Marvell Technology Group Ltd. Reports Second Fiscal Quarter 2013 Financial Results

Revenue: $816 Million, a 2 percent sequential increase

GAAP Net Income: $93 Million, EPS of $0.16

Non-GAAP Net Income: $142 Million, EPS of $0.24

Free Cash Flow: $174 Million, 21 Percent of Revenue

16 Aug, 2012, 16:05 ET from Marvell Technology Group Ltd.

SANTA CLARA, Calif., Aug. 16, 2012 /PRNewswire/ -- Marvell Technology Group Ltd. (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the second quarter of fiscal 2013, ended July 28, 2012.

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Revenue for the second quarter of fiscal 2013 was $816 million, a 2 percent sequential increase from $796 million in the first quarter of fiscal 2013, ended April 28, 2012, and a decrease of 9 percent from $898 million in the second quarter of fiscal 2012, ended July 30, 2011.  

GAAP net income for the second quarter of fiscal 2013 was $93 million, or $0.16 per share (diluted), compared with GAAP net income of $95 million, or $0.16 per share (diluted), for the first quarter of fiscal 2013, and $192 million, or $0.31 per share (diluted), for the second quarter of fiscal 2012.   

Non-GAAP net income was $142 million, or $0.24 per share (diluted), for the second quarter of fiscal 2013, compared with non-GAAP net income of $139 million, or $0.23 per share (diluted) for the first quarter of fiscal 2013 and $234 million, or $0.38 per share (diluted) for the second quarter of fiscal 2012.

"Our results in the second quarter were affected primarily by the slowdown in the macro-economic environment that impacted our storage and mobile end markets. However, our SSD, 500 gigabyte per platter HDD and wireless connectivity products grew double digits sequentially and our networking end market continued to outperform on the strength of new products and share gains," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "Despite the soft near-term demand environment, we are maintaining good profitability and continue to deliver shareholder value through our share repurchase and dividend programs."

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 July 28, 2012, April 28, 2012 and July 30, 2011 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 2013 was 53.2 percent, compared to 54.0 percent for the first quarter of fiscal 2013 and 57.9 percent for the second quarter of fiscal 2012. 

Non-GAAP gross margin for the second quarter of fiscal 2013 was 53.6 percent, compared to 54.5 percent for the first quarter of fiscal 2013 and 58.1 percent for the second quarter of fiscal 2012.

Shares used to compute GAAP net income per diluted share for the second quarter of fiscal 2013 were 570 million shares, compared with 595 million shares in the first quarter of fiscal 2013 and 623 million shares in the second quarter of fiscal 2012. Shares used to compute non-GAAP net income per diluted share for the second quarter of fiscal 2013 were 587 million shares, compared with 606 million shares for the first quarter of fiscal 2013 and 625 million shares for the second quarter of fiscal 2012.

Cash flow from operations for the second quarter of fiscal 2013 was $189 million, compared to the $199 million reported in the first quarter of fiscal 2013 and down from the $263 million in the second quarter of fiscal 2012. Free cash flow for the second quarter of fiscal 2013 was $174 million, compared to the $178 million reported in the first quarter of fiscal 2013 and down from the $235 million in the second quarter of fiscal 2012. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of IP licenses.  

Under the share repurchase program, Marvell repurchased approximately 20 million shares for a total of $250 million in the second quarter of fiscal 2013. Over the past eight quarters, Marvell has repurchased and retired approximately 127 million shares, or about 19 percent, of its outstanding shares demonstrating its commitment to returning shareholder value.

Marvell also paid its first quarterly dividend of $0.06 per share on July 11, 2012 to all shareholders of record as of June 21, 2012. Marvell will pay its next quarterly dividend of $0.06 per share on October 4, 2012 to all shareholders of record as of September 13, 2012.

Marvell intends to pay a regular quarterly cash dividend on its common shares 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 Call Marvell will be conducting a conference call on August 16, 2012 at 1:45 p.m. Pacific Time to discuss results for the second quarter of fiscal 2013. Interested parties may join the conference call by dialing 1- 800-901-5248 or 1-617-786-4512, pass-code 95854864. 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 13, 2012. 

Discussion of Non-GAAP Financial Measures Non-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 (diluted), the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the benefits of stock compensation costs attributable to future services and 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.

About Marvell  Marvell 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 term "Marvell" refers to Marvell Technology Group Ltd. and its subsidiaries. For more information please visit www.marvell.com.   

Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995 This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding Marvell's ability to maintain profitability and deliver shareholder value; relating to the declaration of, timing of, funding of and quarterly amount of dividends; and statements concerning Marvell'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 activity or 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, Marvell's reliance on a few customers for a significant portion of its revenue; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner; uncertainty in the worldwide economic environment; 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; ability to generate cash flows; substantial costs of current and any future litigation; and other risks detailed in Marvell's SEC filings from time to time. When Marvell files its Form 10-Q for the quarter ended July 28, 2012, 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 April 28, 2012, 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.

Marvell® and the Marvell logo are registered trademarks of Marvell and/or its affiliates.

 

For further information, contact:

Sukhi Nagesh

Daniel Yoo

Investor Relations

Media Relations

408-222-8373

408-222-2187

sukhi@marvell.com 

yoo@marvell.com

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

July 28,

April 28,

July 30,

July 28,

July 30,

2012

2012

2011

2012

2011

Net revenue

$ 816,104

$ 796,351

$ 897,520

$ 1,612,455

$ 1,699,922

Cost of goods sold

381,839

366,322

378,117

748,161

712,592

Gross profit

434,265

430,029

519,403

864,294

987,330

Operating expenses:

Research and development

264,175

255,970

249,604

520,145

492,141

Selling and marketing

41,034

40,066

40,390

81,100

78,542

General and administrative

25,718

25,705

23,631

51,423

48,415

Amortization of acquired intangible assets

13,023

14,355

11,138

27,378

25,479

Total operating expenses

343,950

336,096

324,763

680,046

644,577

Operating income

90,315

93,933

194,640

184,248

342,753

Interest and other income, net

5,864

1,057

2,064

6,921

1,846

Income before income taxes

96,179

94,990

196,704

191,169

344,599

Provision for income taxes

3,105

447

4,312

3,552

5,346

Net income

$   93,074

$   94,543

$ 192,392

$    187,617

$    339,253

Basic net income per share

$       0.17

$       0.16

$       0.32

$          0.33

$          0.54

Diluted net income per share

$       0.16

$       0.16

$       0.31

$          0.32

$          0.53

Shares used in computing basic earnings per share

562,362

580,024

608,511

571,193

623,728

Shares used in computing diluted earnings per share

570,325

594,739

623,132

582,532

640,136

 

 

Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

July 28,

April 28,

July 30,

July 28,

July 30,

2012

2012

2011

2012

2011

GAAP net income

$   93,074

$   94,543

$ 192,392

$ 187,617

$ 339,253

Stock-based compensation

33,228

27,192

30,355

60,420

57,835

Amortization of acquired intangible assets

13,023

14,355

11,138

27,378

25,479

Acquisition-related costs (a)

1,577

2,456

-

4,033

-

Restructuring

859

115

567

974

1,186

Legal/Tax related matters

250

-

-

250

-

Non-GAAP net income

$ 142,011

$ 138,661

$ 234,452

$ 280,672

$ 423,753

GAAP weighted average shares - diluted

570,325

594,739

623,132

582,532

640,136

     Non-GAAP adjustment

16,302

10,814

1,645

13,558

3,726

Non-GAAP weighted average shares diluted (b)

586,627

605,553

624,777

596,090

643,862

GAAP diluted net income per share

$       0.16

$       0.16

$       0.31

$       0.32

$       0.53

Non-GAAP diluted net income per share 

$       0.24

$       0.23

$       0.38

$       0.47

$       0.66

GAAP gross profit:

$ 434,265

$ 430,029

$ 519,403

$ 864,294

$ 987,330

     Stock-based compensation

1,775

2,123

1,916

3,898

3,611

     Acquisition-related costs (a)

1,054

1,929

-

2,983

-

Non-GAAP gross profit

$ 437,094

$ 434,081

$ 521,319

$ 871,175

$ 990,941

GAAP gross margin

53.2%

54.0%

57.9%

53.6%

58.1%

     Stock-based compensation

0.2%

0.3%

0.2%

0.2%

0.2%

     Acquisition-related costs (a)

0.2%

0.2%

-

0.2%

-

Non-GAAP gross margin

53.6%

54.5%

58.1%

54.0%

58.3%

GAAP research and development:

$ 264,175

$ 255,970

$ 249,604

$ 520,145

$ 492,141

     Stock-based compensation

(22,413)

(17,174)

(22,128)

(39,587)

(41,721)

     Acquisition-related costs (a)

(466)

(442)

-

(908)

-

     Restructuring

(42)

(2)

(139)

(44)

(307)

Non-GAAP research and development

$ 241,254

$ 238,352

$ 227,337

$ 479,606

$ 450,113

GAAP selling and marketing:

$   41,034

$   40,066

$   40,390

$   81,100

$   78,542

     Stock-based compensation

(3,458)

(3,036)

(3,207)

(6,494)

(5,861)

     Acquisition-related costs (a)

(50)

(46)

-

(96)

-

     Restructuring

(7)

7

-

-

-

Non-GAAP selling and marketing

$   37,519

$   36,991

$   37,183

$   74,510

$   72,681

GAAP general and administrative:

$   25,718

$   25,705

$   23,631

$   51,423

$   48,415

     Stock-based compensation

(5,582)

(4,859)

(3,104)

(10,441)

(6,642)

     Acquisition-related costs (a)

(7)

(39)

-

(46)

-

     Restructuring

(810)

(120)

(428)

(930)

(879)

     Legal/Tax related matters

(250)

-

-

(250)

-

Non-GAAP general and administrative

$   19,069

$   20,687

$   20,099

$   39,756

$   40,894

(a) 

Acquisition-related costs include the step-up in fair value of acquired inventory that was sold during the period, and the amortization of retention bonuses required by the terms of the acquisition. Restructuring costs related to recently completed acquisitions are included within "Restructuring" in the table above.

(b) 

For purposes of calculating non-GAAP diluted net income per share, the GAAP diluted weighted average shares outstanding is adjusted to exclude the benefits of stock compensation costs attributable to future services and not yet recognized in the financial statements.

 

Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

July 28,

January 28,

Assets

2012

2012

Current assets:

Cash, cash equivalents, and short-term investments

$ 2,134,193

$  2,246,498

Accounts receivable, net

390,772

407,263

Inventories

345,712

354,119

Prepaid expenses and other current assets

58,904

71,081

     Total current assets

2,929,581

3,078,961

Property and equipment, net

381,154

383,801

Long-term investments

18,103

23,215

Goodwill and acquired intangible assets, net

2,146,118

2,173,496

Other non-current assets

109,596

108,146

     Total assets

$ 5,584,552

$  5,767,619

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$    335,100

$     304,695

Accrued liabilities

223,508

224,900

Deferred income

67,840

59,959

Total current liabilities

626,448

589,554

Other long-term liabilities

154,990

164,047

     Total liabilities

781,438

753,601

Shareholders' equity:

Common stock

1,115

1,167

Additional paid-in capital

3,317,578

3,683,112

Accumulated other comprehensive income

1,378

776

Retained earnings

1,483,043

1,328,963

     Total shareholders' equity

4,803,114

5,014,018

     Total liabilities and shareholders' equity

$ 5,584,552

$  5,767,619

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Three Months Ended

Six Months Ended

July 28,

July 30,

July 28,

July 30,

2012

2011

2012

2011

Cash flows from operating activities:

Net income

$   93,074

$ 192,392

$ 187,617

$   339,253

Adjustments to reconcile net income to net cash provided

  by operating activities:

Depreciation and amortization

21,285

22,437

42,484

46,474

Stock-based compensation

33,228

30,355

60,420

57,835

Amortization of acquired intangible assets

13,023

11,138

27,378

25,479

Other expense, net

2,272

3,291

5,175

7,145

Excess tax benefits from stock-based compensation

(3)

(11)

(44)

(14)

Changes in assets and liabilities:

Accounts receivable

26,610

19,711

16,491

53,649

Inventories

7,832

(22,897)

8,033

(76,004)

Prepaid expenses and other assets

11,393

16,794

15,635

17,438

Accounts payable

6,288

12,294

27,537

6,999

Accrued liabilities and other

(4,204)

5,359

13,939

(91)

Accrued employee compensation

(24,033)

(14,387)

(24,681)

(29,267)

Deferred income

2,427

(13,063)

7,881

(8,334)

Net cash provided by operating activities

189,192

263,413

387,865

440,562

Cash flows from investing activities:

Purchases of marketable securities

(225,255)

(462,705)

(646,907)

(1,139,884)

Purchases of strategic investments

(750)

(503)

(5,750)

(2,253)

Sales and maturities of investments

322,532

408,522

881,309

681,069

Cash paid for acquisitions, net

(430)

(16,760)

Purchases of technology licenses

(4,407)

(3,325)

(6,452)

(6,615)

Purchases of property and equipment

(10,830)

(25,227)

(29,734)

(42,245)

Net cash provided by (used in) investing activities

81,290

(83,668)

192,466

(526,688)

Cash flows from financing activities:

Repurchase of common stock

(250,327)

(135,740)

(473,484)

(939,241)

Proceeds from employee stock plans

39,526

36,782

57,329

46,623

Minimum tax withholding paid on behalf of employees 

 for net share settlement

(598)

(234)

(9,477)

(4,868)

Dividend payment to shareholders

(33,537)

(33,537)

Principal payments on capital lease obligations

(511)

Excess tax benefits from stock-based compensation

3

11

44

14

Net cash used in financing activities

(244,933)

(99,181)

(459,125)

(897,983)

Net increase (decrease) in cash and cash equivalents

25,549

80,564

121,206

(984,109)

Cash and cash equivalents at beginning of period

880,559

782,401

784,902

1,847,074

Cash and cash equivalents at end of period

$ 906,108

$ 862,965

$ 906,108

$   862,965

 

SOURCE Marvell Technology Group Ltd.



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