- Published: 04 December 2009
- Written by Editor
Marvell Technology Group Ltd. Reports Fiscal Third Quarter Results
Revenue: $803.1 Million, Up 25 Percent Sequentially - GAAP Net Income: $201.6 Million, $0.31 per share EPS Free Cash Flow: $195.9 Million, 24 Percent of Revenues
Marvell Technology Group Ltd. (Nasdaq: MRVL), a world leader in storage, communications and consumer silicon solutions, today reported financial results for the third quarter of fiscal 2010, ended October 31, 2009.
Net revenue for the third quarter of fiscal 2010 was $803.1 million, a 25 percent sequential increase from $640.6 million in the second quarter of fiscal 2010, ended August 1, 2009, and a 2 percent increase from $791.0 million in the third quarter of fiscal 2009, ended November 1, 2008.
GAAP net income was $201.6 million, or $0.31 per share (diluted), for the third quarter of fiscal 2010, as compared to GAAP net income of $58.5 million, or $0.09 per share (diluted), for the second quarter of fiscal 2010. For the third quarter of fiscal 2009 GAAP net income was $70.9 million, or $0.11 per share (diluted).
Non-GAAP net income was $231.8 million, or $0.35 per share (diluted), for the third quarter of fiscal 2010, an increase of 95 percent from non-GAAP net income of $118.7 million, or $0.18 per share (diluted), for the second quarter of fiscal 2010, and a 59 percent increase compared with non-GAAP net income of $145.3 million, or $0.23 per share (diluted), for the third quarter of fiscal 2009.
"We are very pleased with the revenue growth we experienced in the third quarter of fiscal 2010," said Dr. Sehat Sutardja, Marvell Chairman and Chief Executive Officer. "Our sequential revenue growth was better than our revised guidance provided on October 26, 2009, as order momentum improved across all our addressable end-markets. Our results during the third quarter demonstrate that financial discipline is firmly entrenched in Marvell's long-term business model as we again delivered significant improvement across all financial metrics."
Marvell reports net income or loss, basic and diluted net income or 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 or loss to non-GAAP net income for the three months ended October 31, 2009, August 1, 2009 and November 1, 2008, respectively, appear in the financial statements below.
GAAP gross margin for the third quarter of fiscal 2010 was 57.5 percent, compared to 55.0 percent for the second quarter of fiscal 2010 and 52.1 percent for the third quarter of fiscal 2009. Non-GAAP gross margin for the third quarter of fiscal 2010 increased to 57.8 percent, compared to 55.3 percent for the second quarter of fiscal 2010 and 52.3 percent for the third quarter of fiscal 2009.
Shares used to compute GAAP net income per diluted share for the third quarter of fiscal 2010 were 660 million shares, compared with 648 million shares in the second quarter of fiscal 2010 and 631 million shares in the third quarter of fiscal 2009. Shares used to compute non-GAAP net income per diluted share for the third quarter of fiscal 2010 were 664 million shares, compared with 652 million shares for the second quarter of fiscal 2010 and 633 million shares for the third quarter of fiscal 2009.
Cash flow from operations for the third quarter of fiscal 2010 was $203.5 million, up 12 percent sequentially from $182.3 million in the second quarter of fiscal 2010 and down 21 percent from $258.5 million in the third quarter of fiscal 2009. Free cash flow, defined as cash flow from operations less capital expenditures and purchases of IP licenses, was $195.9 million, up 12 percent sequentially from $175.3 million in the second quarter of fiscal 2010 and down 20 percent from $244.3 million in the third quarter of fiscal 2009.
Conference Call
Marvell will be conducting a conference call on December 3, 2009 at 1:30 p.m. PST to discuss results for the third quarter ended October 31, 2009. Interested parties may dial-in to the conference call at 1-866-271-0645, pass-code 78345706. The call is being webcast by Thomson Reuters 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 on the internet will be available following the call until January 3, 2009.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude stock-based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges 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.
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 website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.
About Marvell
Marvell (NASDAQ: MRVL - News) 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 www.marvell.com
Forward-Looking Statements
This press release contains forward-looking statements that involve risks and uncertainties, including statements regarding the Company's expectations regarding the entrenchment of financial discipline; and statements concerning the Company's use of non-GAAP financial measures 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; uncertainty in the worldwide economic environment; successful execution of the Company's restructuring plan and other risks detailed in Marvell's SEC filings. When Marvell files its Form 10-Q for the third quarter of fiscal 2010, 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 Marvell's latest Annual Report on Form 10-K for the year end January 31, 2009, Quarterly Reports on Form 10-Q 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 statements.
For further information, contact: Jeff Palmer Tom Hayes Investor Relations Corporate Communications 408-222-8373 408-222-2815 This email address is being protected from spambots. You need JavaScript enabled to view it. This email address is being protected from spambots. You need JavaScript enabled to view it.
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
October 31, August 1, November 1, October 31, November 1,
2009 2009 2008 2009 2008
Net revenue $803,098 $640,620 $791,046 $1,965,152 $2,437,696
Cost of goods
sold 341,617 288,059 379,137 887,306 1,173,892
Gross profit 461,481 352,561 411,909 1,077,846 1,263,804
Operating
expenses:
Research and
development 212,873 196,190 234,222 615,152 722,411
Selling and
marketing 35,442 32,907 41,158 102,260 129,080
General and
administrative 16,660 29,469 28,869 148,856 72,809
Amortization
and write-
off of
acquired
intangible
assets 26,450 26,446 34,814 83,252 105,049
Total
operating
expenses 291,425 285,012 339,063 949,520 1,029,349
Operating
income 170,056 67,549 72,846 128,326 234,455
Interest and
other income
(expense), net (1,373) 279 11,543 (1,254) 6,097
Income before
income taxes 168,683 67,828 84,389 127,072 240,552
Provision
(benefit)
for income
taxes (32,916) 9,335 13,443 (21,563) 28,300
Net income $201,599 $58,493 $70,946 148,635 212,252
Basic net
income per
share $0.32 $0.09 $0.12 $0.24 $0.35
Diluted net
income per
share $0.31 $0.09 $0.11 $0.23 $0.34
Shares used in
computing
basic earnings
per share 623,613 620,881 611,945 621,057 606,676
Shares used in
computing
diluted
earnings per
share 659,739 648,110 630,810 647,863 630,997
Marvell Technology Group Ltd.
Reconciliation of GAAP Net Income to Non-GAAP Net Income:
(Unaudited)
(In thousands, except per share amounts)
Three Months Ended Nine Months Ended
October 31, August 1, November 1, October 31, November 1,
2009 2009 2008 2009 2008
GAAP net
income $201,599 $58,493 $70,946 $148,635 $212,252
Stock-based
compensation 34,377 30,015 39,578 96,040 132,431
Amortization
and write-off
of acquired
intangible
assets 26,450 26,446 34,814 83,252 105,049
Restructuring (b) 1,919 4,956 - 15,211 -
Legal/Tax
related
matters (a) (32,569) (1,202) - 38,229 -
Other (b) - - - 990 -
Non-GAAP net
income $231,776 $118,708 $145,338 $382,357 $449,732
GAAP weighted
average
shares -
diluted 659,739 648,110 630,810 647,863 630,997
Non-GAAP
adjustment 4,297 3,651 1,740 2,938 168
Non-GAAP
weighted
average
shares
diluted (c) 664,036 651,761 632,550 650,801 631,165
GAAP
diluted
net income
per share $0.31 $0.09 $0.11 $0.23 $0.34
Non-GAAP
diluted
net income
per share $0.35 $0.18 $0.23 $0.59 $0.71
GAAP gross
profit: $461,481 $352,561 $411,909 $1,077,846 $1,263,804
Stock-based
compensation 2,389 1,810 1,795 8,315 8,623
Other - - - 990 -
Non-GAAP gross
profit $463,870 $354,371 $413,704 $1,087,151 $1,272,427
GAAP gross
profit as
a % of
revenue 57.5% 55.0% 52.1% 54.8% 51.8%
Stock-based
compensation 0.3% 0.3% 0.2% 0.4% 0.4%
Other - - - 0.0% -
Non-GAAP
gross profit 57.8% 55.3% 52.3% 55.3% 52.2%
GAAP research
and
development: $212,873 $196,190 $234,222 $615,152 $722,411
Stock-based
compensation (24,134) (22,193) (30,607) (68,064) (93,537)
Restructuring (1,338) (3,526) - (10,704) -
Legal/Tax
settlement - 1,820 - 1,820 -
Non-GAAP
research
and
development $187,401 $172,291 $203,615 $538,204 $628,874
GAAP selling
and marketing: $35,442 $32,907 $41,158 $102,260 $129,080
Stock-based
compensation (4,087) (3,659) (6,896) (11,457) (20,403)
Restructuring (51) (523) - (1,839) -
Legal/Tax
settlement - 659 - 659 -
Non-GAAP
selling
and marketing $31,304 $29,384 $34,262 $89,623 $108,677
GAAP general
and
administrative: $16,660 $29,469 $28,869 $148,856 $72,809
Stock-based
compensation (3,767) (2,353) (280) (8,204) (9,868)
Restructuring (530) (907) - (2,668) -
Legal/Tax
settlement - 158 - (71,842) -
Non-GAAP
general
and
administrative $12,363 $26,367 $28,589 $66,142 $62,941
GAAP
provision
(benefit)
for income
taxes: $(32,916) $9,335 $13,443 $(21,563) $28,300
Tax reserve
reversal 27,317 - - 27,317 -
Income tax
payable
adjustment 5,252 - - 5,252 -
Non-GAAP
provision
(benefit)
for income
taxes $(347) $9,335 $13,443 $11,006 $28,300
(a) Fiscal quarter ended October 31, 2009 includes a $27.3 million
benefit as a result of the expiration of the statute of limitations
related to a tax contingency reserve. In addition, a $5.3 million
income tax benefit was recorded relating to the adjustment of a prior
year deferred tax asset. Fiscal quarter ended August 1, 2009
includes the net impact of our payroll related settlement with the
IRS on related to our historical stock option granting practices. As
the composition of the settlement was different than the initial
reserve, the net benefit includes a $2.6 million benefit to operating
expense with an offset of $1.4 million of interest expense. The nine
months ended October 31, 2009 also includes the $72 million charge
taken in fiscal Q1'10 in connection with the settlement of the class
action litigation.
(b) Amount represents restructuring related costs including severance
costs from reductions in force, asset impairment charges and
facilities consolidation charges. The nine months ended October 31,
2009 including under-utilization charges related to the rampdown of
the Malaysia test operations.
(c) 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 SFAS 123R compensation costs attributable to
future services and not yet recognized in the financial statements
that are treated as proceeds assumed to be used to repurchase shares
under the GAAP treasury method.
Marvell Technology Group Ltd.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands)
October 31, January 31,
Assets 2009 2009
Current assets:
Cash, cash equivalents, and
short-term investments $1,464,187 $951,909
Accounts receivable, net 394,319 222,101
Inventories 239,209 310,654
Prepaid expenses, deferred income taxes
and other current assets 72,796 75,651
Total current assets 2,170,511 1,560,315
Property and equipment, net 349,276 390,853
Long-term investments 39,274 40,541
Goodwill and acquired intangible assets,
net 2,201,016 2,284,164
Other non-current assets 127,643 138,327
Total assets $4,887,720 $4,414,200
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $317,233 $139,028
Accrued liabilities 201,033 175,135
Income taxes payable 14,671 35,803
Deferred income 71,273 57,895
Current portion of capital lease
obligations 1,901 1,787
Total current liabilities 606,111 409,648
Capital lease obligations, net of current
portion 1,011 2,451
Other long-term liabilities 174,298 173,034
Total liabilities 781,420 585,133
Shareholders' equity:
Common stock 1,249 1,233
Additional paid-in capital 4,501,258 4,372,265
Accumulated other comprehensive income
(loss) (1,129) (718)
Accumulated deficit (395,078) (543,713)
Total shareholders' equity 4,106,300 3,829,067
Total liabilities and shareholders'
equity $4,887,720 $4,414,200
Marvell Technology Group Ltd.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(in thousands)
Three Months Ended Nine Months Ended
October 31, November 1, October 31, November 1,
2009 2008 2009 2008
Cash flows from
operating activities:
Net income $201,599 $70,946 $148,635 $212,252
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and
amortization 24,571 29,136 74,976 85,786
Stock-based
compensation 34,377 39,578 96,040 132,431
Amortization and
write-off
of acquired intangible
assets 26,450 34,814 83,252 105,049
Fair market value
adjustment to Intel
inventory sold (10,807) (3,406) (13,883) (14,163)
Excess tax benefits
from stock-based
compensation (136) 138 (205) (356)
Deferred income taxes 263 - 6,131 -
Changes in assets and
liabilities, net of
assets acquired and
liabilities assumed in
acquisitions:
Restricted cash 24,500 - 24,500 (24,500)
Accounts receivable (65,857) 72,810 (172,218) (65,816)
Inventories (17,039) (7,477) 83,548 95,850
Prepaid expenses
and other assets (1,362) 19,037 7,559 61,847
Accounts payable 38,281 (11,882) 172,062 (6,004)
Accrued liabilities
and other (82,687) 10,306 (13,628) (23,693)
Accrued employee
compensation 36,123 7,664 35,149 17,659
Income taxes
payable (33,988) (5,914) (29,060) (100)
Deferred income 29,246 2,715 27,538 (4,700)
Net cash provided
by operating
activities 203,534 258,465 530,396 571,542
Cash flows from investing
activities:
Purchases of
investments (426,998) - (426,998) (10,172)
Sales and maturities
of short-term and
long-term
investments 10,268 5,388 10,318 29,181
Purchases of
technology
licenses - (1,400) (12,550) (2,650)
Purchases of property
and equipment (7,629) (12,780) (14,808) (59,312)
Net cash used in
investing
activities (424,359) (8,792) (444,038) (42,953)
Cash flows from
financing
activities:
Proceeds from the
issuance of common
shares 13,728 12,797 34,749 80,453
Principal payments
on capital
lease and debt
obligations (451) (101,634) (1,326) (205,039)
Excess tax benefits
from stock-based
compensation 136 (138) 205 356
Net cash
provided by
(used in)
financing
activities 13,413 (88,975) 33,628 (124,230)
Net increase in cash
and cash equivalents (207,412) 160,698 119,986 404,359
Cash and cash
equivalents at
beginning of period 1,254,807 859,309 927,409 615,648
Cash and cash
equivalents at
end of period $1,047,395 $1,020,007 $1,047,395 $1,020,007
