Marvell Technology Group Ltd. Reports Fourth Fiscal Quarter and Fiscal Year 2016 Financial Results

From time to time, our customers agreed to take shipments in an earlier fiscal quarter than the fiscal quarter they originally requested delivery. When such agreement would not have occurred but for the request made by Marvell, we refer to such transactions internally as "pull-ins." Pull-in sales increased compared to historical levels beginning in the fourth quarter of fiscal 2015 and returned to historical levels in the third quarter of fiscal 2016. Net revenue in fiscal 2016 related to pull-in sales for shipments taken early by our customers was approximately 9 percent and 11 percent of net revenue in the first and second quarters of fiscal 2016, respectively, and declined to less than 1 percent of net revenue in both the third and fourth quarters of fiscal 2016. This compares to net revenue in fiscal 2015 related to pull-in sales for shipments taken early by our customers, which was less than 1 percent in the first and second quarters of fiscal 2015, 1 percent in the second quarter of fiscal 2015, and increased to 3 percent in the fourth quarter of fiscal 2015. Beginning in fiscal 2017, our policy is not to engage in pull-in transactions and we therefore do not expect them to have any meaningful impact on net revenue in future periods. 

CMU Settlement

On February 17, 2016, Marvell announced that, pursuant to a court-ordered mediation, the company and Carnegie Mellon University settled their patent infringement lawsuit.  The parties resolved the case on mutually acceptable terms, including an aggregate payment by Marvell to CMU of $750 million, with no ongoing royalty payments.  Marvell paid the $750 million in the first quarter of fiscal 2017.

NASDAQ Compliance Plan

On May 3, 2016, Marvell announced that the company received written notification from Nasdaq that, following Marvell's hearing before The Nasdaq Hearings Panel on April 14, 2016, it granted the Company an extension of time to September 6, 2016 to regain compliance with continued listing requirements.  Until that time, shares of Marvell stock will remain listed on The Nasdaq Stock Market.

On February 22, 2016, the Audit Committee approved the engagement of Deloitte & Touche LLP as the Company's new independent public accounting firm.  On March 1, 2016, the Company reported the results of the Audit Committee's independent investigation of certain accounting and internal control matters.  The preparation and filing of the Company's Annual Report on Form 10-K for fiscal 2016 and its Quarterly Reports on Form 10-Q for the second and third quarters of fiscal 2016 and for the first quarter of fiscal 2017 have yet to be completed.  The Company is working diligently to complete these filings as soon as practicable, at which time Marvell believes it will regain full compliance with continued listing requirements.

Additions to Company Leadership

On April 5, 2016, Marvell announced a senior leadership transition with the departure of Chief Executive Officer Dr. Sehat Sutardja and President Weili Dai from their management positions. On May 1, 2016, Richard S. Hill was appointed Chairman of the Board. Mr. Hill will also serve as the company's principal executive officer through the filing of Marvell's Quarterly Report on Form 10-Q for the quarter ended July 30, 2016. 

On July 11, 2016, Matthew J. Murphy joined Marvell as President and Chief Executive Officer and as a director.  A veteran of Maxim Integrated, Mr. Murphy joins an executive team and Board of Directors that has seen a significant infusion of new talent over the past few months, and will be leading that team in the transformation of the Company with a focus on profitable growth.

In addition to Mr. Murphy and Mr. Hill, joining the Board of Directors since April 1, 2016 are Peter A. Feld, Oleg Khaykin, Robert E. Switz and Michael Strachan.  Recent additions to the executive team include Mitchell Gaynor, Executive Vice President and Chief Legal Officer, Chris Koopmans, Executive Vice President Marketing and Sales, and Andy Micallef, Chief Operations Officer.  Maya Strelar-Migotti has returned to her role as Executive Vice President of the Smart Networked Devices and Solutions Business Group and Pantelis Alexopoulos has returned to his role as Executive Vice President of the Storage Business Group.  While a search for a permanent Chief Financial Officer is on-going, the company also recently announced Willem Meintjes as Senior Vice President of Finance.

Conference Call

Marvell will conduct a conference call on Tuesday, July 19, 2016 at 1:45 p.m. Pacific Time to discuss results for the fourth quarter and full year fiscal 2016. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 45077084.  The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until August 19, 2016.    

Discussion of Non-GAAP Financial Measures

Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other  related charges, litigation settlement, 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 diluted 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 diluted net income per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of share-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 provides 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. The Form 8-K is available on the SEC's website at www.sec.gov as well as on the Marvell website in the Investor Relations section at www.marvell.com.

Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995 

This press release contains forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, including: its use of non-GAAP financial measures as important supplemental information. Words such as "anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates," "can," "will" and similar expressions identify such forward-looking statements.  These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. Actual events or results may differ materially from those described in this press release due to a number of risks and uncertainties, including, but not limited to: actions that may be taken by Marvell as a result of the Audit Committee's investigation; adverse impacts of litigation or regulatory activities; Marvell's ability to hire a permanent Chief Financial Officer and Chief Accounting Officer and Controller in a timely manner; Marvell's ability to regain compliance with its SEC reporting obligations within the time of the exemption granted by NASDAQ; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's reliance on the hard disk drive and mobile and wireless markets, which are highly cyclical and intensely competitive; costs and liabilities relating to current and future litigation; Marvell's reliance on a few customers for a significant portion of its revenue; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner and the adoption of those products in the market; seasonality in sales of consumer devices in which Marvell's products are incorporated; uncertainty in the worldwide economic conditions; risks associated with manufacturing and selling a majority of Marvell's products and Marvell's customers' products outside of the United States ; and other risks detailed in Marvell's SEC filings from time to time. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's latest Annual Report on Form 10-K for the year ended January 31, 2015 and its latest Quarterly Report on Form 10-Q for the quarter ended May 2, 2015 as filed with the SEC on June 4, 2015 , and other factors detailed from time to time in Marvell's filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.

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