Marvell Technology Group Ltd. Reports Second Quarter of Fiscal 2017 Financial Results

 

Reconciliations from GAAP to Non-GAAP

(Unaudited)

(In thousands, except per share amounts)














Three Months Ended

Six Months Ended



July 30,


April 30,


August 1,


July 30,


August 1,



2016


2016(d)


2015


2016


2015












GAAP net income (loss)

$   51,305


$ (22,679)


$ (771,940)


$   28,626


$ (757,850)

Share-based compensation

37,196


24,453


36,674


61,649


69,895

Restructuring and other related charges (a)

721


4,441


13,000


5,162


13,592

Amortization of acquired intangible assets

2,946


2,946


3,346


5,892


6,839

Litigation matters (b)

(115)


100


748,117


(15)


746,417

Other (c)

103


(2,743)


10,205


173


31,587

Non-GAAP net income, as reported

$   92,156


$     6,518


$    39,402


$ 101,487


$  110,480

Non-GAAP net income, as adjusted (d)



$     9,331





























GAAP weighted average shares - diluted

514,314


508,794


516,368


513,669


516,298


Non-GAAP adjustment

12,139


13,569


16,574


10,739


17,753

Non-GAAP weighted average shares diluted (e)

526,453


522,363


532,942


524,408


534,051












GAAP diluted net income per share

$       0.10


$     (0.04)


$       (1.49)


$       0.06


$       (1.47)

Non-GAAP diluted net income per share, as reported

$       0.18


$       0.01


$        0.07


$       0.19


$        0.21

Non-GAAP diluted net income per share, as adjusted (d)



$       0.02






























GAAP gross profit:

$ 338,796


$ 281,612


$  248,773


$ 620,408


$  621,908


Share-based compensation

2,832


1,802


2,012


4,634


3,559


Restructuring and other related charges (a)

-


-


-


-


-


Amortization of acquired intangible assets

485


485


778


970


1,703


Litigation matters (b)

-


-


81,390


-


79,690

Non-GAAP gross profit

$ 342,113


$ 283,899


$  332,953


$ 626,012


$  706,860












GAAP gross margin

54.1%


52.1%


35.0%


53.2%


43.3%


Share-based compensation

0.4%


0.3%


0.3%


0.3%


0.3%


Restructuring and other related charges (a)

0.0%


0.0%


0.0%


0.0%


0.0%


Amortization of acquired intangible assets

0.1%


0.1%


0.1%


0.1%


0.1%


Litigation matters (b)

0.0%


0.0%


11.5%


0.0%


5.6%

Non-GAAP gross margin

54.6%


52.5%


46.9%


53.6%


49.3%












GAAP research and development:

$ 228,562


$ 241,271


$  297,321


$ 469,833


$  577,435


Share-based compensation

(28,581)


(24,396)


(27,807)


(52,977)


(52,588)


Restructuring and other related charges (a)

329


(813)


(11,680)


(484)


(11,680)


Litigation matters (b)

-


-


(5,000)


-


(5,000)


Other (c)

(174)


49


(134)


(125)


(134)

Non-GAAP research and development

$ 200,136


$ 216,111


$  252,700


$ 416,247


$  508,033












GAAP selling and marketing:

$   31,094


$   31,379


$    30,841


$   62,473


$    67,015


Share-based compensation

(3,315)


(2,942)


(2,707)


(6,257)


(5,284)


Restructuring and other related charges (a)

(27)


1


-


(26)


-


Other (c)

71


(304)


-


(233)


-

Non-GAAP selling and marketing

$   27,823


$   28,134


$    28,134


$   55,957


$    61,731












GAAP general and administrative:

$   37,173


$   35,623


$    36,563


$   72,796


$    77,590


Share-based compensation

(2,468)


4,687


(4,148)


2,219


(8,464)


Restructuring and other related charges (a)

(1,023)


(3,629)


(1,320)


(4,652)


(1,912)


Litigation matters (b)

115


(100)


(7,060)


15


(7,060)


Other (c)

-


(886)


(2,748)


(886)


(21,050)

Non-GAAP general and administrative

$   33,797


$   35,695


$    21,287


$   69,492


$    39,104












GAAP Carnegie Mellon University litigation settlement

$           -


$           -


$  654,667


$           -


$  654,667


Litigation matters (b)

-


-


(654,667)


-


(654,667)

Non-GAAP Carnegie Mellon University litigation settlement

$           -


$           -


$            -


$           -


$            -












GAAP provision (benefit) for income taxes

$   (5,515)


$   (4,955)


$      5,543


$ (10,470)


$      9,872


Other (c)

-


3,884


(7,323)


1,071


(10,403)

Non-GAAP provision (benefit) for income taxes, as reported

$   (5,515)


$   (1,071)


$     (1,780)


$   (9,399)


$        (531)

Non-GAAP provision (benefit) for income taxes, as adjusted (d)



$   (3,884)









(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. Examples of other incremental charges include impairment of equipment specifically identified as part of the restructuring action. 

(b) 

The amounts recorded represent charges recognized for pending litigation proceedings.

(c) 

Other costs for each of the three months ended July 30, 2016, April 30, 2016 and August 1, 2015, and the six months ended July 30, 2016 and August 1, 2015 include expenses related to retention bonuses offered to employees expected to remain through the ramp down of certain operations related to the mobile business, as well as the closure of certain design center operations in Europe.  Other costs for the three months ended April 30, 2016 and August 1, 2015, and the six months ended July 30, 2016 and August 1, 2015 also include costs for the surety bonds related to the litigation with CMU that was settled in February 2016. In addition, other costs for the six months ended August 1, 2015 include a payment of $15.4 million due to Dr. Sehat Sutardja, the Company's former Chief Executive Officer (see "Note 14 – Related Party Transactions" in the Notes to the Consolidated Financial Statements set forth in the Company's Annual Report on Form 10-K for fiscal 2016). The related tax effect of the payment to Dr. Sutardja is also included in other costs for the three months ended April 30, 2016, and the six months ended July 30, 2016 and August 1, 2015. The tax effect of certain restructuring charges in the three and six months ended August 1, 2015 is also included in other costs for those periods.

(d) 

For the three months ended April 30, 2016, the Company made a correction to the non-GAAP benefit for income taxes of $1,071 thousand that it previously reported in its fiscal 2017 first quarter earnings announcement on Wednesday, July 27, 2016. As a result, the Company now reports non-GAAP net income, as adjusted of $9,331 thousand, non-GAAP earnings per share, as adjusted of $0.02 per share, and non-GAAP benefit for income taxes, as adjusted of $3,884 thousand for the three months ended April 30, 2016. 

(e) 

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 and to also include the dilutive/anti-dilutive effects of common stock options and restricted stock units, as applicable. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method.


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