Marvell Technology Group Ltd. (MRVL)
Q1 2012 Earnings Call Transcript
May 26, 2011 4:45 p.m. ET

Executives

Sukhi Nagesh – Vice President, Investor Relations
Sehat Sutardja Ph.D. – Chairman, President and Chief Executive Officer
Clyde R. Hosein – Chief Financial Officer

Analysts

James Schneider – Goldman Sachs
Glen Yeung – Citigroup
Sanjay Devgan – Morgan Stanley
Harlan Sur – J.P. Morgan
Uche Orji – UBS
Vivek Arya – Bank of America/Merrill Lynch
Craig Berger – FBR Capital Markets
Craig Ellis – Caris & Company
Srini Pajjuri – Credit Agricole Securities

Presentation

Operator

Good day, ladies and gentlemen and welcome to the First Quarter 2012 Marvell Technology Group Limited Earnings Conference Call. My name is Jeff and I''ll be your operator for today.

At this time, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. If at any time, you require operator assistance, please press star followed by zero and we will be happy to assist you. As a reminder, this conference is being recorded for replay purposes. I would now like to introduce our host for today, Mr. Sukhi Nagesh, Vice President of Investor Relations. Please proceed Mr. Nagesh.

Sukhi Nagesh

Thank you, Jeff and good afternoon, everyone. Welcome to Marvell Technology Group''s fiscal first quarter earnings call. I’m Sukhi Nagesh, Marvell''s Vice President of Investor Relations and with me on the call today are Dr. Sehat Sutardja, Marvell''s CEO and Clyde Hosein, Marvell''s CFO. We will all be available during the Q&A portion of the call today. If you have not obtained a copy of our current press release, it can be found at our company website under the Investor Relations section at Marvell.com.

Additionally, this call is being recorded and will be available for replay from Marvell''s corporate website. Please be reminded that this call will include forward-looking statements that involve risks and uncertainties that could cause Marvell''s results to differ materially from management''s current expectations.

The risks and uncertainties include our expectations about sales, of new and existing products, general market trends including statements about TD and the SSD market, statements regarding our financial predictions for the second quarter of fiscal 2012 and our expectations about long-term growth. To fully understand the risks and uncertainties that may cause results to differ from our outlook, please refer to Marvell''s latest annual report on Form 10-K and subsequent SEC filings for a detailed description of our business and associated risks.

Please be reminded that Marvell undertakes no obligation to revise or update publicly any forward-looking statements. During our call today, we will make reference to certain non-GAAP financial measures which exclude stock based compensation expense as well as charges related to acquisitions, restructuring, gains and other charges that are driven primarily by discrete events that management does not consider to be directly related to Marvell''s core operating performance.

Pursuant to Regulation G, Marvell has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures in Marvell''s first quarter earnings press release, which has been furnished to the SEC on Form 8-K and is available on Marvell''s website in the Investor Relations section. With that, I''d now like to turn the call over to Sehat.

Sehat Sutardja, PhD

Thanks, Sukhi and welcome aboard and good afternoon, everyone. Today, we reported first quarter fiscal 2012 revenues of approximately $802 million, reflecting an 11% sequential decrease from the prior quarter. We delivered non-GAAP gross margin of 58.5%, operating margin of 24% and non-GAAP earnings per share of $0.29.

We generated free cash flow of approximately $157 million, equivalent to a 20% free cash flow margin. We continue to deliver strong profitability and cash flow generation, even in this low point of our revenue cycle, highlighting the long-term leverage of our business model. Also, consistent with our plan to return value to our shareholders, we used approximately $800 million to repurchase about 50 million shares in the quarter.

Now, let me summarize our results across our end markets. First, in our mobile and wireless end market, Q1 revenues declined over 30% sequentially and represented approximately 25% of our overall revenues. The sequential decline was higher than previously anticipated and reflects pronounced seasonality in the consumer end markets and continued softness at one of our larger customers.

Given the recent market concern surrounding our mobile and wireless business, I would like to take a moment to address this up front. First, I would like to stress that the mobile end market is the key area for Marvell and we continue to invest new product developments and to strengthen our infrastructure to support new customers.