Marvell Technology Group Ltd. Reports Third Quarter of Fiscal Year 2019 Financial Results

 

Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP (Unaudited)

(In thousands, except per share amounts)

 
   

Three Months Ended

 

Nine Months Ended

   

November 3,
2018

 

August 4,
 2018

 

October 28,
2017

 

November 3,
2018

 

October 28,
2017

GAAP gross profit:

 

$

383,587

   

$

377,110

   

$

377,769

   

$

1,136,390

   

$

1,088,458

 

Special items:

                   

Share-based compensation

 

2,429

   

4,748

   

1,747

   

9,082

   

4,983

 

Amortization of acquired intangible assets

 

57,594

   

18,984

   

   

76,577

   

 

Other cost of goods sold (a)

 

105,841

   

22,933

   

   

128,774

   

3,000

 

Total special items

 

165,864

   

46,665

   

1,747

   

214,433

   

7,983

 

Non-GAAP gross profit

 

$

549,451

   

$

423,775

   

$

379,516

   

$

1,350,823

   

$

1,096,441

 
                     

GAAP gross margin

 

45.1

%

 

56.7

%

 

61.3

%

 

53.6

%

 

60.7

%

Non-GAAP gross margin

 

64.6

%

 

63.7

%

 

61.6

%

 

63.7

%

 

61.1

%

                     
                     
                     

Total GAAP operating expenses

 

$

404,097

   

$

385,401

   

$

227,873

   

$

1,040,112

   

$

712,774

 

Special items:

                   

Share-based compensation

 

(47,811)

   

(68,675)

   

(18,892)

   

(138,433)

   

(58,762)

 

Restructuring related charges (b)

 

(27,031)

   

(35,415)

   

(3,284)

   

(64,013)

   

(8,455)

 

Amortization of acquired intangible assets

 

(21,098)

   

(6,955)

   

(1,076)

   

(28,053)

   

(3,212)

 

Other operating expenses (c)

 

(11,222)

   

(28,229)

   

(120)

   

(54,703)

   

(4,110)

 

Total special items

 

(107,162)

   

(139,274)

   

(23,372)

   

(285,202)

   

(74,539)

 

Total non-GAAP operating expenses

 

$

296,935

   

$

246,127

   

$

204,501

   

$

754,910

   

$

638,235

 
                     
                     
                     

GAAP operating margin

 

(2.4)

%

 

(1.2)

%

 

24.3

%

 

4.5

%

 

20.9

%

Other cost of goods sold (a)

 

12.4

%

 

3.5

%

 

%

 

6.1

%

 

0.2

%

Share-based compensation

 

5.9

%

 

11.0

%

 

3.3

%

 

7.0

%

 

3.6

%

Restructuring related charges (b)

 

3.2

%

 

5.3

%

 

0.5

%

 

3.0

%

 

0.5

%

Amortization and write-off of acquired intangible assets

 

9.2

%

 

3.9

%

 

0.2

%

 

4.9

%

 

0.2

%

Other operating expenses (c)

 

1.4

%

 

4.2

%

 

0.1

%

 

2.6

%

 

0.1

%

Non-GAAP operating margin

 

29.7

%

 

26.7

%

 

28.4

%

 

28.1

%

 

25.5

%

                                         
                                         

GAAP interest and other income (loss), net

 

$

(23,952)

   

$

(14,921)

   

$

6,200

   

$

(31,577)

   

$

16,721

 

Special items:

                   

Restructuring related items (d)

 

1,491

   

(121)

   

(2,286)

   

(142)

   

(5,371)

 

Write-off of debt issuance costs (e)

 

850

   

6,104

   

   

6,954

   

 

Total special items

 

2,341

   

5,983

   

(2,286)

   

6,812

   

(5,371)

 

Total non-GAAP interest and other income (loss), net

 

$

(21,611)

   

$

(8,938)

   

$

3,914

   

$

(24,765)

   

$

11,350

 
                     
                     
                     

GAAP net income (loss)

 

$

(53,767)

   

$

6,759

   

$

200,188

   

$

81,604

   

$

472,068

 

Less: Income from discontinued operations, net of tax

 

   

   

50,851

   

   

87,689

 

GAAP net income (loss) from continuing operations

 

(53,767)

   

6,759

   

149,337

   

81,604

   

384,379

 

Special items:

                   

Other cost of goods sold (a)

 

105,841

   

22,933

   

   

128,774

   

3,000

 

Share-based compensation

 

50,240

   

73,423

   

20,639

   

147,515

   

63,745

 

Restructuring related charges in operating expenses (b)

 

27,031

   

35,415

   

3,284

   

64,013

   

8,455

 

Restructuring related items in interest and other income, net (d)

 

1,491

   

(121)

   

(2,286)

   

(142)

   

(5,371)

 

Amortization of acquired intangible assets

 

78,692

   

25,939

   

1,076

   

104,630

   

3,212

 

Write-off of debt issuance costs (e)

 

850

   

6,104

   

   

6,954

   

 

Other operating expenses (c)

 

11,222

   

28,229

   

120

   

54,703

   

4,110

 

Pre-tax total special items

 

275,367

   

191,922

   

22,833

   

506,447

   

77,151

 

Other income tax effects and adjustments (f)

 

55

   

(36,720)

   

(398)

   

(39,763)

   

(10,760)

 

Non-GAAP net income from continuing operations

 

$

221,655

   

$

161,961

   

$

171,772

   

$

548,288

   

$

450,770

 
                     
                     
                     

Weighted average shares — basic

 

657,519

   

552,238

   

494,096

   

569,031

   

499,568

 

Weighted average shares — diluted

 

657,519

   

562,149

   

504,903

   

578,872

   

510,935

 
                     

GAAP diluted net income (loss) per share from continuing operations

 

$

(0.08)

   

$

0.01

   

$

0.30

   

$

0.14

   

$

0.75

 

Non-GAAP diluted net income per share from continuing operations (g)

 

$

0.33

   

$

0.28

   

$

0.34

   

$

0.95

   

$

0.87

 
   

(a)

Other costs of goods sold includes amortization of the Cavium inventory fair value step up and charges for past intellectual property licensing matters.

   

(b)

Restructuring related charges include employee severance, facilities related costs, and impairment of equipment and other assets.

   

(c)

Other operating expenses primarily include Cavium merger costs and costs of retention bonuses offered to employees who remained through the ramp down of certain operations due to restructuring actions.

   

(d)

Interest and other income, net, includes restructuring related items such as foreign currency remeasurement associated with restructuring related accruals.

   

(e)

Write-off of debt issuance costs is associated with the partial term loan repayment during the three months ended November 3, 2018 and the terminated bridge loan commitment during the three months ended August 4, 2018.

   

(f)

Other income tax effects and adjustments relate to tax provision based on a non-GAAP income tax rate of 4%.

   

(g)

Non-GAAP diluted net income per share from continuing operations for the three months ended November 3, 2018 was calculated by dividing non-GAAP net income from continuing operations by weighted average shares outstanding (diluted) of 665,752 shares due to the non-GAAP net income reported in that period.


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