689 |
(2,197) |
(2,628) |
(1,624) |
(3,858) |
|||||||||||||||
Interest and other income (loss), net |
(19,460) |
(21,651) |
(23,952) |
(61,162) |
(31,577) |
|||||||||||||||
Income (loss) before income taxes |
(80,969) |
(67,879) |
(44,462) |
(190,025) |
64,701 |
|||||||||||||||
Provision (benefit) for income taxes |
1,532 |
(10,548) |
9,305 |
(1,743) |
(16,903) |
|||||||||||||||
Net income (loss) |
(82,501) |
(57,331) |
(53,767) |
(188,282) |
81,604 |
|||||||||||||||
Net income (loss) per share — Basic: |
$ |
(0.12) |
$ |
(0.09) |
$ |
(0.08) |
$ |
(0.28) |
$ |
0.14 |
||||||||||
Net income (loss) per share — Diluted: |
$ |
(0.12) |
$ |
(0.09) |
$ |
(0.08) |
$ |
(0.28) |
$ |
0.14 |
||||||||||
Weighted average shares: |
||||||||||||||||||||
Basic |
668,178 |
663,603 |
657,519 |
667,184 |
569,031 |
|||||||||||||||
Diluted |
668,178 |
663,603 |
657,519 |
667,184 |
578,872 |
Marvell Technology Group Ltd. |
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Condensed Consolidated Balance Sheets (Unaudited) |
||||||||
(In thousands) |
||||||||
November 2, |
February 2, |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
438,369 |
$ |
582,410 |
||||
Accounts receivable, net |
495,216 |
493,122 |
||||||
Inventories |
308,299 |
276,005 |
||||||
Prepaid expenses and other current assets |
43,789 |
43,721 |
||||||
Assets held for sale |
600,893 |
— |
||||||
Total current assets |
1,886,566 |
1,395,258 |
||||||
Property and equipment, net |
316,214 |
318,978 |
||||||
Goodwill |
5,161,312 |
5,494,505 |
||||||
Acquired intangible assets, net |
2,500,215 |
2,560,682 |
||||||
Other non-current assets |
438,955 |
247,329 |
||||||
Total assets |
$ |
10,303,262 |
$ |
10,016,752 |
||||
Liabilities and Shareholders' Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ |
212,955 |
$ |
185,362 |
||||
Accrued liabilities |
305,827 |
335,509 |
||||||
Accrued employee compensation |
130,062 |
115,925 |
||||||
Liabilities held for sale |
5,610 |
— |
||||||
Total current liabilities |
654,454 |
636,796 |
||||||
Long-term debt |
2,036,441 |
1,732,699 |
||||||
Non-current income taxes payable |
48,136 |
59,221 |
||||||
Deferred tax liabilities |
214,492 |
246,252 |
||||||
Other non-current liabilities |
183,921 |
35,374 |
||||||
Total liabilities |
3,137,444 |
2,710,342 |
||||||
Shareholders' equity: |
||||||||
Common shares |
1,341 |
1,317 |
||||||
Additional paid-in capital |
6,355,723 |
6,188,598 |
||||||
Accumulated other comprehensive income |
37 |
— |
||||||
Retained earnings |
808,717 |
1,116,495 |
||||||
Total shareholders' equity |
7,165,818 |
7,306,410 |
||||||
Total liabilities and shareholders' equity |
$ |
10,303,262 |
$ |
10,016,752 |
Marvell Technology Group Ltd. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
November 2, |
November 3, |
November 2, |
November 3, |
|||||||||||||
Cash flows from operating activities: |
||||||||||||||||
Net income (loss) |
$ |
(82,501) |
$ |
(53,767) |
$ |
(188,282) |
$ |
81,604 |
||||||||
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |
||||||||||||||||
Depreciation and amortization |
40,508 |
39,259 |
126,747 |
86,356 |
||||||||||||
Share-based compensation |
66,762 |
50,240 |
189,036 |
133,484 |
||||||||||||
Amortization and write off of acquired intangible assets |
92,760 |
78,691 |
253,467 |
104,630 |
||||||||||||
Amortization of inventory fair value adjustment associated with acquisition |
3,316 |
102,842 |
3,316 |
125,775 |
||||||||||||
Amortization of deferred debt issuance costs and debt discounts |
1,181 |
2,217 |
4,040 |
9,290 |
||||||||||||
Restructuring related impairment charges |
6,146 |
9,888 |
16,243 |
11,881 |
||||||||||||
Other expense, net |
2,574 |
1,771 |
4,590 |
5,402 |
||||||||||||
Deferred income taxes |
(10,275) |
(6,261) |
(7,901) |
(27,675) |
||||||||||||
Changes in assets and liabilities: |
||||||||||||||||
Accounts receivable |
(32,002) |
(10,948) |
8,374 |
(59,697) |
||||||||||||
Inventories |
(39,276) |
(5,007) |
(30,602) |
1,859 |
||||||||||||
Prepaid expenses and other assets |
(3,046) |
7,630 |
(11,039) |
(11,874) |
||||||||||||
Accounts payable |
8,304 |
22,531 |
30,801 |
22,260 |
||||||||||||
Accrued liabilities and other non-current liabilities |
(26,141) |
39,691 |
(106,258) |
27,730 |
||||||||||||
Accrued employee compensation |
37,193 |
20,617 |
11,927 |
(20,922) |
||||||||||||
Net cash provided by operating activities |
65,503 |
299,394 |
304,459 |
490,103 |
||||||||||||
Cash flows from investing activities: |
||||||||||||||||
Purchases of available-for-sale securities |
— |
— |
— |
(14,956) |
||||||||||||
Sales of available-for-sale securities |
18,832 |
— |
18,832 |
623,896 |
||||||||||||
Maturities of available-for-sale securities |
— |
— |
— |
187,985 |
||||||||||||
Purchases of time deposits |
— |
— |
— |
(25,000) |
||||||||||||
Maturities of time deposits |
— |
25,000 |
— |
175,000 |
||||||||||||
Purchases of technology licenses |
(414) |
(9,918) |
(1,936) |
(11,181) |
||||||||||||
Purchases of property and equipment |
(20,742) |
(12,646) |
(62,935) |
(47,035) |
||||||||||||
Cash payment for acquisition, net of cash and cash equivalents acquired |
(477,579) |
— |
(477,579) |
(2,649,465) |
||||||||||||
Other, net |
(1,404) |
(4,007) |
(1,793) |
(7,534) |
||||||||||||
Net cash used in investing activities |
(481,307) |
(1,571) |
(525,411) |
(1,768,290) |
||||||||||||
Cash flows from financing activities: |
||||||||||||||||
Repurchases of common stock |
— |
(53,969) |
(64,272) |
(53,969) |
||||||||||||
Proceeds from employee stock plans |
21,795 |
16,192 |
103,109 |
60,772 |
||||||||||||
Tax withholding paid on behalf of employees for net share settlement |
(19,220) |
(8,915) |
(80,862) |
(45,691) |
||||||||||||
Dividend payments to shareholders |
(40,140) |
(39,411) |
(119,496) |
(108,592) |
||||||||||||
Payments on technology license obligations |
(28,889) |
(23,003) |
(57,213) |
(52,481) |
||||||||||||
Proceeds from issuance of debt |
350,000 |
— |
350,000 |
1,892,605 |
||||||||||||
Principal payments of debt |
— |
(75,000) |
(50,000) |
(681,128) |
||||||||||||
Payment of equity and debt financing costs |
— |
(2,115) |
— |
(11,550) |
||||||||||||
Other, net |
(2,869) |
— |
(4,355) |
— |
||||||||||||
Net cash provided by (used in) in financing activities |
280,677 |
(186,221) |
76,911 |
999,966 |
||||||||||||
Net increase (decrease) in cash and cash equivalents |
(135,127) |
111,602 |
(144,041) |
(278,221) |
||||||||||||
Cash and cash equivalents at beginning of period |
573,496 |
498,659 |
582,410 |
888,482 |
||||||||||||
Cash and cash equivalents at end of period |
$ |
438,369 |
$ |
610,261 |
$ |
438,369 |
$ |
610,261 |
Marvell Technology Group Ltd. Reconciliations from GAAP to Non-GAAP (Unaudited) (In thousands, except per share amounts) |
||||||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||||||
November 2, |
August 3, |
November 3, |
November 2, |
November 3, |
||||||||||||||||
GAAP gross profit: |
$ |
340,067 |
$ |
350,702 |
$ |
383,587 |
$ |
1,052,197 |
$ |
1,136,390 |
||||||||||
Special items: |
||||||||||||||||||||
Share-based compensation |
3,990 |
3,662 |
2,429 |
10,578 |
9,082 |
|||||||||||||||
Amortization of acquired intangible assets |
72,146 |
61,132 |
57,594 |
193,184 |
76,577 |
|||||||||||||||
Other cost of goods sold (a) |
4,758 |
— |
105,841 |
5,208 |
128,774 |
|||||||||||||||
Total special items |
80,894 |
64,794 |
165,864 |
208,970 |
214,433 |
|||||||||||||||
Non-GAAP gross profit |
$ |
420,961 |
$ |
415,496 |
$ |
549,451 |
$ |
1,261,167 |
$ |
1,350,823 |
||||||||||
GAAP gross margin |
51.3 |
% |
53.4 |
% |
45.1 |
% |
53.1 |
% |
53.6 |
% |
||||||||||
Non-GAAP gross margin |
63.5 |
% |
63.3 |
% |
64.6 |
% |
63.6 |
% |
63.7 |
% |
||||||||||
Total GAAP operating expenses |
$ |
401,576 |
$ |
396,930 |
$ |
404,097 |
$ |
1,181,060 |
$ |
1,040,112 |
||||||||||
Special items: |
||||||||||||||||||||
Share-based compensation |
(63,375) |
(60,014) |
(47,811) |
(179,061) |
(138,433) |
|||||||||||||||
Restructuring related charges (b) |
(14,802) |
(16,585) |
(27,031) |
(37,070) |
(64,013) |
|||||||||||||||
Amortization of acquired intangible assets |
(20,614) |
(19,835) |
(21,098) |
(60,283) |
(28,053) |
|||||||||||||||
Other operating expenses (c) |
(19,495) |
(20,676) |
(11,222) |
(46,740) |
(54,703) |
|||||||||||||||
Total special items |
(118,286) |
(117,110) |
(107,162) |
(323,154) |
(285,202) |
|||||||||||||||
Total non-GAAP operating expenses |
$ |
283,290 |
$ |
279,820 |
$ |
296,935 |
$ |
857,906 |
$ |
754,910 |
||||||||||
GAAP operating margin |
(9.3) |
% |
(7.0) |
% |
(2.4) |
% |
(6.5) |
% |
4.5 |
% |
||||||||||
Other cost of goods sold (a) |
0.7 |
% |
— |
% |
12.4 |
% |
0.3 |
% |
6.1 |
% |
||||||||||
Share-based compensation |
10.2 |
% |
9.7 |
% |
5.9 |
% |
9.6 |
% |
7.0 |
% |
||||||||||
Restructuring related charges (b) |
2.2 |
% |
2.5 |
% |
3.2 |
% |
1.9 |
% |
3.0 |
% |
||||||||||
Amortization of acquired intangible assets |
14.0 |
% |
12.3 |
% |
9.2 |
% |
12.8 |
% |
4.9 |
% |
||||||||||
Other operating expenses (c) |
3.0 |
% |
3.2 |
% |
1.4 |
% |
2.3 |
% |
2.6 |
% |
||||||||||
Non-GAAP operating margin |
20.8 |
% |
20.7 |
% |
29.7 |
% |
20.4 |
% |
28.1 |
% |
||||||||||
GAAP interest and other income (loss), net |
$ |
(19,460) |
$ |
(21,651) |
$ |
(23,952) |
$ |
(61,162) |
$ |
(31,577) |
||||||||||
Special items: |
||||||||||||||||||||
Restructuring related items (d) |
(946) |
75 |
1,491 |
(1,209) |
(142) |
|||||||||||||||
Write-off of debt issuance costs (e) |
— |
— |
850 |
458 |
6,954 |
|||||||||||||||
Deal costs (f) |
496 |
1,009 |
— |
1,505 |
— |
|||||||||||||||
Total special items |
(450) |
1,084 |
2,341 |
754 |
6,812 |
|||||||||||||||
Total non-GAAP interest and other income (loss), net |
$ |
(19,910) |
$ |
(20,567) |
$ |
(21,611) |
$ |
(60,408) |
$ |
(24,765) |
||||||||||
GAAP net income (loss) |
$ |
(82,501) |
$ |
(57,331) |
$ |
(53,767) |
$ |
(188,282) |
$ |
81,604 |
||||||||||
Special items: |
||||||||||||||||||||
Other cost of goods sold (a) |
4,758 |
— |
105,841 |
5,208 |
128,774 |
|||||||||||||||
Share-based compensation |
67,365 |
63,676 |
50,240 |
189,639 |
147,515 |
|||||||||||||||
Restructuring related charges in operating expenses (b) |
14,802 |
16,585 |
27,031 |
37,070 |
64,013 |
|||||||||||||||
Restructuring related items in interest and other income, net (d) |
(946) |
75 |
1,491 |
(1,209) |
(142) |
|||||||||||||||
Amortization of acquired intangible assets |
92,760 |
80,967 |
78,692 |
253,467 |
104,630 |
|||||||||||||||
Write-off of debt issuance costs (e) |
— |
— |
850 |
458 |
6,954 |
|||||||||||||||
Transaction costs included in interest and other income, net (f) |
496 |
1,009 |
— |
1,505 |
— |
|||||||||||||||
Other operating expenses (c) |
19,495 |
20,676 |
11,222 |
46,740 |
54,703 |
|||||||||||||||
Pre-tax total special items |
198,730 |
182,988 |
275,367 |
532,878 |
506,447 |
|||||||||||||||
Other income tax effects and adjustments (g) |
(3,773) |
(15,728) |
55 |
(17,177) |
(39,763) |
|||||||||||||||
Non-GAAP net income |
$ |
112,456 |
$ |
109,929 |
$ |
221,655 |
$ |
327,419 |
$ |
548,288 |
||||||||||
Weighted average shares — basic |
668,178 |
663,603 |
657,519 |
667,184 |
569,031 |
|||||||||||||||
Weighted average shares — diluted |
668,178 |
663,603 |
657,519 |
667,184 |
578,872 |
|||||||||||||||
GAAP diluted net income (loss) per share |
$ |
(0.12) |
$ |
(0.09) |
$ |
(0.08) |
$ |
(0.28) |
$ |
0.14 |
||||||||||
Non-GAAP diluted net income per share (h) |
$ |
0.17 |
$ |
0.16 |
$ |
0.33 |
$ |
0.48 |
$ |
0.95 |
(a) |
Other costs of goods sold includes amortization of the Aquantia inventory fair value adjustment in 2019, amortization of the Cavium inventory fair value adjustment in 2018, as well as charges for past intellectual property licensing matters. |
(b) |
Restructuring related charges include employee severance, facilities related costs, and impairment of equipment and other assets. |
(c) |
Other operating expenses include Cavium, Aquantia, and Avera merger costs. |
(d) |
Interest and other income, net, includes restructuring related items such as foreign currency remeasurement associated with restructuring related accruals. |
(e) |
Write-off of debt issuance costs is associated with the partial term loan repayment. |
(f) |
Costs incurred in connection with preparation of the impending 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 4.5% for the three months ended August 3, 2019 and the three and nine months ended November 2, 2019, and based on a non-GAAP income tax rate of 4% for the three and nine months ended November 3, 2018. |
(h) |
Non-GAAP diluted net income per share for the three months ended November 2, 2019, August 3, 2019 and November 3, 2018 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 679,345, 675,755 shares and 665,752 shares, respectively, due to the non-GAAP net income reported in the respective period. Non-GAAP diluted net income per share for the nine months ended November 2, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 678,986 shares due to the non-GAAP net income reported in the period. |
Marvell Technology Group Ltd. |
|
Outlook for the Fourth Quarter of Fiscal Year 2020 |
|
Reconciliations from GAAP to Non-GAAP (Unaudited) |
|
(In millions, except per share amounts) |
|
Outlook for Three Months Ended February 1, 2020 |
|
GAAP revenue |
$750 +/- 3% |
Special items: |
— |
Non-GAAP revenue |
$750 +/- 3% |
GAAP gross margin |
45.5% |
Special items: |
|
Share-based compensation |
0.3% |
Amortization of acquired intangible assets |
16.2% |
Non-GAAP gross margin |
62% |
Total GAAP operating expenses |
$445 - $455 |
Special items: |
|
Share-based compensation |
65 |
Restructuring related charges |
23 |
Amortization of acquired intangible assets |
23 |
Other operating expenses |
22 |
Total non-GAAP operating expenses |
$315 - $320 |
GAAP diluted net loss per share |
$(0.23) - $(0.17) |
Special items: |
|
Share-based compensation |
0.10 |
Amortization of acquired intangible assets |
0.21 |
Restructuring related charges in operating expenses |
0.04 |
Other operating expenses |
0.03 |
Other income tax effects and adjustments |
(0.01) |
Non-GAAP diluted net income per share |
$0.15 - $0.19 |
Quarterly Revenue Trend (Unaudited) (In thousands) |
|||||||||||||||||
Three Months Ended |
% Change |
||||||||||||||||
November 2, |
August 3, |
November 3, |
YoY |
QoQ |
|||||||||||||
Networking (1) |
$ |
329,962 |
$ |
329,605 |
$ |
398,424 |
(17) |
% |
— |
% |
|||||||
Storage (2) |
287,708 |
274,905 |
406,822 |
(29) |
% |
5 |
% |
||||||||||
Total Core |
617,670 |
604,510 |
805,246 |
(23) |
% |
2 |
% |
||||||||||
Other (3) |
44,800 |
52,058 |
45,805 |
(2) |
% |
(14) |
% |
||||||||||
Total Revenue |
$ |
662,470 |
$ |
656,568 |
$ |
851,051 |
(22) |
% |
1 |
% |
Three Months Ended |
||||||||
% of Total |
November 2, |
August 3, |
November 3, |
|||||
Networking (1) |
50 |
% |
50 |
% |
47 |
% |
||
Storage (2) |
43 |
% |
42 |
% |
48 |
% |
||
Total Core |
93 |
% |
92 |
% |
95 |
% |
||
Other (3) |
7 |
% |
8 |
% |
5 |
% |
||
Total Revenue |
100 |
% |
100 |
% |
100 |
% |
(1) |
Networking products are comprised primarily of Ethernet Switches, Ethernet Transceivers, Ethernet NICs, Embedded Communication Processors, Automotive Ethernet, Security Adapters and Processors as well as WiFi Connectivity products. In addition, this grouping includes a few legacy product lines in which we no longer invest, but will generate revenue for several years. |
(2) |
Storage products are comprised primarily of HDD and SSD Controllers, Fibre Channel Adapters and Data Center Storage Solutions. |
(3) |
Other products are comprised primarily of Printer Solutions, Application Processors and others. |
For further information, contact:
Vice President, Investor Relations
408-222-0777
ir@marvell.com
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