Bermuda | 0-30877 | 77-0481679 | ||
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
99.1 |
MARVELL TECHNOLOGY GROUP LTD. | ||
Date: March 8, 2018 | By: | /s/ JEAN HU |
Jean Hu | ||
Chief Financial Officer | ||
• | Q4 Revenue: $615 million |
• | Q4 Gross Margin: 60.7% GAAP gross margin; 62.3% non-GAAP gross margin |
• | Q4 Diluted earnings per share: $0.10 GAAP diluted earnings per share from continuing operations; $0.32 non-GAAP diluted earnings per share from continuing operations |
• | Cash and short-term investments: $1.8 billion |
• | Revenue is expected to be $585 million to $615 million. |
• | GAAP and non-GAAP gross margins are expected to be approximately 62% to 63%. |
• | GAAP operating expenses are expected to be $250 million to $260 million. |
• | Non-GAAP operating expenses are expected to be approximately $215 million. |
• | GAAP diluted EPS from continuing operations is expected to be in the range of $0.22 to $0.26 per share. |
• | Non-GAAP diluted EPS from continuing operations is expected to be in the range of $0.29 to $0.33 per share. |
• | 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). |
Three Months Ended | Year Ended | |||||||||||||||||||
February 3, 2018 | October 28, 2017 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||||||||||
Net revenue | $ | 615,409 | $ | 616,302 | $ | 566,362 | $ | 2,409,170 | $ | 2,300,992 | ||||||||||
Cost of goods sold | 241,927 | 238,533 | 240,448 | 947,230 | 1,017,564 | |||||||||||||||
Gross profit | 373,482 | 377,769 | 325,914 | 1,461,940 | 1,283,428 | |||||||||||||||
Operating expenses: | ||||||||||||||||||||
Research and development | 180,000 | 165,477 | 175,262 | 714,444 | 805,029 | |||||||||||||||
Selling, general and administrative | 68,291 | 59,112 | 59,140 | 238,166 | 251,191 | |||||||||||||||
Litigation settlement (a) | 74,385 | — | — | 74,385 | — | |||||||||||||||
Restructuring related charges (gain) | (3,205 | ) | 3,284 | 90,475 | 5,250 | 96,801 | ||||||||||||||
Total operating expenses | 319,471 | 227,873 | 324,877 | 1,032,245 | 1,153,021 | |||||||||||||||
Operating income from continuing operations | 54,011 | 149,896 | 1,037 | 429,695 | 130,407 | |||||||||||||||
Interest and other income, net | 4,788 | 6,200 | 3,780 | 21,509 | 17,022 | |||||||||||||||
Income from continuing operations before income taxes | 58,799 | 156,096 | 4,817 | 451,204 | 147,429 | |||||||||||||||
Provision (benefit) for income taxes | 10,036 | 6,759 | 68,345 | 18,062 | 72,608 | |||||||||||||||
Income from continuing operations, net of tax | 48,763 | 149,337 | (63,528 | ) | 433,142 | 74,821 | ||||||||||||||
Income (loss) from discontinued operations, net of tax | — | 50,851 | (16,563 | ) | 87,689 | (53,670 | ) | |||||||||||||
Net income | $ | 48,763 | $ | 200,188 | $ | (80,091 | ) | $ | 520,831 | $ | 21,151 | |||||||||
Net income (loss) per share — Basic: | ||||||||||||||||||||
Continuing operations | $ | 0.10 | $ | 0.30 | $ | (0.13 | ) | $ | 0.87 | $ | 0.15 | |||||||||
Discontinued operations | $ | — | $ | 0.11 | $ | (0.03 | ) | $ | 0.18 | $ | (0.11 | ) | ||||||||
Net income per share - Basic | $ | 0.10 | $ | 0.41 | $ | (0.16 | ) | $ | 1.05 | $ | 0.04 | |||||||||
Net income (loss) per share — Diluted: | ||||||||||||||||||||
Continuing operations | $ | 0.10 | $ | 0.30 | $ | (0.13 | ) | $ | 0.85 | $ | 0.14 | |||||||||
Discontinued operations | $ | — | $ | 0.10 | $ | (0.03 | ) | $ | 0.17 | $ | (0.10 | ) | ||||||||
Net income per share - Diluted | $ | 0.10 | $ | 0.40 | $ | (0.16 | ) | $ | 1.02 | $ | 0.04 | |||||||||
Weighted average shares: | ||||||||||||||||||||
Basic | 493,663 | 494,096 | 507,834 | 498,008 | 509,738 | |||||||||||||||
Diluted | 506,197 | 504,903 | 507,834 | 509,667 | 517,513 |
(a) | Represents legal settlement and associated costs related to Luna shareholder litigation matter. |
February 3, 2018 | January 28, 2017 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 888,482 | $ | 814,092 | ||||
Short-term investments | 952,790 | 854,268 | ||||||
Accounts receivable, net | 280,395 | 335,384 | ||||||
Inventories | 170,039 | 170,842 | ||||||
Prepaid expenses and other current assets | 41,482 | 58,771 | ||||||
Assets held for sale | 30,767 | 57,077 | ||||||
Total current assets | 2,363,955 | 2,290,434 | ||||||
Property and equipment, net | 202,222 | 243,397 | ||||||
Goodwill and acquired intangible assets, net | 1,993,310 | 1,996,880 | ||||||
Other non-current assets | 148,800 | 117,939 | ||||||
Total assets | $ | 4,708,287 | $ | 4,648,650 | ||||
Liabilities and Shareholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 145,236 | $ | 143,484 | ||||
Accrued liabilities | 86,958 | 143,491 | ||||||
Accrued employee compensation | 127,711 | 139,647 | ||||||
Deferred income | 61,237 | 63,976 | ||||||
Liabilities held for sale | — | 5,818 | ||||||
Total current liabilities | 421,142 | 496,416 | ||||||
Non-current income taxes payable | 56,976 | 60,646 | ||||||
Other non-current liabilities | 88,756 | 63,937 | ||||||
Total liabilities | 566,874 | 620,999 | ||||||
Shareholders’ equity: | ||||||||
Common stock | 991 | 1,012 | ||||||
Additional paid-in capital | 2,733,292 | 3,016,775 | ||||||
Accumulated other comprehensive income (loss) | (2,322 | ) | 23 | |||||
Retained earnings | 1,409,452 | 1,009,841 | ||||||
Total shareholders’ equity | 4,141,413 | 4,027,651 | ||||||
Total liabilities and shareholders’ equity | $ | 4,708,287 | $ | 4,648,650 |
Marvell Technology Group Ltd. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) | ||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||
February 3, 2018 | January 28, 2017 | February 3, 2018 | January 28, 2017 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 48,763 | $ | (80,091 | ) | $ | 520,831 | $ | 21,151 | |||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | ||||||||||||||||
Depreciation and amortization | 20,918 | 26,683 | 83,487 | 107,851 | ||||||||||||
Share-based compensation | 21,377 | 24,058 | 86,689 | 113,970 | ||||||||||||
Amortization and write-off of acquired intangible assets | 358 | 1,965 | 3,570 | 10,641 | ||||||||||||
Restructuring related impairment charges (gain) | (4,159 | ) | 50,500 | (4,561 | ) | 52,581 | ||||||||||
Gain from investments in privately-held companies | — | — | (2,501 | ) | — | |||||||||||
Amortization of premium /discount on available-for-sale securities | 392 | 1,622 | 995 | 3,319 | ||||||||||||
Other non-cash expense (income), net | (7 | ) | (2,635 | ) | 1,324 | (3,312 | ) | |||||||||
Excess tax benefits from share-based compensation | — | (27 | ) | — | (37 | ) | ||||||||||
Deferred income taxes | 17,027 | 46,859 | 19,825 | 44,637 | ||||||||||||
Gain on sale of property and equipment | (270 | ) | — | (743 | ) | — | ||||||||||
Gain on sale of discontinued operations | — | — | (88,406 | ) | — | |||||||||||
Gain on sale of business | — | — | (5,254 | ) | — | |||||||||||
Changes in assets and liabilities: | ||||||||||||||||
Accounts receivable | 85,719 | 26,811 | 54,989 | (12,084 | ) | |||||||||||
Inventories | 3,878 | 18,381 | (12,160 | ) | 29,325 | |||||||||||
Prepaid expenses and other assets | (627 | ) | 2,181 | 12,494 | 1,825 | |||||||||||
Accounts payable | (36,700 | ) | (38,694 | ) | (16,613 | ) | (28,153 | ) | ||||||||
Accrued liabilities and other non-current liabilities | (21,898 | ) | 27,498 | (62,360 | ) | 3,763 | ||||||||||
Carnegie Mellon University accrued litigation settlement (a) | — | — | — | (736,000 | ) | |||||||||||
Accrued employee compensation | (1,324 | ) | 7,597 | (11,936 | ) | 18,016 | ||||||||||
Deferred income | (13,706 | ) | 6,138 | (8,557 | ) | 14,072 | ||||||||||
Net cash provided by (used in) operating activities | 119,741 | 118,846 | 571,113 | (358,435 | ) | |||||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchases of available-for-sale securities | (162,607 | ) | (146,046 | ) | (835,494 | ) | (489,856 | ) | ||||||||
Sales of available-for-sale securities | 22,671 | 157,953 | 306,822 | 616,697 | ||||||||||||
Maturities of available-for-sale securities | 120,639 | 41,264 | 426,341 | 239,557 | ||||||||||||
Return of investment from (in) privately-held companies | — | (258 | ) | 6,089 | 16 | |||||||||||
Purchases of time deposits | (75,000 | ) | (75,000 | ) | (300,000 | ) | (275,000 | ) | ||||||||
Maturities of time deposits | 75,000 | 75,000 | 300,000 | 125,000 | ||||||||||||
Purchases of technology licenses | (1,331 | ) | (1,870 | ) | (6,587 | ) | (10,309 | ) | ||||||||
Purchases of property and equipment | (13,395 | ) | (6,786 | ) | (38,551 | ) | (44,510 | ) | ||||||||
Proceeds from sales of property and equipment | 10,571 | — | 12,559 | — | ||||||||||||
Net proceeds from sale of discontinued operations | — | — | 165,940 | — | ||||||||||||
Net proceeds from sale of business | — | — | 2,402 | — | ||||||||||||
Net cash provided by (used in) investing activities | (23,452 | ) | 44,257 | 39,521 | 161,595 | |||||||||||
Cash flows from financing activities: | ||||||||||||||||
Repurchases of common stock | — | (125,033 | ) | (527,574 | ) | (181,564 | ) | |||||||||
Proceeds from employee stock plans | 42,878 | 62,383 | 180,302 | 74,219 | ||||||||||||
Minimum tax withholding paid on behalf of employees for net share settlement | (905 | ) | (402 | ) | (26,840 | ) | (16,683 | ) | ||||||||
Dividend payments to shareholders | (29,695 | ) | (30,457 | ) | (119,251 | ) | (122,292 | ) | ||||||||
Payments on technology license obligations | (5,806 | ) | (7,117 | ) | (28,503 | ) | (20,965 | ) | ||||||||
Excess tax benefits from share-based compensation | — | 27 | — | 37 | ||||||||||||
Payment of equity and debt financing costs | (14,378 | ) | — | (14,378 | ) | — | ||||||||||
Net cash used in financing activities | (7,906 | ) | (100,599 | ) | (536,244 | ) | (267,248 | ) | ||||||||
Net increase (decrease) in cash and cash equivalents | 88,383 | 62,504 | 74,390 | (464,088 | ) | |||||||||||
Cash and cash equivalents at beginning of period | 800,099 | 751,588 | 814,092 | 1,278,180 | ||||||||||||
Cash and cash equivalents at end of period | $ | 888,482 | $ | 814,092 | $ | 888,482 | $ | 814,092 |
(a) | The Company paid $750.0 million to Carnegie Mellon University in connection with a litigation settlement agreement. |
Marvell Technology Group Ltd. Reconciliations from GAAP to Non-GAAP (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
February 3, 2018 | October 28, 2017 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||||||||||
GAAP gross profit: | $ | 373,482 | $ | 377,769 | $ | 325,914 | $ | 1,461,940 | $ | 1,283,428 | ||||||||||
Special items: | ||||||||||||||||||||
Share-based compensation | 1,662 | 1,747 | 1,641 | 6,645 | 8,334 | |||||||||||||||
Other cost of goods sold (a) | 8,000 | — | — | 11,000 | — | |||||||||||||||
Total special items | 9,662 | 1,747 | 1,641 | 17,645 | 8,334 | |||||||||||||||
Non-GAAP gross profit | $ | 383,144 | $ | 379,516 | $ | 327,555 | $ | 1,479,585 | $ | 1,291,762 | ||||||||||
GAAP gross margin | 60.7 | % | 61.3 | % | 57.5 | % | 60.7 | % | 55.8 | % | ||||||||||
Non-GAAP gross margin | 62.3 | % | 61.6 | % | 57.8 | % | 61.4 | % | 56.1 | % | ||||||||||
Total GAAP operating expenses | $ | 319,471 | $ | 227,873 | $ | 324,877 | $ | 1,032,245 | $ | 1,153,021 | ||||||||||
Special items: | ||||||||||||||||||||
Share-based compensation | (19,715 | ) | (18,892 | ) | (20,021 | ) | (78,477 | ) | (93,065 | ) | ||||||||||
Restructuring related charges (gain) (b) | 3,205 | (3,284 | ) | (90,475 | ) | (5,250 | ) | (96,801 | ) | |||||||||||
Amortization and write-off of acquired intangible assets | (358 | ) | (1,076 | ) | (1,480 | ) | (3,570 | ) | (8,376 | ) | ||||||||||
Litigation settlement (c) | (74,385 | ) | — | — | (74,385 | ) | — | |||||||||||||
Other operating expenses (d) | (10,579 | ) | (120 | ) | (315 | ) | (14,689 | ) | (1,544 | ) | ||||||||||
Total special items | (101,832 | ) | (23,372 | ) | (112,291 | ) | (176,371 | ) | (199,786 | ) | ||||||||||
Total non-GAAP operating expenses | $ | 217,639 | $ | 204,501 | $ | 212,586 | $ | 855,874 | $ | 953,235 | ||||||||||
GAAP operating margin | 8.8 | % | 24.3 | % | 0.2 | % | 17.8 | % | 5.7 | % | ||||||||||
Other cost of goods sold (a) | 1.3 | % | — | % | — | % | 0.5 | % | — | % | ||||||||||
Share-based compensation | 3.5 | % | 3.3 | % | 3.8 | % | 3.5 | % | 4.4 | % | ||||||||||
Restructuring related charges (gain) (b) | (0.5 | )% | 0.5 | % | 16.0 | % | 0.2 | % | 4.2 | % | ||||||||||
Amortization and write-off of acquired intangible assets | 0.1 | % | 0.2 | % | 0.2 | % | 0.1 | % | 0.3 | % | ||||||||||
Litigation settlement (c) | 12.1 | % | — | % | — | % | 3.1 | % | — | % | ||||||||||
Other operating expenses (d) | 1.6 | % | 0.1 | % | 0.1 | % | 0.7 | % | 0.1 | % | ||||||||||
Non-GAAP operating margin | 26.9 | % | 28.4 | % | 20.3 | % | 25.9 | % | 14.7 | % | ||||||||||
Marvell Technology Group Ltd. Reconciliations from GAAP to Non-GAAP (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
February 3, 2018 | October 28, 2017 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||||||||||
GAAP interest and other income, net | $ | 4,788 | $ | 6,200 | $ | 3,780 | $ | 21,509 | $ | 17,022 | ||||||||||
Special items: | ||||||||||||||||||||
Restructuring related items (e) | 1,355 | (2,286 | ) | — | (4,016 | ) | — | |||||||||||||
Total special items | 1,355 | (2,286 | ) | — | (4,016 | ) | — | |||||||||||||
Total non-GAAP interest and other income, net | $ | 6,143 | $ | 3,914 | $ | 3,780 | $ | 17,493 | $ | 17,022 | ||||||||||
GAAP net income | $ | 48,763 | $ | 200,188 | $ | (80,091 | ) | $ | 520,831 | $ | 21,151 | |||||||||
Less: Income (loss) from discontinued operations, net of tax | — | 50,851 | (16,563 | ) | 87,689 | (53,670 | ) | |||||||||||||
GAAP net income from continuing operations | 48,763 | 149,337 | (63,528 | ) | 433,142 | 74,821 | ||||||||||||||
Special items: | ||||||||||||||||||||
Other cost of goods sold (a) | 8,000 | — | — | 11,000 | — | |||||||||||||||
Share-based compensation | 21,377 | 20,639 | 21,662 | 85,122 | 101,399 | |||||||||||||||
Restructuring related charges (gain) (b) | (1,850 | ) | 998 | 90,475 | 1,234 | 96,801 | ||||||||||||||
Amortization and write-off of acquired intangible assets | 358 | 1,076 | 1,480 | 3,570 | 8,376 | |||||||||||||||
Litigation settlement (c) | 74,385 | — | — | 74,385 | — | |||||||||||||||
Other operating expenses (d) | 10,579 | 120 | 315 | 14,689 | 1,544 | |||||||||||||||
Pre-tax total special items | 112,849 | 22,833 | 113,932 | 190,000 | 208,120 | |||||||||||||||
Other income tax effects and adjustments (f) | 3,170 | (398 | ) | 67,989 | (7,590 | ) | 66,918 | |||||||||||||
Non-GAAP net income from continuing operations | $ | 164,782 | $ | 171,772 | $ | 118,393 | $ | 615,552 | $ | 349,859 | ||||||||||
Marvell Technology Group Ltd. Reconciliations from GAAP to Non-GAAP (Unaudited) (In thousands, except per share amounts) | ||||||||||||||||||||
Three Months Ended | Year Ended | |||||||||||||||||||
February 3, 2018 | October 28, 2017 | January 28, 2017 | February 3, 2018 | January 28, 2017 | ||||||||||||||||
Weighted average shares — basic | 493,663 | 494,096 | 507,834 | 498,008 | 509,738 | |||||||||||||||
Weighted average shares — diluted | 506,197 | 504,903 | 507,834 | 509,667 | 517,513 | |||||||||||||||
Non-GAAP weighted average shares — diluted (g) | 512,223 | 512,676 | 528,141 | 516,789 | 527,197 | |||||||||||||||
GAAP diluted net income (loss) per share from continuing operations | $ | 0.10 | $ | 0.30 | $ | (0.13 | ) | $ | 0.85 | $ | 0.14 | |||||||||
Non-GAAP diluted net income per share from continuing operations | $ | 0.32 | $ | 0.34 | $ | 0.22 | $ | 1.19 | $ | 0.66 |
(a) | Other costs of goods sold in the three months ended February 3, 2018 and the year ended February 3, 2018 include charges for past intellectual property licensing matters. |
(b) | Restructuring related charges include costs that are a direct result of restructuring. Such charges include employee severance, facilities related costs, contract cancellation charges and impairment of equipment. Restructuring related charges in the three months ended February 3, 2018 and the year ended February 3, 2018 includes the gain on sale of a building that was a direct result of restructuring. |
(c) | Represents legal settlement and associated costs related to shareholder litigation matter. |
(d) | Other operating expenses primarily include Cavium merger costs, costs related to royalty matters, and costs of retention bonuses offered to employees who remained through the ramp down of certain operations due to restructuring actions. |
(e) | Interest and other income, net includes restructuring related items such as gain on sale of a business and foreign currency remeasurement related to restructuring related accruals. |
(f) | Other income tax effects and adjustments in the three months ended February 3, 2018 and October 28, 2017 and in the year ended February 3, 2018 include adjustment to the tax provision based on a non-GAAP tax rate of 4%. Other income tax effects and adjustments in the three months ended January 28, 2017 and the year ended January 28, 2017 include $68.0 million and $67.0 million, respectively, of tax expense relating to restructuring charges. |
(g) | Non-GAAP diluted share count excludes the impact of share-based compensation expense expected to be incurred in future periods and not yet recognized in the Company's financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method. |
Three Months Ended | % Change | ||||||||||||||||
February 3, 2018 | October 28, 2017 | January 28, 2017 | YoY | QoQ | |||||||||||||
Storage (1) | $ | 323,718 | $ | 315,338 | $ | 310,771 | 4 | % | 3 | % | |||||||
Networking (2) | 155,340 | 150,497 | 148,090 | 5 | % | 3 | % | ||||||||||
Connectivity (3) | 86,271 | 102,662 | 65,638 | 31 | % | (16 | )% | ||||||||||
Total Core | 565,329 | 568,497 | 524,499 | 8 | % | (1 | )% | ||||||||||
Other (4) | 50,080 | 47,805 | 41,863 | 20 | % | 5 | % | ||||||||||
Total Revenue | $ | 615,409 | $ | 616,302 | $ | 566,362 | 9 | % | — | % |
Three Months Ended | ||||||||
% of Total | February 3, 2018 | October 28, 2017 | January 28, 2017 | |||||
Storage (1) | 53 | % | 51 | % | 55 | % | ||
Networking (2) | 25 | % | 24 | % | 26 | % | ||
Connectivity (3) | 14 | % | 17 | % | 12 | % | ||
Total Core | 92 | % | 92 | % | 93 | % | ||
Other (4) | 8 | % | 8 | % | 7 | % | ||
Total Revenue | 100 | % | 100 | % | 100 | % |
(1) Storage products are comprised primarily of HDD, SSD Controllers and Data Center Storage Solutions. |
(2) Networking products are comprised primarily of Ethernet Switches, Ethernet Transceivers, Embedded ARM Processors and Automotive Ethernet, as well as a few legacy product lines in which we no longer invest, but will generate revenue for several years. |
(3) Connectivity products are comprised primarily of WiFi solutions including WiFi only, WiFi/Bluetooth combos and WiFi Microcontroller combos. |
(4) Other products are comprised primarily of Printer Solutions, Application Processors and others. |