Marvell Technology Group Ltd. Reports Fourth Fiscal Quarter and Fiscal Year 2013 Financial Results

Key Fourth Quarter of Fiscal 2013 and Fiscal Year 2013 Financial Highlights

-Revenue: Q4 FY 2013 $775 Million; FY 2013, $3.17 Billion
-GAAP Net Income: Q4 FY 2013, $50 Million; FY 2013, $307 Million
-GAAP EPS: Q4 FY 2013, $0.09; FY 2013, $0.54
-Non-GAAP Net Income: Q4 FY 2013, $104 Million; FY 2013, $498 Million
-Non-GAAP EPS: Q4 FY 2013, $0.19; FY 2013, $0.86
-Free Cash Flow: Q4 FY 2013, $161 Million, FY 2013, $626 Million

First Quarter of Fiscal 2014 Financial Outlook

Marvell’s financial outlook does not include the potential impact of future share repurchases, pending litigation matters, business combinations, asset acquisitions or other investments that may be completed after February 2, 2013.

-Revenue is expected to be in the range of $700 to $740 Million
-GAAP Gross Margin is expected to be in the range of 52.7% +/- 50 bps. Non-GAAP Gross Margin is expected to be in the range of 53.0% +/- 50 bps.
-GAAP Operating Expenses are expected to be in the range of $360 Million +/- $10 Million. Non-GAAP Operating Expenses to be in the range of $310 Million +/- $10 Million.
-GAAP EPS expected to be in the range of $0.04 +/- $0.02. Non-GAAP EPS expected to be in the range of $0.14 +/- $0.02.

Fourth Quarter of Fiscal 2013 and Fiscal Year 2013 Summary

Revenue for the fourth quarter of fiscal 2013 was $775 million, a 1 percent sequential decrease from $781 million in the third quarter of fiscal 2013, ended October 27, 2012, and a 4 percent increase from revenue of $743 million in the fourth quarter of fiscal 2012, ended January 28, 2012.

For the fiscal year ended February 2, 2013, revenue was $3.17 billion, a decrease of 7 percent from revenue of $3.39 billion for the fiscal year ended January 28, 2012.

GAAP net income for the fourth quarter of fiscal 2013 was $50 million, or $0.09 per share (diluted), compared with GAAP net income of $69 million, or $0.12 per share (diluted), for the third quarter of fiscal 2013, and $81 million, or $0.13 per share (diluted), for the fourth quarter of fiscal 2012.

For the year ended February 2, 2013, GAAP net income was $307 million, or $0.54 per share (diluted), compared with GAAP net income of $615 million, or $0.99 per share (diluted), for the year ended January 28, 2012.

Non-GAAP net income was $104 million, or $0.19 per share (diluted), for the fourth quarter of fiscal 2013, compared with non-GAAP net income of $113 million, or $0.20 per share (diluted), for the third quarter of fiscal 2013 and $127 million, or $0.21 per share (diluted), for the fourth quarter of fiscal 2012.

For the fiscal year ended February 2, 2013, non-GAAP net income was $498 million, or $0.86 per share (diluted), compared with non-GAAP net income of $795 million, or $1.27 per share (diluted) for the fiscal year ended January 28, 2012.

“Fiscal year 2013 was a disappointing year for Marvell. Industry hard disk drive unit shipments declined for the year offsetting share gains, the networking end market was relatively flat and we endured a product transition in Mobile. Despite the revenue decline, Marvell remained profitable and generated $626 million in free cash flow while simultaneously continuing investments in several key initiatives,” said Dr. Sehat Sutardja, Marvell’s Chairman and Chief Executive Officer. “We expect many of our investments and key initiatives to produce tangible results in the new fiscal year across all of our served end markets. These include continued share gains in HDDs, strong growth and share gains in SSDs and hybrids, above market growth in networking, increased traction for our connectivity products and a resumption of growth in our mobile business.”

Marvell reports net income, basic and diluted net income per share, in accordance with U.S. generally accepted accounting principles (GAAP) and on a non-GAAP basis as outlined below. Reconciliations of GAAP net income to non-GAAP net income for the three months ended February 2, 2013, October 27, 2012 and January 28, 2012 appear in the financial statements below. Non-GAAP net income, where applicable, excludes the effect of stock-based compensation, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, and certain one-time expenses and benefits.

GAAP gross margin for the fourth quarter of fiscal 2013 was 52.2 percent, compared to 52.0 percent for the third quarter of fiscal 2013 and 54.1 percent for the fourth quarter of fiscal 2012. GAAP gross margin for fiscal year 2013 was 52.9 percent compared to 56.8 percent for fiscal year 2012.

Non-GAAP gross margin for the fourth quarter of fiscal 2013 was 53.2 percent, compared to 52.3 percent for the third quarter of fiscal 2013 and 54.5 percent for the fourth quarter of fiscal 2012. Non-GAAP gross margin for fiscal year 2013 was 53.4 percent compared to 57.0 percent for fiscal year 2012.

Shares used to compute GAAP net income per diluted share for the fourth quarter of fiscal 2013 were 528 million shares, compared with 559 million shares in the third quarter of fiscal 2013 and 599 million shares in the fourth quarter of fiscal 2012. Shares used to compute GAAP net income per diluted share for fiscal year 2013 were 563 million shares as compared with 623 million shares for fiscal year 2012.

Shares used to compute non-GAAP net income per diluted share for the fourth quarter of fiscal 2013 were 544 million shares, compared with 578 million shares for the third quarter of fiscal 2013 and 606 million shares for the fourth quarter of fiscal 2012. Shares used to compute non-GAAP net income per diluted share for fiscal year 2013 were 579 million shares as compared with 627 million shares for fiscal year 2012. The decrease in shares used to compute both Marvell’s GAAP and non-GAAP net income per diluted share was primarily due to Marvell’s share repurchase program.

Cash flow from operations for the fourth quarter of fiscal 2013 was $205 million, compared to the $137 million reported in the third quarter of fiscal 2013 and the $69 million reported in the fourth quarter of fiscal 2012. Free cash flow for the fourth quarter of fiscal 2013 was $161 million, compared to the $113 million reported in the third quarter of fiscal 2013 and the $38 million reported in the fourth quarter of fiscal 2012. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of IP licenses.

Under the share repurchase program, Marvell repurchased approximately 34 million shares for a total of $283 million in the fourth quarter of fiscal 2013. Over the past ten quarters, Marvell has repurchased and retired approximately 184 million shares, or about 27 percent, of its outstanding shares.

Marvell also paid a quarterly dividend of $0.06 per share on December 21, 2012 to all shareholders of record as of December 13, 2012. Marvell intends to pay its next quarterly dividend of $0.06 per share on April 4, 2013 to all shareholders of record as of March 14, 2013.

The payment of future quarterly cash dividends on Marvell’s common shares is subject to, among other things, the best interests of its shareholders, its results of operations, cash balances and future cash requirements, financial condition, statutory requirements of Bermuda law, and other factors that the board of directors may deem relevant.

Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of stock-based compensation expense, amortization of acquired intangible assets, acquisition-related costs, restructuring costs, and certain one-time expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to Marvell’s core operating performance. Non-GAAP net income per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP net income per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of stock-based compensation expected to be incurred in future periods but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also include the dilutive/anti-dilutive effects of common stock options and restricted stock units.

Marvell believes that the presentation of non-GAAP financial measures provide important supplemental information to management and investors regarding financial and business trends relating to Marvell’s financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, the information provided by GAAP financial measures. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance. For further information regarding why Marvell believes that these non-GAAP measures provide useful information to investors, the specific manner in which management uses these measures, and some of the limitations associated with the use of these measures, please refer to Marvell’s Current Report on Form 8-K filed today with the SEC.