Marvell: Fiscal 4Q19 Financial Results

(in $ million)	4Q18	4Q19	FY18	FY19
Revenue	615.4	744.8	2,409	2,866
*Growth*		21%		*19%*
Net income (loss)	48.8	(260.7)	520.8	(179.1)

Highlights

Q4 Revenue: $745 million
Q4 Gross Margin: 43.2% GAAP gross margin; 64.5% non-GAAP gross margin
Q4 Diluted loss per share: $(0.40) GAAP diluted loss per share from continuing operations; $0.25 non-GAAP diluted income per share from continuing operations
Cash and short-term investments: $582 million

Marvell Technology Group Ltd. reported financial results for the fourth fiscal quarter and the full fiscal year, ended February 2, 2019.

Revenue for the fourth quarter of fiscal 2019 was $745 million.

GAAP net loss from continuing operations for 4FQ19 was $(261) million, or $(0.40) per diluted share. Non-GAAP net income from continuing operations for 4FQ19 was $168 million, or $0.25 per diluted share.

Cash flow from operations for 4FQ19 was $107 million.

Revenue for FY19 was $2.9 billion. GAAP net loss from continuing operations for FY19 was $(179) million, or $(0.30) per diluted share.

Non-GAAP net income from continuing operations for FY19 was $716 million, or $1.19 per diluted share.

Cash flow from operations for FY19 was $597 million.

“Marvell continued to improve its financial performance in fiscal 2019, while also increasing scale and diversifying its business through the acquisition of Cavium. While macroeconomic conditions are currently impacting our first quarter outlook, we expect growth to resume in the second quarter,” said Matt Murphy, Marvell’s president and CEO. “Looking ahead, we are excited about our expanding position in the 5G market, including our recently announced partnership with Samsung, which includes multiple generations of baseband and control plane processors for both LTE and 5G base stations.”

1FQ20 Outlook
• Revenue is expected to be $650 million +/- 3%.
• GAAP gross margin is expected to be 55%.
• Non-GAAP gross margin is expected to be 64%.
• GAAP operating expenses are expected to be $378 million to $388 million.
• Non-GAAP operating expenses are expected to be $295 million to $300 million.
• GAAP diluted loss per share from continuing operations is expected to be $(0.09) to $(0.05) per share.
• Non-GAAP diluted income per share from continuing operations is expected to be $0.12 to $0.16 per share.

Comments

(in $ million)

4Q18

3Q19

4Q19

Storage revenue

323.7

406.8

317.0

Y/Y growth

29%

-2%

Storage products comprised HDD and SSD controllers, FC adapters and data center storage solutions.

The third quarter of fiscal 2019 was the first full quarter that Marvell and Cavium operated as a combined company.

The majority of company's weakness during the most recent quarter was in storage, representing only 43% of revenue in 4FQ19 vs. 53% in in 4FQ18.

Storage revenue for the quarter came in below expectations at $317 million declining 22% sequentially and 2% Y/Y.

The majority of the shortfall was due to a reduction in demand for storage controllers. FC business was slightly lower than expected too, but within a normal revenue range for that business.

Marvell believes that demand for its storage controller products was impacted primarily by macroeconomic uncertainty, a reduction in cloud capital spending and PC CPU shortages. In addition to a reduction in direct orders, it also experienced changes in customer demand for products consigned to third-party logistics hubs commonly referred to as vendor-managed inventory arrangements. Changes in consumption through these arrangements can occur without any prior notice and in the fourth quarter, these were particularly pronounced and volatile.

The firm expects that the majority of the remaining notebook market using HDDs would shift to SSDs over the next few years, creating a headwind for HDD storage controllers. However, it expects to offset these headwinds with growth from investment areas in nearline HDDs, preamps and enterprise and data center SSDs, including new flash solutions.

By closely coupling in the controller and pre-amp design, Marvell was able to develop a chip sets solution that delivers capacity leadership. This has increased its dollar content in this HDD by approximately 75% from its prior nearline solution.

However, Marvell does expect the next quarter to be the bottom for its storage revenue in FY20 but Its customers have indicated they expect demand to increase in the second half of this year.

Firm also believes that it started to under ship the HDD end markets starting in 4FQ19 and projects this under shipment to continue in next quarter.

Global revenue is expected to be down to only $650 million or -13% Q/Q, once more especially impacted by storage business.