Marvell Technology Group Ltd. Reports Second Quarter of Fiscal Year 2020 Financial Results

 

Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP (Unaudited)

(In thousands, except per share amounts)














Three Months Ended


Six Months Ended



August 3,
2019


May 4,
2019


August 4,
2018


August 3,
2019


August 4,
2018

GAAP gross profit:


$

350,702



$

361,428



$

377,110



$

712,130



$

752,803


Special items:











Share-based compensation


3,662



2,926



4,748



6,588



6,653


Amortization of acquired intangible assets


61,132



59,906



18,984



121,038



18,984


Other cost of goods sold (a)




450



22,933



450



22,933


Total special items


64,794



63,282



46,665



128,076



48,570


Non-GAAP gross profit


$

415,496



$

424,710



$

423,775



$

840,206



$

801,373













GAAP gross margin


53.4

%


54.6

%


56.7

%


54.0

%


59.3

%

Non-GAAP gross margin


63.3

%


64.1

%


63.7

%


63.7

%


63.1

%


































Total GAAP operating expenses


$

396,930



$

382,554



$

385,401



$

779,484



$

636,015


Special items:











Share-based compensation


(60,014)



(55,672)



(68,675)



(115,686)



(90,622)


Restructuring related charges (b)


(16,585)



(5,682)



(35,415)



(22,267)



(36,982)


Amortization of acquired intangible assets


(19,835)



(19,834)



(6,955)



(39,669)



(6,955)


Other operating expenses (c)


(20,676)



(6,569)



(28,229)



(27,245)



(43,481)


Total special items


(117,110)



(87,757)



(139,274)



(204,867)



(178,040)


Total non-GAAP operating expenses


$

279,820



$

294,797



$

246,127



$

574,617



$

457,975



































GAAP operating margin


(7.0)

%


(3.2)

%


(1.2)

%


(5.1)

%


9.2

%

Other cost of goods sold (a)


%


0.1

%


3.5

%


%


1.9

%

Share-based compensation


9.7

%


8.8

%


11.0

%


9.3

%


7.7

%

Restructuring related charges (b)


2.5

%


0.9

%


5.3

%


1.7

%


2.9

%

Amortization of acquired intangible assets


12.3

%


12.0

%


3.9

%


12.2

%


2.0

%

Other operating expenses (c)


3.2

%


1.0

%


4.2

%


2.0

%


3.3

%

Non-GAAP operating margin


20.7

%


19.6

%


26.7

%


20.1

%


27.0

%











































GAAP interest and other income (loss), net


$

(21,651)



$

(20,051)



$

(14,921)



$

(41,702)



$

(7,625)


Special items:











Restructuring related items (d)


75



(338)



(121)



(263)



(1,633)


Write-off of debt issuance costs (e)




458



6,104



458



6,104


Deal costs (f)


1,009







1,009




Total special items


1,084



120



5,983



1,204



4,471


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


$

(20,567)



$

(19,931)



$

(8,938)



$

(40,498)



$

(3,154)



































GAAP net income (loss)


$

(57,331)



$

(48,450)



$

6,759



$

(105,781)



$

135,371


Special items:











Other cost of goods sold (a)




450



22,933



450



22,933


Share-based compensation


63,676



58,598



73,423



122,274



97,275


Restructuring related charges in operating expenses (b)


16,585



5,682



35,415



22,267



36,982


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


75



(338)



(121)



(263)



(1,633)


Amortization of acquired intangible assets


80,967



79,740



25,939



160,707



25,939


Write-off of debt issuance costs (e)




458



6,104



458



6,104


Deal costs in interest and other income, net (f)


1,009







1,009




Other operating expenses (c)


20,676



6,569



28,229



27,245



43,481


Pre-tax total special items


182,988



151,159



191,922



334,147



231,081


Other income tax effects and adjustments (g)


(15,728)



2,324



(36,720)



(13,404)



(39,818)


Non-GAAP net income


$

109,929



$

105,033



$

161,961



$

214,962



$

326,634



































Weighted average shares — basic


663,603



658,963



552,238



661,280



524,787


Weighted average shares — diluted


663,603



658,963



562,149



661,280



535,433













GAAP diluted net income (loss) per share


$

(0.09)



$

(0.07)



$

0.01



$

(0.16)



$

0.25


Non-GAAP diluted net income per share (h)


$

0.16



$

0.16



$

0.28



$

0.32



$

0.60




(a)

Other costs of goods sold includes amortization of the Cavium inventory fair value step up in 2018 as well as charges for past intellectual property licensing matters in 2019.

(b)

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

(c)

Other operating expenses include Cavium, Aquantia, and Avera merger costs.

(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 May 4, 2019, as well as during the three and six months ended August 4, 2018.

(f)

Deal costs include transaction costs incurred in connection with the divestiture of the Wi-Fi Connectivity business.

(g)

Other income tax effects and adjustments relate to tax provision based on a non-GAAP income tax rate of 4.5% for the three months ended May 4, 2019 and the three and six months ended August 3, 2019, and based on a non-GAAP income tax rate of 4% for the three and six months ended August 4, 2018.

(h)

Non-GAAP diluted net income per share for the three months ended August 3, 2019 and May 4, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 675,755 shares and 671,048 shares, respectively, due to the non-GAAP net income reported in the respective period. Non-GAAP diluted net income per share for the six months ended August 3, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 673,399 shares due to the non-GAAP net income reported in the period.


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