Marvell Technology Reports Fiscal Third Quarter Results
- F3Q09 Net Income: $71 Million (GAAP), $145 Million (non-GAAP)
- F3Q09 EPS: $0.11 (GAAP), $0.23 (non-GAAP)
- F3Q09 Free Cash Flow: $246 Million
Marvell Technology Reports Fiscal Third Quarter Results
SANTA CLARA, Calif., Dec. 2 /PRNewswire-FirstCall/ -- Marvell Technology Group Ltd. (Nasdaq: MRVL), a leader in storage, communications and consumer silicon solutions, today reported financial results for the third quarter of fiscal year 2009, ended November 1, 2008.
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Net revenue for the third quarter of fiscal 2009 was $791.0 million, an increase of 4 percent over $758.2 million in the third quarter of fiscal 2008, ended October 27, 2007, and a 6 percent sequential decrease from $842.6 million in the second quarter of fiscal 2009, ended August 2, 2008.
"The results for our third quarter were in-line with our revised expectations, however we continue to experience limited visibility into the near-term demand for our products," said Dr. Sehat Sutardja, Marvell Chairman and Chief Executive Officer. "We are taking the appropriate steps to better align our operating expenses to reflect the challenging business environment we face. Our results in our third quarter demonstrate initial progress toward these goals."
Marvell reports net income (loss), basic and diluted net income (loss) 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 (loss) to non-GAAP net income for the three and nine months ended November 1, 2008 and October 27, 2007 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization and write-offs of acquired intangible assets and restructuring costs.
GAAP net income was $70.9 million, or $0.11 per share (diluted), for the third quarter of fiscal 2009, compared with a GAAP net loss of $6.4 million, or a loss of $0.01 per share for the third quarter of fiscal 2008. In the second quarter of fiscal 2009 GAAP net income was $71.4 million, or $0.11 per share (diluted).
Non-GAAP net income increased to $145.3 million, or $0.23 per share (diluted) for the third quarter of fiscal 2009, a 69 percent increase compared with non-GAAP net income of $86.2 million, or $0.14 per share (diluted) for the third quarter of fiscal 2008 and a decrease of 6 percent from non-GAAP net income of $154.0 million, or $0.24 per share (diluted) for the second quarter of fiscal 2009.
Non-GAAP gross margin for the third quarter of fiscal 2009 was 52.3 percent, compared to non-GAAP gross margin of 52.3 percent for the second quarter of fiscal 2009 and non-GAAP gross margin of 48.3 percent for the third quarter of fiscal 2008.
Shares used to compute GAAP net income per diluted share, for the third quarter of fiscal 2009 were 631 million shares, compared with 591 million shares in the third quarter of fiscal 2008 and 638 million shares in the second quarter of fiscal 2009. Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2009 were 633 million shares compared with 631 million shares for the third quarter of fiscal 2008 and 640 million shares for the second quarter of fiscal 2009.
Cash flow from operations for the third quarter of fiscal 2009 was $258.5 million, up 41 percent sequentially from the $182.9 million reported in the second quarter of fiscal 2009. Free cash flow, defined as cash flow from operations, less investments in property, plant and equipment, was $245.7 million, up 47 percent sequentially from the $166.9 million reported in the second quarter of fiscal 2009.
Conference Call
Marvell will be conducting a conference call on December 2, 2008 at 1:45 p.m. PST to discuss results for the third quarter of fiscal 2009. Interested parties may dial-in to the conference call at 1-866-700-7173, pass-code 97916114. The call is being webcast by ThomsonReuters and can be accessed at Marvell's website under the Investor Events section of the Investor Relations page at http://www.marvell.com/investors/events.jsp. Replay of the call can be accessed by dialing 1-888-286-8010, and referring to conference code 42768501 until midnight December 9, 2008.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions and other charges and gains that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP earnings per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP earnings per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of compensation costs 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/antidilutive effects of warrants, common stock options and restricted stock.
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 http://www.sec.gov as well as on the Marvell website in the Investor Relations section at http://www.marvell.com.
About Marvell
Marvell Technology (Nasdaq: MRVL) is a global leader in the development of storage, communications and consumer silicon solutions. Marvell's diverse product portfolio includes switching, transceiver, communications controller, wireless, and storage solutions that power the entire communications infrastructure, including enterprise, metro, home, and storage networking. As used in this release, the terms "Company" and "Marvell" refer to Marvell Technology Group Ltd. and its subsidiaries. For more information visit http://www.marvell.com
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the near-term demand for our products and our expected progress toward aligning our operating expenses to the business environment we face and statements concerning the Company's use of non-GAAP net income and net income per share as important supplemental information. These statements are not guarantees of results and should not be considered as an indication of future performance. Actual events or results may differ materially from those described in this document due to a number of risks and uncertainties, including, among others, the Company's reliance on major customers and suppliers; market acceptance of new products; and other risks detailed in Marvell's SEC filings. When Marvell files its Form 10-Q for the third quarter of fiscal 2009, 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. The Company's results also remain subject to review by the Company's independent registered public accounting firm. 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 August 2, 2008 and Current Reports on Form 8-K, 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
For further information, contact: Jeff Palmer Louise Kehoe Investor Relations Ogilvy PR/ Marvell 408-222-8373 650-544-5070 jpalmer@marvell.com louise.kehoe@ogilvypr.com Marvell Technology Group Ltd. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except per share amounts) Three Months Ended Nine Months Ended November 1, August 2, October 27, November 1, October 27, 2008 2008 2007 2008 2007 Net revenue $791,046 $842,575 $758,246 $2,437,696 $2,050,007 Cost of goods sold 379,137 405,913 396,209 1,173,892 1,059,156 Gross profit 411,909 436,662 362,037 1,263,804 990,851 Operating expenses: Research and development 234,222 249,714 252,205 722,411 722,532 Selling and marketing 41,158 41,834 46,423 129,080 150,757 General and administrative 28,869 30,989 32,537 72,809 90,300 Amortization of acquired intangible assets 34,814 34,988 37,311 105,049 111,924 Total operating expenses 339,063 357,525 368,476 1,029,349 1,075,513 Operating income (loss) 72,846 79,137 (6,439) 234,455 (84,662) Interest and other income (expense), net 11,543 (754) (9,409) 6,097 (27,308) Income (loss) before income taxes 84,389 78,383 (15,848) 240,552 (111,970) Provision (benefit) for income taxes 13,443 7,016 (9,412) 28,300 3,750 Net income (loss) $70,946 $71,367 $(6,436) 212,252 $(115,720) Basic net income (loss) per share $0.12 $0.12 $(0.01) $0.35 $(0.20) Diluted net income (loss) per share $0.11 $0.11 $(0.01) $0.34 $(0.20) Shares used in computing basic earnings per share 611,945 606,860 590,759 606,676 588,573 Shares used in computing diluted earnings per share 630,810 637,832 590,759 630,997 588,573 Marvell Technology Group Ltd. Reconciliation of Non-GAAP Adjustments (Unaudited) (In thousands, except per share amounts) Three Months Ended November 1, 2008 GAAP Adjustments Non-GAAP Net revenue $791,046 $- $791,046 Cost of goods sold 379,137 1,795 (a) 377,342 Gross profit 411,909 1,795 413,704 Gross margin 52.1% 52.3% Operating expenses: Research and development 234,222 30,607 (a) 203,615 Selling and marketing 41,158 6,896 (a) 34,262 General and administrative 28,869 280 (a) 28,589 Amortization of acquired intangible assets 34,814 34,814 (b) - Total operating expenses 339,063 72,597 266,466 Operating income (loss) 72,846 74,392 147,238 Interest and other income (expense), net 11,543 - 11,543 Income (loss) before income taxes 84,389 74,392 158,781 Provision for income taxes 13,443 - 13,443 Net income (loss) $70,946 $74,392 $145,338 Basic net income (loss) per share $0.12 $0.24 Diluted net income (loss) per share $0.11 $0.23 Shares used in computing basic earnings per share 611,945 611,945 Shares used in computing diluted earnings per share 630,810 632,550 Three Months Ended October 27, 2007 GAAP Adjustments Non-GAAP Net revenue $758,246 $- $758,246 Cost of goods sold 396,209 4,326 (a)(b) 391,883 Gross profit 362,037 4,326 366,363 Gross margin 47.7% 48.3% Operating expenses: Research and development 252,205 39,989 (a) 212,216 Selling and marketing 46,423 6,949 (a) 39,474 General and administrative 32,537 4,092 (a) 28,445 Amortization of acquired intangible assets 37,311 37,311 (b) - Total operating expenses 368,476 88,341 280,135 Operating income (loss) (6,439) 92,667 86,228 Interest and other income (expense), net (9,409) - (9,409) Income (loss) before income taxes (15,848) 92,667 76,819 Provision for income taxes (9,412) - (9,412) Net income (loss) $(6,436) $92,667 $86,231 Basic net income (loss) per share $(0.01) $0.15 Diluted net income (loss) per share $(0.01) $0.14 Shares used in computing basic earnings per share 590,759 590,759 Shares used in computing diluted earnings per share 590,759 630,613 (a) Consists of For three months ending November 1, 2008, employee stock-based compensation expense of $1,795 for cost of goods sold, $30,607 for research and development, $6,896 for selling and marketing and $280 for general and administrative. For three months ending October 27, 2007, employee stock-based compensation expense of $4,326 for cost of goods sold, $39,989 for research and development, $6,949 for selling and marketing and $4,092 for general and administrative. (b) Consists of For three months ending November 1, 2008, amortization of intangible assets related to previous acquisitions. For three months ending October 27, 2007, amortization of intangible assets related to previous acquisitions. Marvell Technology Group Ltd. Reconciliation of Non-GAAP Adjustments (Unaudited) (In thousands, except per share amounts) Nine Months Ended November 1, 2008 GAAP Adjustments Non-GAAP Net revenue $2,437,696 $- $2,437,696 Cost of goods sold 1,173,892 8,623 (a) 1,165,269 Gross profit 1,263,804 8,623 1,272,427 Gross margin 51.8% 52.2% Operating expenses: Research and development 722,411 93,537 (a) 628,874 Selling and marketing 129,080 20,403 (a) 108,677 General and administrative 72,809 9,868 (a) 62,941 Amortization of acquired intangible assets 105,049 105,049 (b) - Total operating expenses 1,029,349 228,857 800,492 Operating income (loss) 234,455 237,480 471,935 Interest and other income (expense), net 6,097 - 6,097 Income (loss) before income taxes 240,552 237,480 478,032 Provision for income taxes 28,300 - 28,300 Net income (loss) $212,252 $237,480 $449,732 Basic net income (loss) per share $0.35 $0.74 Diluted net income (loss) per share $0.34 $0.71 Shares used in computing basic earnings per share 606,676 606,676 Shares used in computing diluted earnings per share 630,997 631,165 Nine Months Ended October 27, 2007 GAAP Adjustments Non-GAAP Net revenue $2,050,007 $- $2,050,007 Cost of goods sold 1,059,156 10,619 (a) 1,048,537 Gross profit 990,851 10,619 1,001,470 Gross margin 48.3% 48.9% Operating expenses: Research and development 722,532 106,622 (a) 615,910 Selling and marketing 150,757 25,097 (a) 125,660 General and administrative 90,300 18,682 (a) 71,618 Amortization of acquired intangible assets 111,924 111,924 (b) - Total operating expenses 1,075,513 262,325 813,188 Operating income (loss) (84,662) 272,944 188,282 Interest and other income (expense), net (27,308) - (27,308) Income (loss) before income taxes (111,970) 272,944 160,974 Provision for income taxes 3,750 - 3,750 Net income (loss) $(115,720) $272,944 $157,224 Basic net income (loss) per share $(0.20) $0.27 Diluted net income (loss) per share $(0.20) $0.25 Shares used in computing basic earnings per share 588,573 588,573 Shares used in computing diluted earnings per share 588,573 631,544 (a) Consists of For nine months ending November 1, 2008, employee stock-based compensation expense of $8,623 for cost of goods sold, $93,537 for research and development, $20,403 for selling and marketing and $9,868 for general and administrative For nine months ending October 27, 2007, employee stock-based compensation expense of $10,619 for cost of goods sold, $106,622 for research and development, $25,097 for selling and marketing and $18,682 for general and administrative (b) Consists of For nine months ending November 1, 2008, amortization of intangible assets related to previous acquisitions. For nine months ending October 27, 2007, amortization of intangible assets related to previous acquisitions. Marvell Technology Group Ltd. Condensed Consolidated Balance Sheets (Unaudited) (In thousands) November 1, February 2, Assets 2008 2008 Current assets: Cash, cash equivalents, restricted cash and short-term investments $1,044,507 $630,902 Accounts receivable, net 397,836 332,020 Inventories 339,533 419,494 Prepaid expenses, deferred income taxes and other current assets 79,352 121,325 Total current assets 1,861,228 1,503,741 Property and equipment, net 401,521 416,241 Long-term investments 40,310 45,628 Goodwill and acquired intangible assets, net 2,323,855 2,427,877 Other non-current assets 123,591 157,107 Total assets $4,750,505 $4,550,594 Liabilities and Shareholders' Equity Current liabilities: Accounts payable $224,119 $231,135 Accrued liabilities 240,202 241,062 Income taxes payable 37,513 39,132 Deferred income 64,720 69,420 Current portion of capital lease obligations 1,751 2,463 Total current liabilities 568,305 583,212 Capital lease obligations, net of current portion 2,911 4,238 Term loan obligations, long-term portion 187,750 390,750 Other long-term liabilities 160,452 160,875 Total liabilities 919,418 1,139,075 Shareholders' equity: Common stock 1,226 1,200 Additional paid-in capital 4,309,512 4,100,659 Accumulated other comprehensive income (loss) (948) 615 Accumulated deficit (478,703) (690,955) Total shareholders' equity 3,831,087 3,411,519 Total liabilities and shareholders' equity $4,750,505 $4,550,594 Marvell Technology Group Ltd. Condensed Consolidated Statements of Cash Flows (Unaudited) (in thousands) Three Months Ended Nine Months Ended November 1, October 27, November 1, October 27, 2008 2007 2008 2007 Cash flows from operating activities: Net income (loss) $70,946 $(6,436) $212,252 $(115,720) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 29,136 26,384 85,786 78,804 Stock-based compensation 39,578 55,356 132,431 161,020 Amortization of acquired intangible assets 34,814 37,311 105,049 111,924 Gain from sale of asset under construction - - - (5,122) Fair market value adjustment to Intel inventory sold (3,406) (26,273) (14,163) (103,914) Interest expense related to supply contract - 1,645 - 4,668 Excess tax benefits from stock-based compensation 138 (65) (356) (300) Changes in assets and liabilities, net of assets acquired and liabilities assumed in acquisitions: Restricted cash - - (24,500) - Accounts receivable 72,810 (28,230) (65,816) (56,932) Inventories (7,477) (70,086) 95,850 (158,834) Prepaid expenses and other assets 19,037 45,531 61,847 99,523 Accounts payable (11,882) (53,441) (6,004) (31,107) Accrued liabilities and other 10,306 19,945 (23,693) (6,254) Accrued employee compensation 7,664 9,642 17,659 10,497 Income taxes payable (5,914) (8,120) (100) (4,192) Deferred income 2,715 21,515 (4,700) 29,833 Net cash provided by operating activities 258,465 24,678 571,542 13,894 Cash flows from investing activities: Cash paid in acquisitions, net - - - (7,141) Purchases of investments - (52,579) (10,172) (166,230) Sales and maturities of short-term and long-term investments 5,388 70,495 29,181 120,516 Acquisition costs - (70) - (1,208) Purchases of technology licenses (1,400) (2,675) (2,650) (19,525) Purchases of property and equipment (12,780) (16,622) (59,312) (81,135) Proceeds from sale of assets under construction - - - 5,122 Net cash used in investing activities (8,792) (1,451) (42,953) (149,601) Cash flows from financing activities: Proceeds from the issuance of common shares 12,797 29,608 80,453 32,289 Principal payments on capital lease and debt obligations (101,634) (1,778) (205,039) (9,589) Excess tax benefits from stock-based compensation (138) 65 356 300 Net cash provided by (used in) financing activities (88,975) 27,895 (124,230) 23,000 Net increase (decrease) in cash and cash equivalents 160,698 51,122 404,359 (112,707) Cash and cash equivalents at beginning of period 859,309 404,179 615,648 568,008 Cash and cash equivalents at end of period $1,020,007 $455,301 $1,020,007 $455,301
SOURCE Marvell Technology Group Ltd. -0- 12/02/2008 /CONTACT: Jeff Palmer, Investor Relations of Marvell, +1-408-222-8373, jpalmer@marvell.com; or Louise Kehoe of Ogilvy PR, +1-650-544-5070, louise.kehoe@ogilvypr.com, for Marvell/ /Photo: NewsCom: http://www.newscom.com/cgi-bin/prnh/20070411/SFW034LOGO AP Archive: http://photoarchive.ap.org PRN Photo Desk, photodesk@prnewswire.com/ /Web site: http://www.marvell.com/ (MRVL) CO: Marvell Technology Group Ltd. ST: California IN: CPR HRD NET STW SU: ERN CCA JR-CD -- AQTU112 -- 4834 12/02/2008 16:06 EST http://www.prnewswire.com