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

Revenue: $781 Million, a 4 percent sequential decrease

GAAP Net Income: $69 Million, EPS of $0.12

Non-GAAP Net Income: $113 Million, EPS of $0.20

Free Cash Flow: $113 Million, 14 Percent of Revenue

15 Nov, 2012, 16:03 ET from Marvell Technology Group Ltd.

SANTA CLARA, Calif., Nov. 15, 2012 /PRNewswire/ -- Marvell Technology Group Ltd. (NASDAQ: MRVL), a global leader in integrated silicon solutions, today reported financial results for the third quarter of fiscal 2013, ended October 27, 2012.

(Logo: http://photos.prnewswire.com/prnh/20100719/SF36559LOGO-b)

Revenue for the third quarter of fiscal 2013 was $781 million, a 4 percent sequential decrease from $816 million in the second quarter of fiscal 2013, ended July 28, 2012, and a decrease of 18 percent from $950 million in the third quarter of fiscal 2012, ended October 29, 2011.  

GAAP net income for the third quarter of fiscal 2013 was $69 million, or $0.12 per share (diluted), compared with GAAP net income of $93 million, or $0.16 per share (diluted), for the second quarter of fiscal 2013, and $195 million, or $0.32 per share (diluted), for the third quarter of fiscal 2012.   

Non-GAAP net income was $113 million, or $0.20 per share (diluted), for the third quarter of fiscal 2013, compared with non-GAAP net income of $142 million, or $0.24 per share (diluted), for the second quarter of fiscal 2013 and $244 million, or $0.40 per share (diluted), for the third quarter of fiscal 2012.

"Our results in the third quarter were affected primarily by the slowdown in PC demand. Despite the near-term softness in PCs, we are focused on growing our overall storage business through share gains in HDDs and growth in SSDs," said Dr. Sehat Sutardja, Marvell's Chairman and Chief Executive Officer. "We remain confident in our investments and multiple long-term growth opportunities. We also remain committed to returning cash to our shareholders 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 October 27, 2012, July 28, 2012 and October 29, 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 third quarter of fiscal 2013 was 52 percent, compared to 53.2 percent for the second quarter of fiscal 2013 and 56.6 percent for the third quarter of fiscal 2012. 

Non-GAAP gross margin for the third quarter of fiscal 2013 was 52.3 percent, compared to 53.6 percent for the second quarter of fiscal 2013 and 56.8 percent for the third quarter of fiscal 2012.

Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2013 were 559 million shares, compared with 570 million shares in the second quarter of fiscal 2013 and 613 million shares in the third quarter of fiscal 2012. Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2013 were 578 million shares, compared with 587 million shares for the second quarter of fiscal 2013 and 615 million shares for the third quarter of fiscal 2012.

Cash flow from operations for the third quarter of fiscal 2013 was $137 million, compared to the $189 million reported in the second quarter of fiscal 2013 and the $262 million reported in the third quarter of fiscal 2012. Free cash flow for the third quarter of fiscal 2013 was $113 million, compared to the $174 million reported in the second quarter of fiscal 2013 and the $239 million reported in the third 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 23 million shares for a total of $203 million in the third quarter of fiscal 2013. Over the past nine quarters, Marvell has repurchased and retired approximately 150 million shares, or about 22 percent, of its outstanding shares.

Marvell also paid a 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 its next quarterly dividend of $0.06 per share on December 21, 2012 to all shareholders of record as of December 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 November 15, 2012 at 1:45 p.m. Pacific Time to discuss results for the third quarter of fiscal 2013. Interested parties may join the conference call by dialing 1- 866-578-5771 or 1-617-213-8055, pass-code 32388248. 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 December 14, 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, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of stock-based compensation 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/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 investments and long-term growth opportunities; share repurchase and dividend programs; 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; any costs relating to current and future litigation; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner; uncertainty in the worldwide economic conditions; 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; and other risks detailed in Marvell's SEC filings from time to time. When Marvell files its Form 10-Q for the quarter ended October 27, 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 July 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

Nine Months Ended

October 27,

July 28,

October 29,

October 27,

October 29,

2012

2012

2011

2012

2011

Net revenue

$     780,881

$ 816,104

$     950,417

$  2,393,336

$  2,650,339

Cost of goods sold

374,503

381,839

412,100

1,122,664

1,124,692

Gross profit

406,378

434,265

538,317

1,270,672

1,525,647

Operating expenses:

Research and development

263,615

264,175

266,255

783,760

758,396

Selling and marketing

38,398

41,034

40,500

119,498

119,042

General and administrative

24,514

25,718

29,021

75,937

77,436

Amortization of acquired intangible assets

13,054

13,023

11,155

40,432

36,634

Total operating expenses

339,581

343,950

346,931

1,019,627

991,508

Operating income

66,797

90,315

191,386

251,045

534,139

Interest and other income, net

2,387

5,864

7,729

9,308

9,575

Income before income taxes

69,184

96,179

199,115

260,353

543,714

Provision for income taxes

368

3,105

3,994

3,920

9,340

Net income

$       68,816

$   93,074

$     195,121

$     256,433

$     534,374

Basic net income per share

$           0.12

$       0.17

$           0.32

$           0.45

$           0.87

Diluted net income per share

$           0.12

$       0.16

$           0.32

$           0.45

$           0.85

Shares used in computing basic earnings per share

553,049

562,362

600,504

565,145

615,987

Shares used in computing diluted earnings per share

559,348

570,325

613,499

574,804

631,257

 

Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP

(Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Nine Months Ended

October 27,

July 28,

October 29,

October 27,

October 29,

2012

2012

2011

2012

2011

GAAP net income

$      68,816

$   93,074

$      195,121

$     256,433

$     534,374

Stock-based compensation

30,374

33,228

30,611

90,794

88,446

Amortization of acquired intangible assets

13,054

13,023

11,155

40,432

36,634

Acquisition-related costs (a)

523

1,577

-

4,556

-

Restructuring

129

859

105

1,103

1,291

Legal/Tax related matters

-

250

7,459

250

7,459

Non-GAAP net income

$    112,896

$ 142,011

$      244,451

$     393,568

$     668,204

GAAP weighted average shares - diluted

559,348

570,325

613,499

574,804

631,257

Non-GAAP adjustment

18,452

16,302

1,558

15,190

2,983

Non-GAAP weighted average shares diluted (b)

577,800

586,627

615,057

589,994

634,240

GAAP diluted net income per share

$          0.12

$       0.16

$            0.32

$           0.45

$           0.85

Non-GAAP diluted net income per share 

$          0.20

$       0.24

$            0.40

$           0.67

$           1.05

GAAP gross profit:

$    406,378

$ 434,265

$      538,317

$  1,270,672

$  1,525,647

Stock-based compensation

1,944

1,775

1,940

5,842

5,551

Acquisition-related costs (a)

-

1,054

-

2,983

-

Non-GAAP gross profit

$    408,322

$ 437,094

$      540,257

$  1,279,497

$  1,531,198

GAAP gross margin

52.0%

53.2%

56.6%

53.1%

57.6%

Stock-based compensation

0.3%

0.2%

0.2%

0.2%

0.2%

Acquisition-related costs (a)

-

0.2%

-

0.2%

-

Non-GAAP gross margin

52.3%

53.6%

56.8%

53.5%

57.8%

GAAP research and development:

$    263,615

$ 264,175

$      266,255

$     783,760

$     758,396

Stock-based compensation

(22,565)

(22,413)

(21,905)

(62,152)

(63,626)

Acquisition-related costs (a)

(458)

(466)

(1,366)

-

Restructuring

(2)

(42)

(1)

(46)

(308)

Legal/Tax related matters

-

-

(3,137)

-

(3,137)

Non-GAAP research and development

$    240,590

$ 241,254

$      241,212

$     720,196

$     691,325

GAAP selling and marketing:

$      38,398

$   41,034

$        40,500

$     119,498

$     119,042

Stock-based compensation

(3,101)

(3,458)

(3,402)

(9,595)

(9,263)

Acquisition-related costs (a)

(57)

(50)

-

(153)

-

Restructuring

3

(7)

-

3

-

Non-GAAP selling and marketing

$      35,243

$   37,519

$        37,098

$     109,753

$     109,779

GAAP general and administrative:

$      24,514

$   25,718

$        29,021

$       75,937

$       77,436

Stock-based compensation

(2,764)

(5,582)

(3,364)

(13,205)

(10,006)

Acquisition-related costs (a)

(8)

(7)

-

(54)

-

Restructuring

(130)

(810)

(104)

(1,060)

(983)

Legal/Tax related matters

-

(250)

(4,322)

(250)

(4,322)

Non-GAAP general and administrative

$      21,612

$   19,069

$        21,231

$       61,368

$       62,125

(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 potential benefits of stock-based compensation costs expected to be incurred in future periods but not yet recognized in the financial statements.

 

Marvell Technology Group Ltd.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands)

October 27,

January 28,

Assets

2012

2012

Current assets:

Cash, cash equivalents, and short-term investments

$  2,016,799

$  2,246,498

Accounts receivable, net

374,770

407,263

Inventories

323,997

354,119

Prepaid expenses and other current assets

62,264

71,081

Total current assets

2,777,830

3,078,961

Property and equipment, net

376,437

383,801

Long-term investments

18,103

23,215

Goodwill and acquired intangible assets, net

2,134,061

2,173,496

Other non-current assets

119,523

108,146

Total assets

$  5,425,954

$  5,767,619

Liabilities and Shareholders' Equity

Current liabilities:

Accounts payable

$     291,366

$     304,695

Accrued liabilities

249,645

224,900

Deferred income

59,458

59,959

Total current liabilities

600,469

589,554

Other long-term liabilities

149,191

164,047

Total liabilities

749,660

753,601

Shareholders' equity:

Common stock

1,073

1,167

Additional paid-in capital

3,153,463

3,683,112

Accumulated other comprehensive income

3,375

776

Retained earnings

1,518,383

1,328,963

Total shareholders' equity

4,676,294

5,014,018

Total liabilities and shareholders' equity

$  5,425,954

$  5,767,619

 

 

Marvell Technology Group Ltd.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(in thousands)

Three Months Ended

Nine Months Ended

October 27,

October 29,

October 27,

October 29,

2012

2011

2012

2011

Cash flows from operating activities:

Net income

$       68,816

$     195,121

$     256,433

$     534,374

Adjustments to reconcile net income to net cash provided

  by operating activities:

Depreciation and amortization

22,317

20,179

64,801

66,653

Stock-based compensation

30,374

30,611

90,794

88,446

Amortization of acquired intangible assets

13,054

11,155

40,432

36,634

Other expense, net

1,260

4,266

6,435

11,411

Excess tax benefits from stock-based compensation

(5)

(85)

(49)

(99)

Changes in assets and liabilities:

   Accounts receivable

16,002

(45,351)

32,493

8,298

   Inventories

21,601

12,037

29,634

(63,967)

   Prepaid expenses and    other assets

358

16,791

15,993

34,229

   Accounts payable

(54,674)

(2,806)

(27,137)

4,193

   Accrued liabilities and    other

(3,653)

(17,939)

10,286

(18,030)

   Accrued employee    compensation

29,509

36,191

4,828

6,924

   Deferred income

(8,382)

1,417

(501)

(6,917)

      Net cash provided by       operating activities

136,577

261,587

524,442

702,149

Cash flows from investing activities:

Purchases of marketable securities

(558,457)

(443,008)

(1,205,364)

(1,582,892)

Purchases of strategic investments

(1,250)

(5,750)

(3,503)

Sales and maturities of investments

436,435

402,145

1,317,744

1,083,214

Cash paid for acquisitions, net

(1,000)

(2,000)

(1,000)

(18,760)

Purchases of technology licenses

(4,235)

(2,978)

(10,687)

(9,593)

Purchases of property and equipment

(19,356)

(20,085)

(49,090)

(62,330)

      Net cash provided by       (used in) investing       activities

(146,613)

(67,176)

45,853

(593,864)

Cash flows from financing activities:

Repurchase of common stock

(202,987)

(215,155)

(676,471)

(1,154,396)

Proceeds from employee stock plans

8,915

8,942

66,244

55,565

Minimum tax withholding paid on behalf of employees 

 for net share settlement

(345)

(304)

(9,822)

(5,172)

Dividend payment to shareholders

(33,476)

(67,013)

Principal payments on capital lease obligations

(511)

Excess tax benefits from stock-based compensation

5

85

49

99

      Net cash used in       financing activities

(227,888)

(206,432)

(687,013)

(1,104,415)

Net decrease in cash and cash equivalents

(237,924)

(12,021)

(116,718)

(996,130)

Cash and cash equivalents at beginning of period

906,108

862,965

784,902

1,847,074

Cash and cash equivalents at end of period

$     668,184

$     850,944

$     668,184

$     850,944

 

 

 

SOURCE Marvell Technology Group Ltd.



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