Marvell Technology Group Ltd. Reports First Quarter of Fiscal 2017 Financial Results
Key First Quarter of Fiscal 2017 Highlights
- Revenue: Q1 FY 2017,
\\$541 Million - GAAP Net (Loss): Q1 FY 2017,
(\\$23) Million - GAAP Diluted (Loss) Per Share: Q1 FY 2017,
(\\$0.04) - Non-GAAP Net Income: Q1 FY 2017,
\\$7 Million - Non-GAAP Diluted EPS: Q1 FY 2017, \\$0.01
- Cash Flow from Operations: Q1 FY 2017,
(\\$610) Million - Cash and ST Investments:
\\$1.6 Billion
Second Quarter of Fiscal 2017 Financial Outlook
- Revenue is expected to be in the range of
\\$625 Million to \\$635 Million . - GAAP and Non-GAAP Gross Margins are expected to be in the range of 52 percent to 54 percent.
- GAAP Operating Expenses are expected to be in the range of
\\$307 Million to \\$317 Million . Non-GAAP Operating Expenses are expected to be in the range of\\$270 Million to \\$280 Million . - GAAP Diluted EPS are expected to be in the range of
\\$0.03 to \\$0.05 . Non-GAAP Diluted EPS are expected to be in the range of\\$0.10 to \\$0.12 .
First Quarter of Fiscal 2017 Summary
Revenues for the first quarter of fiscal 2017 were
In the first quarter of fiscal 2017, storage revenue declined 16 percent sequentially, reflecting lower HDD industry demand partially offset by growth in SSD. Networking revenue in the first quarter of fiscal 2017 grew 5 percent sequentially due to improved enterprise networking demand. Mobile and wireless revenue decreased 29 percent sequentially, mainly driven by the previously anticipated declines in revenue resulting from
GAAP net loss for the first quarter of fiscal 2017 was
Non-GAAP net income for the first quarter of fiscal 2017 was
GAAP gross margin percentage for the first quarter of fiscal 2017 was 52.1 percent, compared to 50.9 percent for the fourth quarter of fiscal 2016 and 51.5 percent for the first quarter of fiscal 2016.
Non-GAAP gross margin percentage for the first quarter of fiscal 2017 was 52.5 percent, compared to 51.9 percent for the fourth quarter of fiscal 2016 and 51.6 percent for the first quarter of fiscal 2016. The sequential improvement in fourth quarter GAAP and Non-GAAP gross margin percentages was mainly due to a larger mix of higher margin networking sales and a smaller mix of lower margin mobile handset platform-related revenues compared to the prior quarter. Refer to the GAAP to Non-GAAP reconciliation table and related footnotes at the end of this press release for more details.
Operating expenses on a GAAP basis for the first quarter of fiscal 2017 were
Non-GAAP operating expenses were
GAAP and Non-GAAP operating expenses for the first quarter of fiscal 2017 and fourth quarter of fiscal year 2016 include
Shares used to compute GAAP net income per diluted share for the first quarter of fiscal 2017 were 509 million shares, compared with 509 million shares in the fourth quarter of fiscal 2016 and 527 million shares in the first quarter of fiscal 2016.
Shares used to compute non-GAAP net income per diluted share for the first quarter of fiscal 2017 were 522 million shares, compared with 519 million shares for the fourth quarter of fiscal 2016 and 535 million shares for the first quarter of fiscal 2016.
Net cash provided from operations for the first quarter of fiscal 2017 was
The payment of future quarterly cash dividends on
Update Regarding NASDAQ Compliance Plan
On
The filings of the Company's Annual Report on Form 10-K for fiscal year 2016, ended
Conference Call
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other related charges, litigation settlement, 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, including:
About Marvell
As used in this release, the term "
Marvell® and the
Marvell Technology Group Ltd. |
|||||||||||
Condensed Consolidated Statements of Operations |
|||||||||||
(Unaudited) |
|||||||||||
(In thousands, except per share amounts) |
|||||||||||
Three Months Ended |
|||||||||||
April 30, |
January 30, |
May 2, |
|||||||||
2016 |
2016 |
2015 |
|||||||||
(Preliminary) |
|||||||||||
Net revenue |
\\$ 540,822 |
\\$ 616,158 |
\\$ 724,288 |
||||||||
Cost of goods sold |
259,210 |
302,610 |
351,153 |
||||||||
Gross profit |
281,612 |
313,548 |
373,135 |
||||||||
Operating expenses: |
|||||||||||
Research and development |
241,271 |
239,703 |
280,114 |
||||||||
Selling and marketing |
31,379 |
31,301 |
36,174 |
||||||||
General and administrative |
35,623 |
37,812 |
41,027 |
||||||||
Amortization and write-off of acquired intangible assets |
2,461 |
2,462 |
2,568 |
||||||||
Total operating expenses |
310,734 |
311,278 |
359,883 |
||||||||
Operating income (loss) |
(29,122) |
2,270 |
13,252 |
||||||||
Interest and other income, net |
1,488 |
1,084 |
5,167 |
||||||||
Income (loss) before income taxes |
(27,634) |
3,354 |
18,419 |
||||||||
Provision (benefit) for income taxes |
(4,955) |
(846) |
4,329 |
||||||||
Net income (loss) |
\\$ (22,679) |
\\$ 4,200 |
\\$ 14,090 |
||||||||
Basic net income (loss) per share |
\\$ (0.04) |
\\$ 0.01 |
\\$ 0.03 |
||||||||
Diluted net income (loss) per share |
\\$ (0.04) |
\\$ 0.01 |
\\$ 0.03 |
||||||||
Shares used in computing basic earnings (loss) per share |
508,794 |
506,352 |
516,228 |
||||||||
Shares used in computing diluted earnings (loss) per share |
508,794 |
508,590 |
527,167 |
Marvell Technology Group Ltd. |
||||||||||
Condensed Consolidated Balance Sheets |
||||||||||
(Unaudited) |
||||||||||
(In thousands) |
||||||||||
April 30, |
January 30, |
|||||||||
Assets |
2016 |
2016 |
||||||||
(Preliminary) |
||||||||||
Current assets: |
||||||||||
Cash, cash equivalents and short-term investments |
\\$ 1,615,240 |
\\$ 2,282,749 |
||||||||
Accounts receivable, net |
280,658 |
323,300 |
||||||||
Inventories |
196,739 |
210,017 |
||||||||
Prepaid expenses and other current assets |
57,139 |
102,560 |
||||||||
Total current assets |
2,149,776 |
2,918,626 |
||||||||
Property and equipment, net |
283,584 |
299,540 |
||||||||
Long-term investments |
8,974 |
11,296 |
||||||||
Goodwill and acquired intangible assets, net |
2,045,009 |
2,047,955 |
||||||||
Other non-current assets |
169,778 |
164,710 |
||||||||
Total assets |
\\$ 4,657,121 |
\\$ 5,442,127 |
||||||||
Liabilities and Shareholders' Equity |
||||||||||
Current liabilities: |
||||||||||
Accounts payable |
\\$ 193,697 |
\\$ 180,372 |
||||||||
Accrued liabilities |
236,514 |
253,691 |
||||||||
Carnige Mellon University accrued litigation settlement |
- |
736,000 |
||||||||
Deferred income |
54,488 |
55,722 |
||||||||
Total current liabilities |
484,699 |
1,225,785 |
||||||||
Other non-current liabilities |
72,604 |
76,219 |
||||||||
Total liabilities |
557,303 |
1,302,004 |
||||||||
Shareholders' equity: |
||||||||||
Common stock |
1,022 |
1,015 |
||||||||
Additional paid-in capital |
3,038,732 |
3,028,921 |
||||||||
Accumulated other comprehensive income |
2,222 |
(795) |
||||||||
Retained earnings |
1,057,842 |
1,110,982 |
||||||||
Total shareholders' equity |
4,099,818 |
4,140,123 |
||||||||
Total liabilities and shareholders' equity |
\\$ 4,657,121 |
\\$ 5,442,127 |
Marvell Technology Group Ltd. |
|||||||||||
Condensed Consolidated Statements of Cash Flows |
|||||||||||
(Unaudited) |
|||||||||||
(in thousands) |
|||||||||||
Three Months Ended |
|||||||||||
April 30, |
May 2, |
||||||||||
2016 |
2015 |
||||||||||
(Preliminary) |
|||||||||||
Cash flows from operating activities: |
|||||||||||
Net income (loss) |
\\$ (22,679) |
\\$ 14,090 |
|||||||||
Adjustments to reconcile net income (loss) to net cash provided |
|||||||||||
by operating activities: |
|||||||||||
Depreciation and amortization |
21,788 |
26,620 |
|||||||||
Share-based compensation |
24,453 |
33,221 |
|||||||||
Amortization and write-off of acquired intangible assets |
2,946 |
3,053 |
|||||||||
Non-cash restructuring and other related charges |
896 |
573 |
|||||||||
Other non-cash expense, net |
1,361 |
(561) |
|||||||||
Excess tax benefits from share-based compensation |
— |
(18) |
|||||||||
Changes in assets and liabilities: |
|||||||||||
Accounts receivable |
42,642 |
27,141 |
|||||||||
Inventories |
13,598 |
(31,318) |
|||||||||
Prepaid expenses and other assets(a) |
38,056 |
1,969 |
|||||||||
Accounts payable |
19,922 |
17,125 |
|||||||||
Accrued liabilities and other non-current liabilities (a) |
(758,502) |
(11,576) |
|||||||||
Accrued employee compensation |
7,152 |
(14,424) |
|||||||||
Deferred income |
(1,234) |
(7,027) |
|||||||||
Net cash provided by (used in) operating activities |
(609,601) |
58,868 |
|||||||||
Cash flows from investing activities: |
|||||||||||
Purchases of available-for-sale securities |
(93,365) |
(392,900) |
|||||||||
Sales and maturities of available-for-sale securities |
316,310 |
247,495 |
|||||||||
Purchase of time deposits |
(50,000) |
— |
|||||||||
Purchases of technology licenses |
(4,050) |
(3,606) |
|||||||||
Purchases of property and equipment |
(6,542) |
(7,334) |
|||||||||
Purchase of equipment previously leased |
— |
(10,240) |
|||||||||
Net cash provided by (used in) investing activities |
162,353 |
(166,585) |
|||||||||
Cash flows from financing activities: |
|||||||||||
Repurchase of common stock (b) |
— |
(20,273) |
|||||||||
Proceeds from employee stock plans |
315 |
13,013 |
|||||||||
Minimum tax withholding paid on behalf of employees |
|||||||||||
for net share settlement |
(15,270) |
(22,310) |
|||||||||
Dividend payments to shareholders |
(30,461) |
(30,910) |
|||||||||
Payments on technology license obligations |
(5,294) |
(4,067) |
|||||||||
Excess tax benefits from share-based compensation |
— |
18 |
|||||||||
Net cash used in financing activities |
(50,710) |
(64,529) |
|||||||||
Net increase (decrease) in cash and cash equivalents |
(497,958) |
(172,246) |
|||||||||
Cash and cash equivalents at beginning of period |
1,278,180 |
1,210,977 |
|||||||||
Cash and cash equivalents at end of period |
\\$ 780,222 |
\\$ 1,038,731 |
|||||||||
(a) |
In the three months ended April 30, 2016, the Company paid a total of \\$750.0 million to CMU in connection with the settlement agreement that was reached in February 2016. Of this settlement, the Company recognized a charge of \\$736.0 million in fiscal 2016. The remaining \\$14.0 million was recorded in prepaid expenses and other assets, to be recognized in cost of good sold over the remaining term of the license from February 2016 through April 2018. For further detail of the accounting for the settlement, see "Note 15 – Subsequent Events" in the Notes to the Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for fiscal 2016. |
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(b) |
Marvell records all repurchases as well as investment purchases and sales, based on trade date in accordance with U.S. GAAP. Cash paid for repurchase of Marvell common shares includes a total of 1.4 million shares repurchased for \\$22.1 million in the first quarter of fiscal 2016, adjusted for repurchases of \\$1.8 million made within the final three days of the quarter that are accrued but not yet paid due to the standard settlement period that normally takes up to three days. |
Marvell Technology Group Ltd. |
||||||||||
Reconciliations from GAAP to Non-GAAP |
||||||||||
(Unaudited) |
||||||||||
(In thousands, except per share amounts) |
||||||||||
Three Months Ended |
||||||||||
April 30, |
January 30, |
May 2, |
||||||||
2016 |
2016 |
2015 |
||||||||
(Preliminary) |
||||||||||
GAAP net income (loss) |
\\$ (22,679) |
\\$ 4,200 |
\\$ 14,090 |
|||||||
Share-based compensation |
24,453 |
32,419 |
33,221 |
|||||||
Restructuring and other related charges (a) |
4,441 |
4,396 |
592 |
|||||||
Amortization and write-off of acquired intangible assets |
2,946 |
2,947 |
3,493 |
|||||||
Litigation matters (b) |
100 |
3,791 |
(1,700) |
|||||||
Other (c) |
(2,743) |
6,754 |
21,382 |
|||||||
Non-GAAP net income |
\\$ 6,518 |
\\$ 54,507 |
\\$ 71,078 |
|||||||
GAAP weighted average shares - diluted |
508,794 |
508,590 |
527,167 |
|||||||
Non-GAAP adjustment |
13,569 |
9,978 |
7,993 |
|||||||
Non-GAAP weighted average shares diluted (d) |
522,363 |
518,568 |
535,160 |
|||||||
GAAP diluted net income per share |
\\$ (0.04) |
\\$ 0.01 |
\\$ 0.03 |
|||||||
Non-GAAP diluted net income per share |
\\$ 0.01 |
\\$ 0.11 |
\\$ 0.13 |
|||||||
GAAP gross profit: |
\\$ 281,612 |
\\$ 313,548 |
\\$ 373,135 |
|||||||
Share-based compensation |
1,802 |
1,862 |
1,547 |
|||||||
Restructuring and other related charges (a) |
- |
7 |
- |
|||||||
Amortization of acquired intangible assets |
485 |
485 |
925 |
|||||||
Litigation matters (b) |
- |
3,711 |
(1,700) |
|||||||
Non-GAAP gross profit |
\\$ 283,899 |
\\$ 319,613 |
\\$ 373,907 |
|||||||
GAAP gross margin |
52.1% |
50.9% |
51.5% |
|||||||
Share-based compensation |
0.3% |
0.3% |
0.2% |
|||||||
Restructuring and other related charges (a) |
0.0% |
0.0% |
0.0% |
|||||||
Amortization of acquired intangible assets |
0.1% |
0.1% |
0.1% |
|||||||
Litigation matters (b) |
0.0% |
0.6% |
-0.2% |
|||||||
Non-GAAP gross margin |
52.5% |
51.9% |
51.6% |
|||||||
GAAP research and development: |
\\$ 241,271 |
\\$ 239,703 |
\\$ 280,114 |
|||||||
Share-based compensation |
(24,396) |
(23,630) |
(24,781) |
|||||||
Restructuring and other related charges (a) |
(813) |
(3,703) |
- |
|||||||
Other (c) |
49 |
(3,485) |
- |
|||||||
Non-GAAP research and development |
\\$ 216,111 |
\\$ 208,885 |
\\$ 255,333 |
|||||||
GAAP selling and marketing: |
\\$ 31,379 |
\\$ 31,301 |
\\$ 36,174 |
|||||||
Share-based compensation |
(2,942) |
(3,214) |
(2,577) |
|||||||
Restructuring and other related charges (a) |
1 |
(118) |
- |
|||||||
Other (c) |
(304) |
(393) |
- |
|||||||
Non-GAAP selling and marketing |
\\$ 28,134 |
\\$ 27,576 |
\\$ 33,597 |
|||||||
GAAP general and administrative: |
\\$ 35,623 |
\\$ 37,812 |
\\$ 41,027 |
|||||||
Share-based compensation |
4,687 |
(3,713) |
(4,316) |
|||||||
Restructuring and other related charges (a) |
(3,629) |
(568) |
(592) |
|||||||
Litigation matters (b) |
(100) |
(80) |
- |
|||||||
Other (c) |
(886) |
(2,876) |
(18,302) |
|||||||
Non-GAAP general and administrative |
\\$ 35,695 |
\\$ 30,575 |
\\$ 17,817 |
|||||||
GAAP provision (benefit) for income taxes |
\\$ (4,955) |
\\$ (846) |
\\$ 4,329 |
|||||||
Other (c) |
3,884 |
- |
(3,080) |
|||||||
Non-GAAP provision (benefit) for income taxes |
\\$ (1,071) |
\\$ (846) |
\\$ 1,249 |
(a) |
Restructuring and other related charges include costs that qualify under U.S. GAAP as restructuring costs and other incremental charges that are a direct result of restructuring. For the three months ended April 30, 2016, such charges include \\$3.5 million for a remaining lease obligation and \\$0.9 million for the impairment of certain mobile-related equipment. For the three months ended January 30, 2016, such other related charges include \\$0.4 million for the impairment of certain leasehold improvements due to the restructuring of the mobile platform business, in addition to \\$4.0 million of restructuring charges, primarily for severance and facility-related costs. For the three months ended May 2, 2015, such charges includes \\$0.6 million for the impairment of equipment held for sale. |
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(b) |
The amounts recorded represent charges recognized for pending litigation proceedings. |
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(c) |
Other costs include a \\$3.9 million tax effect from restructuring charges within the income tax provision for the three months ended April 30, 2016. Other costs for each of the three months ended April 30, 2016 and January 30, 2016 include expenses related to retention bonuses offered to mobile employees expected to remain through the ramp down of certain operations. Other costs for the three months ended May 2, 2015 include a payment of \\$15.4 million to Dr. Sehat Surtardja, the Company's former Chief Executive Officer, and its related tax effect on the income tax provision. |
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(d) |
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 share-based compensation costs expected to be incurred in future periods but not yet recognized in the financial statements. |
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