Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP (Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Year Ended

February 1,
2020

November 2,
2019

February 2,
2019

February 1,
2020

February 2,
2019

GAAP gross profit:

$

304,744

$

340,067

$

322,002

$

1,356,941

$

1,458,392

Special items:

Share-based compensation

3,181

3,990

2,942

13,759

12,024

Amortization of acquired intangible assets

86,383

72,146

57,591

279,567

134,169

Other cost of goods sold (a)

52,510

4,758

97,598

57,718

226,372

Total special items

142,074

80,894

158,131

351,044

372,565

Non-GAAP gross profit

$

446,818

$

420,961

$

480,133

$

1,707,985

$

1,830,957

GAAP gross margin

42.5

%

51.3

%

43.2

%

50.3

%

50.9

%

Non-GAAP gross margin

62.3

%

63.5

%

64.5

%

63.3

%

63.9

%

Total GAAP operating expenses

$

419,239

$

401,576

$

375,010

$

1,600,299

$

1,415,122

Special items:

Share-based compensation

(49,989)

(63,375)

(47,638)

(229,050)

(186,071)

Restructuring related charges (b)

(18,258)

(14,802)

(12,740)

(55,328)

(76,753)

Amortization of acquired intangible assets

(28,232)

(20,614)

(21,097)

(88,515)

(49,150)

Other operating expenses (c)

(16,621)

(19,495)

(7,392)

(63,361)

(62,095)

Total special items

(113,100)

(118,286)

(88,867)

(436,254)

(374,069)

Total non-GAAP operating expenses

$

306,139

$

283,290

$

286,143

$

1,164,045

$

1,041,053

GAAP operating margin

(16.0)

%

(9.3)

%

(7.1)

%

(9.0)

%

1.5

%

Other cost of goods sold (a)

7.3

%

0.7

%

13.1

%

2.1

%

7.9

%

Share-based compensation

7.4

%

10.2

%

6.8

%

9.0

%

6.9

%

Restructuring related charges (b)

2.5

%

2.2

%

1.7

%

2.0

%

2.7

%

Amortization of acquired intangible assets

16.0

%

14.0

%

10.6

%

13.6

%

6.4

%

Other operating expenses (c)

2.4

%

3.0

%

0.9

%

2.5

%

2.2

%

Non-GAAP operating margin 

19.6

%

20.8

%

26.0

%

20.2

%

27.6

%

GAAP interest and other income (loss), net

$

1,102,902

$

(19,460)

$

(16,340)

$

1,041,740

$

(47,917)

Special items:

      Gain on sale of intellectual property

—

—

(3,500)

—

(3,500)

       Restructuring related items (d)

(1,122,988)

(946)

157

(1,124,197)

15

       Write-off of debt issuance costs (e)

1,621

—

782

2,079

7,736

       Deal costs (f)

—

496

—

1,505

—

Total special items

(1,121,367)

(450)

(2,561)

(1,120,613)

4,251

Total non-GAAP interest and other income (loss), net

$

(18,465)

$

(19,910)

$

(18,901)

$

(78,873)

$

(43,666)

GAAP net income (loss)

$

1,772,673

$

(82,501)

$

(260,698)

$

1,584,391

$

(179,094)

Special items:

Other cost of goods sold (a)

52,510

4,758

97,598

57,718

226,372

Share-based compensation

53,170

67,365

50,580

242,809

198,095

Restructuring related charges (gain) in operating expenses (b)

18,258

14,802

12,740

55,328

76,753

Restructuring related items in interest and other income (loss), net (d)

(1,122,988)

(946)

157

(1,124,197)

15

Amortization of acquired intangible assets

114,615

92,760

78,688

368,082

183,319

Gain on sale of intellectual property

—

—

(3,500)

—

(3,500)

Write-off of debt issuance costs (e)

1,621

—

782

2,079

7,736

Transaction costs included in interest and other income, net (f)

—

496

—

1,505

—

Other operating expenses (c)

16,621

19,495

7,392

63,361

62,095

Pre-tax total special items

(866,193)

198,730

244,437

(333,315)

750,885

Other income tax effects and adjustments (g)

(789,761)

(3,773)

184,348

(806,938)

144,585

Non-GAAP net income

$

116,719

$

112,456

$

168,087

$

444,138

$

716,376

Weighted average shares — basic

665,562

668,178

657,835

664,709

591,232

Weighted average shares — diluted

675,700

668,178

657,835

676,094

591,232

GAAP diluted net income (loss) per share

$

2.62

$

(0.12)

$

(0.40)

$

2.34

$

(0.30)

Non-GAAP diluted net income per share (h)

$

0.17

$

0.17

$

0.25

$

0.66

$

1.19

(a)

Other costs of goods sold includes amortization of the Avera and Aquantia inventory fair value adjustment in fiscal 2020, amortization of the Cavium inventory fair value adjustment in fiscal 2019, as well as charges for past intellectual property licensing matters.

(b)

Restructuring related charges include employee severance, facilities related costs, and impairment of equipment and other assets.  Restructuring related charges in the three months and twelve months ended February 2, 2019 include gain on sale of a building that was a direct result of restructuring.

(c)

Other operating expenses primarily include Cavium, Aquantia and Avera merger costs. 

(d)

Interest and other income (loss), net includes restructuring related items such as gain on sale of a business and foreign currency remeasurement associated with restructuring related accruals.

(e)

Write-off of debt issuance costs is associated with the partial term loan repayment.

(f)

Costs incurred in connection with preparation of the divestiture of the Wi-Fi Connectivity business.

(g)

Other income tax effects and adjustments relate to tax provision based on a non-GAAP income tax rate of 4.5% for the three months ended November 2, 2019 and the three and twelve months ended February 1, 2020, and based on a non-GAAP income tax rate of 4% for the three and twelve months ended February 2, 2019.

(h)

Non-GAAP diluted net income per share for the three months ended November 2, 2019 and February 2, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 679,345 and 663,580 shares, respectively, due to the non-GAAP net income reported in the respective period. Non-GAAP diluted net income per share for the year ended February 2, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 600,049, due to the non-GAAP net income reported in the period.