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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One) | | | | | |
☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended November 2, 2024
or | | | | | |
☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission file number: 001-40357
MARVELL TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter) | | | | | | | | |
Delaware | | 85-3971597 |
(State or other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
1000 N. West Street, Suite 1200
Wilmington, Delaware 19801
(302) 295-4840
(Address of principal executive offices, zip code and registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
| | | | | | | | | | | | | | |
| | | | |
Title of each class | | Trading Symbol(s) | | Name of each exchange on which registered |
Common Stock, par value $0.002 per share | | MRVL | | The Nasdaq Global Select Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act. | | | | | | | | | | | |
Large accelerated filer | ☒ | Accelerated filer | ☐ |
| | | |
Non-accelerated filer | ¨ | Smaller reporting company | ☐ |
| | Emerging growth company | ☐ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No
The number of shares of common stock of the registrant outstanding as of November 27, 2024 was 865.3 million.
TABLE OF CONTENTS
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Item 1. | | |
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Item 2. | | |
Item 3. | | |
Item 4. | | |
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Item 1. | | |
Item 1A. | | |
Item 2. | | |
Item 5. | | |
Item 6. | | |
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PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
MARVELL TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(In millions, except par value per share)
| | | | | | | | | | | |
| November 2, 2024 | | February 3, 2024 |
ASSETS |
Current assets: | | | |
Cash and cash equivalents | $ | 868.1 | | | $ | 950.8 | |
| | | |
Accounts receivable, net | 997.9 | | | 1,121.6 | |
Inventories | 859.4 | | | 864.4 | |
Prepaid expenses and other current assets | 91.4 | | | 125.9 | |
| | | |
Total current assets | 2,816.8 | | | 3,062.7 | |
Property and equipment, net | 781.9 | | | 756.0 | |
Goodwill | 11,586.9 | | | 11,586.9 | |
Acquired intangible assets, net | 2,957.7 | | | 4,004.1 | |
Deferred tax assets | 406.5 | | | 311.9 | |
Other non-current assets | 1,165.8 | | | 1,506.9 | |
Total assets | $ | 19,715.6 | | | $ | 21,228.5 | |
| | | |
LIABILITIES AND STOCKHOLDERS’ EQUITY |
Current liabilities: | | | |
Accounts payable | $ | 538.1 | | | $ | 411.3 | |
Accrued liabilities | 825.2 | | | 1,032.9 | |
Accrued employee compensation | 270.9 | | | 262.7 | |
| | | |
| | | |
| | | |
Short-term debt | 129.4 | | | 107.3 | |
Total current liabilities | 1,763.6 | | | 1,814.2 | |
| | | |
Long-term debt | 3,965.5 | | | 4,058.6 | |
| | | |
| | | |
Other non-current liabilities | 613.6 | | | 524.3 | |
Total liabilities | 6,342.7 | | | 6,397.1 | |
Commitments and contingencies (Note 8) | | | |
Stockholders’ equity: | | | |
Common stock, $0.002 par value | 1.7 | | | 1.7 | |
Additional paid-in capital | 14,629.0 | | | 14,845.3 | |
Accumulated other comprehensive income (loss) | (0.3) | | | 1.1 | |
Accumulated deficit | (1,257.5) | | | (16.7) | |
Total stockholders’ equity | 13,372.9 | | | 14,831.4 | |
Total liabilities and stockholders’ equity | $ | 19,715.6 | | | $ | 21,228.5 | |
See accompanying notes to unaudited condensed consolidated financial statements
MARVELL TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| November 2, 2024 | | October 28, 2023 | | November 2, 2024 | | October 28, 2023 |
Net revenue | $ | 1,516.1 | | | $ | 1,418.6 | | | $ | 3,949.9 | | | $ | 4,081.2 | |
Cost of goods sold | 1,166.7 | | | 867.4 | | | 2,485.1 | | | 2,451.7 | |
Gross profit | 349.4 | | | 551.2 | | | 1,464.8 | | | 1,629.5 | |
Operating expenses: | | | | | | | |
Research and development | 488.6 | | | 481.1 | | | 1,451.4 | | | 1,436.6 | |
Selling, general and administrative | 205.3 | | | 213.0 | | | 602.5 | | | 622.0 | |
| | | | | | | |
Restructuring related charges | 358.3 | | | 3.4 | | | 366.4 | | | 105.3 | |
Total operating expenses | 1,052.2 | | | 697.5 | | | 2,420.3 | | | 2,163.9 | |
Operating loss | (702.8) | | | (146.3) | | | (955.5) | | | (534.4) | |
Interest expense | (47.2) | | | (52.6) | | | (144.4) | | | (159.1) | |
Interest income and other, net | (0.5) | | | 11.4 | | | 5.4 | | | 22.1 | |
Interest and other loss, net | (47.7) | | | (41.2) | | | (139.0) | | | (137.0) | |
Loss before income taxes | (750.5) | | | (187.5) | | | (1,094.5) | | | (671.4) | |
Benefit from income taxes | (74.2) | | | (23.2) | | | (9.3) | | | (130.7) | |
Net loss | $ | (676.3) | | | $ | (164.3) | | | $ | (1,085.2) | | | $ | (540.7) | |
| | | | | | | |
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| | | | | | | |
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| | | | | | | |
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Net loss per share — basic | $ | (0.78) | | | $ | (0.19) | | | $ | (1.25) | | | $ | (0.63) | |
| | | | | | | |
Net loss per share — diluted | $ | (0.78) | | | $ | (0.19) | | | $ | (1.25) | | | $ | (0.63) | |
| | | | | | | |
Weighted-average shares: | | | | | | | |
Basic | 865.7 | | | 862.6 | | | 865.5 | | | 860.1 | |
Diluted | 865.7 | | | 862.6 | | | 865.5 | | | 860.1 | |
See accompanying notes to unaudited condensed consolidated financial statements
MARVELL TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(In millions)
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended | | Nine Months Ended |
| November 2, 2024 | | October 28, 2023 | | November 2, 2024 | | October 28, 2023 |
Net loss | $ | (676.3) | | | $ | (164.3) | | | $ | (1,085.2) | | | $ | (540.7) | |
Other comprehensive income (loss), net of tax | | | | | | | |
| | | | | | | |
| | | | | | | |
Net change in unrealized gain (loss) on cash flow hedges | 0.1 | | | (0.4) | | | (1.4) | | | (1.4) | |
| | | | | | | |
Other comprehensive income (loss), net of tax | 0.1 | | | (0.4) | | | (1.4) | | | (1.4) | |
Comprehensive loss, net of tax | $ | (676.2) | | | $ | (164.7) | | | $ | (1,086.6) | | | $ | (542.1) | |
See accompanying notes to unaudited condensed consolidated financial statements
MARVELL TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | | | | | |
| Shares | | Amount | | | | | Total | | | | |
Balance at February 3, 2024 | 865.5 | | | $ | 1.7 | | | $ | 14,845.3 | | | $ | 1.1 | | | $ | (16.7) | | | $ | 14,831.4 | | | | | |
Issuance of common stock in connection with equity incentive plans | 2.2 | | | — | | | 2.2 | | | — | | | — | | | 2.2 | | | | | |
Tax withholdings related to net share settlement of restricted stock units | — | | | — | | | (74.1) | | | — | | | — | | | (74.1) | | | | | |
Stock-based compensation | — | | | — | | | 137.3 | | | — | | | — | | | 137.3 | | | | | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Repurchase of common stock | (2.2) | | | — | | | (150.0) | | | — | | | — | | | (150.0) | | | | | |
Cash dividends declared and paid ($0.06 per share) | — | | | — | | | — | | | — | | | (51.8) | | | (51.8) | | | | | |
Net loss | — | | | — | | | — | | | — | | | (215.6) | | | (215.6) | | | | | |
Other comprehensive loss | — | | | — | | | — | | | (0.7) | | | — | | | (0.7) | | | | | |
Balance at May 4, 2024 | 865.5 | | | $ | 1.7 | | | $ | 14,760.7 | | | $ | 0.4 | | | $ | (284.1) | | | $ | 14,478.7 | | | | | |
Issuance of common stock in connection with equity incentive plans | 3.2 | | | — | | | 49.3 | | | — | | | — | | | 49.3 | | | | | |
Tax withholdings related to net share settlement of restricted stock units | — | | | — | | | (57.6) | | | — | | | — | | | (57.6) | | | | | |
Stock-based compensation | — | | | — | | | 155.5 | | | — | | | — | | | 155.5 | | | | | |
| | | | | | | | | | | | | | | |
Repurchase of common stock | (2.5) | | | — | | | (175.0) | | | — | | | — | | | (175.0) | | | | | |
| | | | | | | | | | | | | | | |
Cash dividends declared and paid ($0.06 per share) | — | | | — | | | — | | | — | | | (51.9) | | | (51.9) | | | | | |
Net loss | — | | | — | | | — | | | — | | | (193.3) | | | (193.3) | | | | | |
Other comprehensive loss | — | | | — | | | — | | | (0.8) | | | — | | | (0.8) | | | | | |
Balance at August 3, 2024 | 866.2 | | | $ | 1.7 | | | $ | 14,732.9 | | | $ | (0.4) | | | $ | (529.3) | | | $ | 14,204.9 | | | | | |
Issuance of common stock in connection with equity incentive plans | 1.6 | | | — | | | 0.9 | | | — | | | — | | | 0.9 | | | | | |
Tax withholdings related to net share settlement of restricted stock units | — | | | — | | | (58.6) | | | — | | | — | | | (58.6) | | | | | |
Stock-based compensation | — | | | — | | | 153.8 | | | — | | | — | | | 153.8 | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Repurchase of common stock | (2.6) | | | — | | | (200.0) | | | — | | | — | | | (200.0) | | | | | |
Cash dividends declared and paid ($0.06 per share) | — | | | — | | | — | | | — | | | (51.9) | | | (51.9) | | | | | |
Net loss | — | | | — | | | — | | | — | | | (676.3) | | | (676.3) | | | | | |
Other comprehensive income | — | | | — | | | — | | | 0.1 | | | — | | | 0.1 | | | | | |
Balance at November 2, 2024 | 865.2 | | | $ | 1.7 | | | $ | 14,629.0 | | | $ | (0.3) | | | $ | (1,257.5) | | | $ | 13,372.9 | | | | | |
MARVELL TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY - (Continued)
(In millions, except per share amounts)
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | |
| Common Stock | | Additional Paid-in Capital | | Accumulated Other Comprehensive Loss | | Retained Earnings | | | | | | |
| Shares | | Amount | | | | | Total | | | | |
Balance at January 28, 2023 | 856.1 | | | $ | 1.7 | | | $ | 14,512.0 | | | $ | — | | | $ | 1,123.5 | | | $ | 15,637.2 | | | | | |
| | | | | | | | | | | | | | | |
Issuance of common stock in connection with equity incentive plans | 3.8 | | | — | | | 8.3 | | | — | | | — | | | 8.3 | | | | | |
Tax withholdings related to net share settlement of restricted stock units | — | | | — | | | (72.6) | | | — | | | — | | | (72.6) | | | | | |
Stock-based compensation | — | | | — | | | 142.2 | | | — | | | — | | | 142.2 | | | | | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Cash dividends declared and paid ($0.06 per share) | — | | | — | | | — | | | — | | | (51.4) | | | (51.4) | | | | | |
Net loss | — | | | — | | | — | | | — | | | (168.9) | | | (168.9) | | | | | |
Other comprehensive loss | — | | | — | | | — | | | (0.9) | | | — | | | (0.9) | | | | | |
Balance at April 29, 2023 | 859.9 | | | $ | 1.7 | | | $ | 14,589.9 | | | $ | (0.9) | | | $ | 903.2 | | | $ | 15,493.9 | | | | | |
Issuance of common stock in connection with equity incentive plans | 3.4 | | | — | | | 52.1 | | | — | | | — | | | 52.1 | | | | | |
Tax withholdings related to net share settlement of restricted stock units | — | | | — | | | (51.2) | | | — | | | — | | | (51.2) | | | | | |
Stock-based compensation | — | | | — | | | 154.0 | | | — | | | — | | | 154.0 | | | | | |
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| | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | |
Cash dividends declared and paid ($0.06 per share) | — | | | — | | | — | | | — | | | (51.7) | | | (51.7) | | | | | |
Net loss | — | | | — | | | — | | | — | | | (207.5) | | | (207.5) | | | | | |
Other comprehensive loss | — | | | — | | | — | | | (0.1) | | | — | | | (0.1) | | | | | |
| | | | | | | | | | | | | | | |
Balance at July 29, 2023 | 863.3 | | | $ | 1.7 | | | $ | 14,744.8 | | | $ | (1.0) | | | $ | 644.0 | | | $ | 15,389.5 | | | | | |
Issuance of common stock in connection with equity incentive plans | 1.8 | | | — | | | 0.6 | | | — | | | — | | | 0.6 | | | | | |
Tax withholdings related to net share settlement of restricted stock units | — | | | — | | | (44.9) | | | — | | | — | | | (44.9) | | | | | |
Stock-based compensation | — | | | — | | | 154.7 | | | — | | | — | | | 154.7 | | | | | |
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Repurchase of common stock | (0.8) | | | — | | | (50.0) | | | — | | | — | | | (50.0) | | | | | |
Cash dividends declared and paid ($0.06 per share) | — | | | — | | | — | | | — | | | (51.8) | | | (51.8) | | | | | |
Net loss | — | | | — | | | — | | | — | | | (164.3) | | | (164.3) | | | | | |
Other comprehensive loss | — | | | — | | | — | | | (0.4) | | | — | | | (0.4) | | | | | |
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Balance at October 28, 2023 | 864.3 | | | $ | 1.7 | | | $ | 14,805.2 | | | $ | (1.4) | | | $ | 427.9 | | | $ | 15,233.4 | | | | | |
See accompanying notes to unaudited condensed consolidated financial statements
MARVELL TECHNOLOGY, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In millions)
| | | | | | | | | | | |
| Nine Months Ended |
| November 2, 2024 | | October 28, 2023 |
Cash flows from operating activities: | | | |
Net loss | $ | (1,085.2) | | | $ | (540.7) | |
Adjustments to reconcile net loss to net cash provided by operating activities: | | | |
Depreciation and amortization | 225.5 | | | 226.0 | |
Stock-based compensation | 449.8 | | | 454.5 | |
Amortization of acquired intangible assets | 805.5 | | | 811.6 | |
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| | | |
Restructuring related impairment charges | 524.1 | | | 32.2 | |
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Deferred income taxes | (106.2) | | | (283.7) | |
Other expense, net | 42.1 | | | 39.9 | |
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Changes in assets and liabilities: | | | |
Accounts receivable | 123.7 | | | (22.4) | |
Prepaid expenses and other assets | 176.2 | | | 14.4 | |
Inventories | (60.2) | | | 123.1 | |
Accounts payable | 109.8 | | | (87.5) | |
Accrued employee compensation | 11.9 | | | 0.7 | |
Accrued liabilities and other non-current liabilities | (49.8) | | | 55.8 | |
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| | | |
Net cash provided by operating activities | 1,167.2 | | | 823.9 | |
Cash flows from investing activities: | | | |
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Purchases of technology licenses | (6.2) | | | (3.3) | |
Purchases of property and equipment | (214.7) | | | (265.3) | |
| | | |
Acquisitions, net of cash acquired | (10.4) | | | (5.5) | |
| | | |
| | | |
Other, net | 0.9 | | | (0.2) | |
Net cash used in investing activities | (230.4) | | | (274.3) | |
Cash flows from financing activities: | | | |
Repurchases of common stock | (525.0) | | | (50.0) | |
Proceeds from employee stock plans | 52.4 | | | 61.1 | |
Tax withholding paid on behalf of employees for net share settlement | (190.3) | | | (168.7) | |
Dividend payments to stockholders | (155.6) | | | (154.9) | |
Payments on technology license obligations | (124.4) | | | (110.2) | |
Proceeds from borrowings | — | | | 1,295.3 | |
Principal payments of debt | (76.6) | | | (1,600.6) | |
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| | | |
| | | |
Other, net | — | | | (7.0) | |
Net cash used in financing activities | (1,019.5) | | | (735.0) | |
Net decrease in cash and cash equivalents | (82.7) | | | (185.4) | |
Cash and cash equivalents at beginning of period | 950.8 | | | 911.0 | |
Cash and cash equivalents at end of period | $ | 868.1 | | | $ | 725.6 | |
See accompanying notes to unaudited condensed consolidated financial statements
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The unaudited condensed consolidated financial statements of Marvell Technology, Inc. (“MTI”), a Delaware corporation, and its wholly owned subsidiaries (the “Company”), as of and for the three and nine months ended November 2, 2024, have been prepared as required by the U.S. Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been condensed or omitted as permitted by the SEC. These unaudited condensed consolidated financial statements and related notes should be read in conjunction with the Company’s fiscal 2024 audited financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2024. In the opinion of management, the financial statements include all adjustments, including normal recurring adjustments and other adjustments, that are considered necessary for fair presentation of the Company’s financial position and results of operations. All inter-company accounts and transactions have been eliminated. Operating results for the periods presented herein are not necessarily indicative of the results that may be expected for the entire year. Certain prior period amounts have been reclassified to conform to current period presentation. These financial statements should also be read in conjunction with the Company’s critical accounting policies included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 3, 2024 and those included in this Quarterly Report on Form 10-Q below. All dollar amounts in the financial statements and tables in these notes, except per share amounts, are stated in millions of U.S. dollars unless otherwise noted.
The Company’s fiscal year is the 52- or 53-week period ending on the Saturday closest to January 31. Accordingly, every fifth or sixth fiscal year will have a 53-week period. The additional week in a 53-week year is added to the fourth quarter, making such quarter consist of 14 weeks. Fiscal 2024 had a 53-week year. Fiscal 2025 is a 52-week year.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, the Company evaluates its estimates, including those related to revenue recognition, provisions for sales returns and allowances, inventory excess and obsolescence, goodwill and other intangible assets, restructuring, income taxes, litigation and other contingencies. Actual results could differ from these estimates and such differences could affect the results of operations reported in future periods. In the current macroeconomic environment, these estimates could require increased judgment and carry a higher degree of variability and volatility. As events continue to evolve and additional information becomes available, these estimates may change materially in future periods.
Note 2. Recent Accounting Pronouncements
Accounting Pronouncements Not Yet Effective
In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280) to improve reportable segment disclosures. The update requires disclosure of incremental segment information on an annual and interim basis. The ASU is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, and requires retrospective application to all prior periods presented in the financial statements. Early adoption is permitted. The Company is evaluating the impact that this new standard will have on the Company’s consolidated financial statements disclosures. The Company does not expect the adoption of this new standard to have a material effect on the Company’s results of operations or financial condition.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) to improve income tax disclosures to enhance transparency and decision usefulness of income tax disclosure. The ASU is effective for fiscal years beginning after December 15, 2024 with updates to be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is evaluating the impact that this new standard will have on the Company’s consolidated financial statements.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40) requiring disaggregated disclosure of certain expense captions into specified categories in the notes to financial statements on an annual and interim basis. The ASU is effective for fiscal years beginning after December 15, 2026 with updates to be applied on a prospective basis with the option to apply the standard retrospectively. Early adoption is permitted. The Company is evaluating the impact that this new standard will have on the Company’s consolidated financial statements.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
Note 3. Revenue
Disaggregation of Revenue
The majority of the Company’s revenue is generated from sales of the Company’s products.
The following table summarizes net revenue disaggregated by end market (in millions, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | November 2, 2024 | | % of Total | | October 28, 2023 | | % of Total | | November 2, 2024 | | % of Total | | October 28, 2023 | | % of Total |
Net revenue by end market: | | | | | | | | | | | | | | | | |
Data center | | $ | 1,101.1 | | | 73 | % | | $ | 555.8 | | | 39 | % | | $ | 2,798.4 | | | 71 | % | | $ | 1,451.4 | | | 36 | % |
Enterprise networking | | 150.9 | | | 10 | % | | 271.1 | | | 19 | % | | 455.0 | | | 12 | % | | 963.4 | | | 24 | % |
Carrier infrastructure | | 84.7 | | | 6 | % | | 316.5 | | | 22 | % | | 232.4 | | | 6 | % | | 881.9 | | | 22 | % |
Consumer | | 96.5 | | | 6 | % | | 168.7 | | | 12 | % | | 227.4 | | | 6 | % | | 478.5 | | | 12 | % |
Automotive/industrial | | 82.9 | | | 5 | % | | 106.5 | | | 8 | % | | 236.7 | | | 5 | % | | 306.0 | | | 6 | % |
| | $ | 1,516.1 | | | | | $ | 1,418.6 | | | | | $ | 3,949.9 | | | | | $ | 4,081.2 | | | |
The following table summarizes net revenue disaggregated by primary geographical market based on destination of shipment (in millions, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
| | November 2, 2024 | | % of Total | | October 28, 2023 | | % of Total | | November 2, 2024 | | % of Total | | October 28, 2023 | | % of Total | | | | |
Net revenue based on destination of shipment: | | | | | | | | | | | | | | | | | | | | |
China | | $ | 658.4 | | | 43 | % | | $ | 605.3 | | | 43 | % | | $ | 1,774.8 | | | 45 | % | | $ | 1,690.3 | | 41 | % | | | | |
United States | | 256.0 | | | 17 | % | | 217.1 | | | 15 | % | | 675.4 | | | 17 | % | | 607.2 | | 15 | % | | | | |
Singapore | | 46.1 | | | 3 | % | | 73.5 | | | 5 | % | | 299.6 | | | 8 | % | | 256.7 | | 6 | % | | | | |
Taiwan | | 198.5 | | | 13 | % | | 22.9 | | | 2 | % | | 279.6 | | | 7 | % | | 135.8 | | 3 | % | | | | |
Thailand | | 73.3 | | | 5 | % | | 94.5 | | | 7 | % | | 233.3 | | | 6 | % | | 215.9 | | 5 | % | | | | |
Malaysia | | 40.3 | | | 3 | % | | 31.6 | | | 2 | % | | 122.7 | | | 3 | % | | 169.5 | | 4 | % | | | | |
Japan | | 55.8 | | | 4 | % | | 37.5 | | | 3 | % | | 106.3 | | | 3 | % | | 125.4 | | 3 | % | | | | |
| | | | | | | | | | | | | | | | | | | | |
Finland | | 32.5 | | | 2 | % | | 158.4 | | | 11 | % | | 74.5 | | | 2 | % | | 353.7 | | 9 | % | | | | |
Other | | 155.2 | | | 10 | % | | 177.8 | | | 12 | % | | 383.7 | | | 9 | % | | 526.7 | | 14 | % | | | | |
| | $ | 1,516.1 | | | | | $ | 1,418.6 | | | | | $ | 3,949.9 | | | | | $ | 4,081.2 | | | | | | |
These destinations of shipment are not necessarily indicative of the geographic location of the Company’s end customers or the country in which the Company’s end customers sell devices containing the Company’s products. For example, a substantial majority of the shipments made to China relate to sales to non-China based customers that have factories or contract manufacturing operations located within China.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
The following table summarizes net revenue disaggregated by customer type (in millions, except percentages):
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended | | |
| | November 2, 2024 | | % of Total | | October 28, 2023 | | % of Total | | November 2, 2024 | | % of Total | | October 28, 2023 | | % of Total | | | | |
Net revenue by customer type: | | | | | | | | | | | | | | | | | | | | |
Direct customers | | $ | 895.4 | | | 59 | % | | $ | 937.6 | | | 66 | % | | $ | 2,229.2 | | | 56 | % | | $ | 2,685.7 | | | 66 | % | | | | |
Distributors | | 620.7 | | | 41 | % | | 481.0 | | | 34 | % | | 1,720.7 | | | 44 | % | | 1,395.5 | | | 34 | % | | | | |
| | $ | 1,516.1 | | | | | $ | 1,418.6 | | | | | $ | 3,949.9 | | | | | $ | 4,081.2 | | | | | | | |
Contract Liabilities
Contract liabilities consist of the Company’s obligation to transfer goods or services to a customer for which the Company has received consideration or the amount is due from the customer. Contract liability balances are comprised of deferred revenue. The amount of revenue recognized during the nine months ended November 2, 2024 that was included in the deferred revenue balance at February 3, 2024 was not material.
As of the end of a reporting period, some of the performance obligations associated with contracts will have been unsatisfied or only partially satisfied. The Company has elected the practical expedient and does not disclose the value of unsatisfied performance obligations for contracts with an original expected duration of one year or less.
Note 4. Restructuring
The Company continuously evaluates its existing operations to increase operational efficiency, decrease costs and increase profitability.
Fiscal 2025 Plan
A restructuring plan was initiated during the third quarter of fiscal 2025 (the “Fiscal 2025 Plan”) to increase research and development investment in the data center end market and reduce investment in new product development in other end markets including the cancellation of certain future product releases. As a result, the Company was required to assess the recoverability of related long-lived assets. On completion of the assessment, the Company determined the carrying values of certain long-lived assets were not recoverable. The Company utilized a discounted cash flow method of valuation to determine the fair value of the associated assets and liabilities and compared to their carrying values, which resulted in recognition of asset impairment charges for acquired intangible assets, purchased technology licenses, and property and equipment. The Company’s assumptions included future expected revenues, expenses, capital expenditures and other costs, discount rate, and whether or not alternative uses were available for affected assets.
The Company recognized $715.1 million of total restructuring and other related charges for the three and nine months ended November 2, 2024 related to the Fiscal 2025 Plan. Restructuring charges were mainly comprised of impairment and write-off of acquired intangible assets, purchased technology licenses, inventories, property and equipment, and other non-current assets, as well as recognition of future contractual obligations, accrued legal reserve, severance, other one-time termination benefits, and other costs. The restructuring charges included $159.0 million impairment of capitalized purchased technology licenses that the Company has ceased use of in the third quarter of fiscal 2025. In addition, the Company recognized $97.8 million of restructuring charges related to payment obligations for future services associated with these technology licensing agreements. See “Note 8 – Commitments and Contingencies” for additional information. The Company expects the Fiscal 2025 Plan to be substantially completed by the end of fiscal 2026.
Fiscal 2024 Plan
A restructuring plan was initiated during the first quarter of fiscal 2024 (the “Fiscal 2024 Plan”) to streamline the organization and optimize resources. Restructuring charges were mainly comprised of severance, other one-time termination benefits, impairment and write-off of purchased technology licenses and equipment, and other costs. The Company recorded restructuring and other related charges of $8.1 million for the nine months ended November 2, 2024, and $3.4 million and $105.3 million for the three and nine months ended October 28, 2023, respectively, related to the Fiscal 2024 Plan. As of the third quarter of fiscal 2025, substantially all actions relating to the Fiscal 2024 Plan have been completed.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
The following table provides a summary of restructuring related charges as presented in the unaudited condensed consolidated statements of operations (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | November 2, 2024 | | October 28, 2023 | | November 2, 2024 | | October 28, 2023 |
Restructuring related charges included in cost of goods sold | | $ | 356.8 | | | $ | — | | | $ | 356.8 | | | $ | — | |
Restructuring related charges included in operating expenses | | 358.3 | | | 3.4 | | | 366.4 | | | 105.3 | |
Restructuring related charges included in net loss | | $ | 715.1 | | | $ | 3.4 | | | $ | 723.2 | | | $ | 105.3 | |
The following table presents details of the restructuring related charges as presented in the unaudited condensed consolidated statements of operations (in millions):
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Three Months Ended | | Nine Months Ended |
| | November 2, 2024 | | October 28, 2023 | | November 2, 2024 | | October 28, 2023 |
Employee severance and related costs | | $ | 6.7 | | | $ | 3.0 | | | $ | 13.6 | | | $ | 69.1 | |
Impairment and write-off of assets | | | | | | | | |
Acquired intangible assets | | 240.1 | | | — | | | 240.1 | | | — | |
Purchased technology licenses | | 159.0 | | | — | | | 159.0 | | | 28.6 | |
Inventories | | 62.0 | | | — | | | 62.0 | | | — | |
Property and equipment | | 34.0 | | | — | | | 34.0 | | | 1.3 | |
Other non-current assets | | 25.2 | | | — | | | 25.2 | | | — | |
Recognition of future contractual obligations | | 114.0 | | | — | | | 114.0 | | | — | |
Accrued legal reserve | | 50.0 | | | — | | | 50.0 | | | — | |
Other | | 24.1 | | | 0.4 | | | 25.3 | | | 6.3 | |
| | $ | 715.1 | | | $ | 3.4 | | | $ | 723.2 | | | $ | 105.3 | |
The following table sets forth a reconciliation of the beginning and ending restructuring liability balances by major type of cost associated with the restructuring charges (in millions):
| | | | | | | | | | | | | | | | | |
| Employee Severance and Related Costs | | Other Exit-Related Costs | | Total |
Balance at February 3, 2024 | $ | 15.5 | | | $ | 1.5 | | | $ | 17.0 | |
Charges (1) | 13.6 | | | 187.8 | | | 201.4 | |
Net cash payments | (22.3) | | | (0.9) | | | (23.2) | |
Non-cash items (2) | — | | | 170.5 | | | 170.5 | |
Balance at November 2, 2024 | 6.8 | | | 358.9 | | | 365.7 | |
Less: non-current portion | — | | | 236.9 | | | 236.9 | |
Current portion | $ | 6.8 | | | $ | 122.0 | | | $ | 128.8 | |
(1)Impairment and other non-cash charges of $521.8 million recognized in the current quarter were recorded directly to the unaudited condensed consolidated statements of operations and were not included in the restructuring liability balances above.
(2)Includes recognition of restructuring liabilities for future contractual obligations as a result of the cease use of related assets.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
The current portion of the restructuring liability is comprised of $120.8 million and $8.0 million included as components of accrued liabilities and accounts payable, respectively, and the non-current portion of the restructuring liability is included as a component of other non-current liabilities in the accompanying unaudited condensed consolidated balance sheets.
Note 5. Goodwill and Acquired Intangible Assets, Net
Goodwill
Goodwill represents the excess of the purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination. The carrying value of goodwill as of November 2, 2024 and February 3, 2024 was $11.6 billion.
Acquired Intangible Assets, Net
As of November 2, 2024 and February 3, 2024, net carrying amounts excluding fully amortized intangible assets were as follows (in millions, except for weighted-average remaining amortization period):
| | | | | | | | | | | | | | | | | | | | | | | |
| November 2, 2024 |
| Gross Carrying Amounts | | Accumulated Amortization and Impairment | | Net Carrying Amounts | | Weighted-Average Remaining Amortization Period (Years) |
Developed technologies | $ | 5,162.0 | | | $ | (3,296.6) | | | $ | 1,865.4 | | | 3.8 |
Customer contracts and related relationships | 2,179.0 | | | (1,437.4) | | | 741.6 | | | 2.6 |
| | | | | | | |
Trade names | 50.0 | | | (35.3) | | | 14.7 | | | 1.5 |
Total acquired amortizable intangible assets | $ | 7,391.0 | | | $ | (4,769.3) | | | $ | 2,621.7 | | | 3.4 |
In-process research and development | 336.0 | | | — | | | 336.0 | | | n/a |
Total acquired intangible assets | $ | 7,727.0 | | | $ | (4,769.3) | | | $ | 2,957.7 | | | |
The Company regularly assesses the results of its business to determine whether events or circumstances exist that indicate whether the carrying amount of the acquired intangible assets may not be recoverable. During the quarter ended November 2, 2024, impairment charges of $240.1 million related to certain acquired developed technologies intangible assets were recognized as part of restructuring actions. The gross carrying amounts and accumulated amortization of fully impaired intangible assets were excluded from the table above. See “Note 4 – Restructuring” for further information.
| | | | | | | | | | | | | | | | | | | | | | | |
| February 3, 2024 |
| Gross Carrying Amounts | | Accumulated Amortization | | Net Carrying Amounts | | Weighted-Average Remaining Amortization Period (Years) |
Developed technologies | $ | 4,989.0 | | | $ | (2,613.5) | | | $ | 2,375.5 | | | 3.8 |
Customer contracts and related relationships | 2,179.0 | | | (1,191.5) | | | 987.5 | | | 3.3 |
Trade names | 50.0 | | | (27.9) | | | 22.1 | | | 2.2 |
| | | | | | | |
Total acquired amortizable intangible assets | $ | 7,218.0 | | | $ | (3,832.9) | | | $ | 3,385.1 | | | 3.6 |
In-process research and development | 619.0 | | | — | | | 619.0 | | | n/a |
Total acquired intangible assets | $ | 7,837.0 | | | $ | (3,832.9) | | | $ | 4,004.1 | | | |
The intangible assets are amortized on a straight-line basis over the estimated useful lives, except for certain customer contracts and related relationships, which are amortized using an accelerated method of amortization over the expected customer lives, which more closely align with the pattern of realization of economic benefits expected to be obtained. The in-process research and development (“IPR&D”) will be accounted for as an indefinite-lived intangible asset and will not be amortized until the underlying project reaches technological feasibility and commercial production, at which point, the IPR&D is reclassified as an amortizable acquired intangible asset and amortized over the asset’s estimated useful life. Useful lives for these IPR&D projects are expected to range between 8 to 10 years. In the event the IPR&D is abandoned, the related assets will be written off.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
Amortization expense for acquired intangible assets for the three and nine months ended November 2, 2024 was $264.9 million and $805.5 million, respectively. Amortization expense for acquired intangible assets for the three and nine months ended October 28, 2023 was $269.8 million and $811.6 million, respectively.
The following table presents the estimated future amortization expense of acquired amortizable intangible assets as of November 2, 2024 (in millions):
| | | | | | | | |
Fiscal Year | | Amount |
Remainder of 2025 | | $ | 247.0 | |
2026 | | 941.7 | |
2027 | | 811.3 | |
2028 | | 282.1 | |
2029 | | 129.0 | |
Thereafter | | 210.6 | |
| | $ | 2,621.7 | |
Note 6. Fair Value Measurements
Fair value is an exit price representing the amount that would be received in the sale of an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or a liability. As a basis for considering such assumptions, the accounting guidance establishes a three-tier value hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value:
Level 1 — Observable inputs that reflect quoted prices for identical assets or liabilities in active markets.
Level 2 — Other inputs that are directly or indirectly observable in the marketplace.
Level 3 — Unobservable inputs that are supported by little or no market activity.
The fair value hierarchy also requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value.
The Company’s Level 1 assets include marketable equity investments that are classified as other non-current assets and which are valued primarily using quoted market prices. The Company’s Level 2 assets include time deposits, as the market inputs used to value these instruments consist of market yield. In addition, forward contracts and the severance pay fund are classified within Level 2 of the fair value hierarchy as the valuation inputs are based on quoted prices and market observable data of similar instruments.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
The tables below set forth, by level, the Company’s assets and liabilities that are measured at fair value on a recurring basis. The tables do not include assets and liabilities that are measured at historical cost or any basis other than fair value (in millions):
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at November 2, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Items measured at fair value on a recurring basis: | | | | | | | |
Assets | | | | | | | |
Cash equivalents: | | | | | | | |
| | | | | | | |
Time deposits | $ | — | | | $ | 49.3 | | | $ | — | | | $ | 49.3 | |
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Other non-current assets: | | | | | | | |
Marketable equity investments | 9.3 | | | — | | | — | | | 9.3 | |
Severance pay fund | — | | | 0.5 | | | — | | | 0.5 | |
Total assets | $ | 9.3 | | | $ | 49.8 | | | $ | — | | | $ | 59.1 | |
Liabilities | | | | | | | |
Accrued liabilities: | | | | | | | |
Foreign currency forward contracts | $ | — | | | $ | 0.3 | | | $ | — | | | $ | 0.3 | |
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| | | | | | | |
Total liabilities | $ | — | | | $ | 0.3 | | | $ | — | | | $ | 0.3 | |
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The carrying value of investments in non-marketable equity securities recorded to fair value on a non-recurring basis is adjusted for observable transactions for identical or similar investments of the same issuer or for impairment. These securities relate to equity investments in privately-held companies. These items measured at fair value on a non-recurring basis are classified as Level 3 in the fair value hierarchy because the value is estimated based on valuation methods using the observable transaction price at the transaction date and other unobservable inputs such as volatility, rights and obligations of the securities held. As of November 2, 2024 and February 3, 2024, non-marketable equity investments had a carrying value of $49.4 million and $45.8 million, respectively, and are included in other non-current assets in the Company’s unaudited condensed consolidated balance sheets.
| | | | | | | | | | | | | | | | | | | | | | | |
| Fair Value Measurements at February 3, 2024 |
| Level 1 | | Level 2 | | Level 3 | | Total |
Items measured at fair value on a recurring basis: | | | | | | | |
Assets | | | | | | | |
Cash equivalents: | | | | | | | |
| | | | | | | |
Time deposits | $ | — | | | $ | 2.6 | | | $ | — | | | $ | 2.6 | |
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Prepaid expenses and other current assets: | | | | | | | |
Foreign currency forward contracts | — | | | 1.2 | | | — | | | 1.2 | |
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Other non-current assets: | | | | | | | |
Marketable equity investments | 9.3 | | | — | | | — | | | 9.3 | |
Severance pay fund | — | | | 0.5 | | | — | | | 0.5 | |
Total assets | $ | 9.3 | | | $ | 4.3 | | | $ | — | | | $ | 13.6 | |
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Fair Value of Debt
The Company classified the 2026 Term Loan, 2026 Senior Notes, 2028 Senior Notes, 2029 Senior Notes, 2031 Senior Notes, and 2033 Senior Notes as Level 2 in the fair value measurement hierarchy. The carrying value of the 2026 Term Loan approximates its fair value as the 2026 Term Loan is carried at a market observable interest rate that resets periodically. The estimated aggregate fair value of the unsecured senior notes was $3.4 billion at November 2, 2024 and $3.3 billion at February 3, 2024, and were classified as Level 2 as there are quoted prices from less active markets for the notes. See “Note 7 – Debt” for additional information.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
Note 7. Debt
Summary of Borrowings and Outstanding Debt
The following table summarizes the Company’s outstanding debt at November 2, 2024 and February 3, 2024 (in millions):
| | | | | | | | | | | | | | |
| | November 2, 2024 | | February 3, 2024 |
Face Value Outstanding: | | | | |
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2026 Term Loan - 5-Year Tranche | | $ | 623.4 | | | $ | 700.0 | |
Term Loan Total | | 623.4 | | | 700.0 | |
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4.875% MTG/MTI 2028 Senior Notes | | 499.9 | | | 499.9 | |
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1.650% 2026 Senior Notes | | 500.0 | | | 500.0 | |
2.450% 2028 Senior Notes | | 750.0 | | | 750.0 | |
5.750% 2029 Senior Notes | | 500.0 | | | 500.0 | |
2.950% 2031 Senior Notes | | 750.0 | | | 750.0 | |
5.950% 2033 Senior Notes | | 500.0 | | | 500.0 | |
Senior Notes Total | | 3,499.9 | | | 3,499.9 | |
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Total borrowings | | $ | 4,123.3 | | | $ | 4,199.9 | |
Less: Unamortized debt discount and issuance cost | | (28.4) | | | (34.0) | |
Net carrying amount of debt | | $ | 4,094.9 | | | $ | 4,165.9 | |
Less: Current portion (1) | | 129.4 | | | 107.3 | |
| | | | |
Non-current portion | | $ | 3,965.5 | | | $ | 4,058.6 | |
(1)As of November 2, 2024, the current portion of outstanding debt that is due within twelve months includes a portion of the 2026 Term Loan - 5-Year Tranche. The weighted-average interest rate on short-term debt outstanding at November 2, 2024 and February 3, 2024 was 6.171% and 6.830%, respectively.
2024 and 2026 Term Loans
On December 7, 2020, the Company entered into a term loan credit agreement with a lending syndicate led by JP Morgan Chase Bank, N.A (the “2024 and 2026 Term Loan Agreement”) in order to finance the acquisition of Inphi Corporation (“Inphi”). The 2024 and 2026 Term Loan Agreement provides for borrowings of $1.8 billion consisting of: (i) $875.0 million loan with a 3-year term from the funding date (the “3-Year Tranche Loan”) and (ii) $875.0 million loan with a 5-year term from the funding date (the “5-Year Tranche Loan” and, together with the 3-Year Tranche Loan, the “2024 and 2026 Term Loans”).
On April 14, 2023, the Company entered into an amendment to the 2024 and 2026 Term Loan Agreement. The amendment modifies the existing agreement to, among other things, adopt Secured Overnight Financing Rate (“SOFR”) interest rates and conform the maximum leverage ratio financial covenant with the amended and restated revolving credit agreement.
The 3-Year Tranche Loan, due on April 19, 2024, which had a remaining principal of $735.0 million, was repaid in full during the quarter ended October 28, 2023.
Pursuant to the amended 2024 and 2026 Term Loan Agreement, the 5-Year Tranche Loan has a stated floating interest rate which equates to adjusted term SOFR + 137.5 bps. The effective interest rate for the 5-Year Tranche Loan was 4.980% as of November 2, 2024. The 5-Year Tranche Loan requires scheduled principal payments at the end of each fiscal quarter equal to (i) 1.25% of the aggregate principal amount on the term funding date for the first four full fiscal quarters following the term loan funding date, (ii) 2.50% of the aggregate principal amount on the term funding date for the fifth through twelfth full fiscal quarters following the term loan funding date, and (iii) 3.75% of the aggregate principal amount on the term funding date for each fiscal quarter following the twelfth full fiscal quarter following the term loan funding date. During the three and nine months ended November 2, 2024, the Company repaid $32.8 million and $76.6 million, respectively, of the principal outstanding of the 5-Year Tranche Loan. As of November 2, 2024, the Company had $623.4 million of 5-Year Tranche Loan borrowings outstanding.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
The 2024 and 2026 Term Loan Agreement requires that the Company and its subsidiaries comply with covenants relating to customary matters, including with respect to creating or permitting certain liens, entering into sale and leaseback transactions, and consolidating, merging, liquidating or dissolving. It also prohibits subsidiaries of the Company from incurring additional indebtedness, subject to certain exceptions, and requires that the Company maintain a leverage ratio financial covenant as of the end of any fiscal quarter.
2023 Revolving Credit Facility
On December 7, 2020, the Company entered into a revolving line of credit agreement with a lending syndicate led by JP Morgan Chase Bank, N.A for borrowings of up to $750.0 million. On April 14, 2023, the Company entered into an agreement to amend and restate the credit facility to increase the borrowing capacity to $1.0 billion (as so amended and restated, the “2023 Revolving Credit Facility”). The 2023 Revolving Credit Facility has a 5-year term and a stated floating interest rate which equates to an adjusted term SOFR plus an applicable margin. The borrowings from the Revolving Loans will be used for general corporate purposes of the Company. The Company may prepay any borrowings at any time without premium or penalty. An unused commitment fee is payable quarterly based on unused balances at a rate that is based on the ratings of the Company’s senior unsecured long-term indebtedness. This annual rate was 0.175% at November 2, 2024.
As of November 2, 2024, the 2023 Revolving Credit Facility was undrawn and available for draw down through April 14, 2028.
The 2023 Revolving Credit Facility requires that the Company and its subsidiaries comply with covenants relating to customary matters. The covenants are consistent with the 2024 and 2026 Term Loan Agreement covenants discussed above.
As of November 2, 2024, the Company was in compliance with its debt covenants for the credit agreements discussed above.
2029 and 2033 Senior Unsecured Notes
On September 18, 2023, the Company completed an offering of (i) $500.0 million aggregate principal amount of the Company’s 5.750% Senior Notes due 2029 (the “2029 Senior Notes”) and (ii) $500.0 million aggregate principal amount of the Company’s 5.950% Senior Notes due 2033 (the “2033 Senior Notes”, and, together with the 2029 Senior Notes, the “2029 and 2033 Senior Notes”).
The 2029 Senior Notes have a 5.5-year term and mature on February 15, 2029 and the 2033 Senior Notes have a 10-year term and mature on September 15, 2033. The stated and effective interest rates for the 2029 Senior Notes are 5.750% and 5.891%, respectively. The stated and effective interest rates for the 2033 Senior Notes are 5.950% and 6.082%, respectively. The Company may redeem the 2029 and 2033 Senior Notes, in whole or in part, at any time prior to their maturity at the redemption prices set forth in 2029 and 2033 Senior Notes. In addition, upon the occurrence of a change of control repurchase event (which involves the occurrence of both a change of control and a ratings event involving the 2029 and 2033 Senior Notes being rated below investment grade), the Company will be required to make an offer to repurchase the 2029 and 2033 Senior Notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the repurchase date. The indenture governing the 2029 and 2033 Senior Notes also contains certain limited covenants restricting the Company’s ability to incur certain liens, enter into certain sale and leaseback transactions and merge or consolidate with any other entity or convey, transfer or lease all or substantially all of the Company’s properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions. As of November 2, 2024, the Company had $1.0 billion borrowings outstanding from 2029 and 2033 Senior Notes.
2026, 2028, and 2031 Senior Unsecured Notes
On April 12, 2021, the Company completed an offering of (i) $500.0 million aggregate principal amount of the Company’s 1.650% Senior Notes due 2026 (the “2026 Senior Notes”), (ii) $750.0 million aggregate principal amount of the Company’s 2.450% Senior Notes due 2028 (the “2028 Senior Notes”) and (iii) $750.0 million aggregate principal amount of the Company’s 2.950% Senior Notes due 2031 (the “2031 Senior Notes”, and, together with the 2026 Senior Notes and the 2028 Senior Notes, the “2026, 2028 and 2031 Senior Notes”). On October 8, 2021, the 2026, 2028 and 2031 Senior Notes issued on April 12, 2021 were exchanged for new notes. The terms of the new notes issued in the exchange are substantially identical to the notes issued in April 2021, except that the new notes are registered under the Securities Act of 1933, as amended (the “Securities Act”) and the transfer restrictions and registration rights applicable to the 2026, 2028 and 2031 Senior Notes issued in April 2021 do not apply to the new notes.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
The 2026 Senior Notes have a 5-year term and mature on April 15, 2026, the 2028 Senior Notes have a 7-year term and mature on April 15, 2028, and the 2031 Senior Notes have a 10-year term and mature on April 15, 2031. The stated and effective interest rates for the 2026 Senior Notes are 1.650% and 1.839%, respectively. The stated and effective interest rates for the 2028 Senior Notes are 2.450% and 2.554%, respectively. The stated and effective interest rates for the 2031 Senior Notes are 2.950% and 3.043%, respectively. The Company may redeem the 2026, 2028 and 2031 Senior Notes, in whole or in part, at any time prior to their respective maturity at the redemption prices set forth in the indenture governing the 2026, 2028 and 2031 Senior Notes. In addition, upon the occurrence of a change of control repurchase event (which involves the occurrence of both a change of control and a ratings event involving the 2026, 2028 and 2031 Senior Notes being rated below investment grade), the Company will be required to make an offer to repurchase the 2026, 2028 and 2031 Senior Notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the repurchase date. The indenture governing the 2026, 2028 and 2031 Senior Notes also contains certain limited covenants restricting the Company’s ability to incur certain liens, enter into certain sale and leaseback transactions and merge or consolidate with any other entity or convey, transfer or lease all or substantially all of the Company’s properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions. As of November 2, 2024, the Company had $2.0 billion borrowings outstanding from 2026, 2028 and 2031 Senior Notes.
2023 and 2028 Senior Unsecured Notes
On June 22, 2018, the Company’s Bermuda-based parent company Marvell Technology Group, Ltd. (“MTG”) completed a public offering of (i) $500.0 million aggregate principal amount of 4.200% Senior Notes due 2023 (the “MTG 2023 Notes”) and (ii) $500.0 million aggregate principal amount of 4.875% Senior Notes due 2028 (the “MTG 2028 Notes” and, together with the MTG 2023 Notes, the “MTG Senior Notes”).
In April 2021, in conjunction with the Company’s U.S. domiciliation, the Company commenced Exchange Offers on April 19, 2021 for the outstanding $1.0 billion in aggregate principal amount of the MTG Senior Notes outstanding in exchange for corresponding senior notes to be issued by the Company’s U.S. domiciled parent MTI. MTI made an offer to (i) exchange any and all of the outstanding MTG 2023 Notes for up to an aggregate principal amount of $500.0 million of new 4.200% Senior Notes due 2023 issued by MTI (the “MTI 2023 Notes”) and to (ii) exchange any and all of the outstanding MTG 2028 Notes for up to an aggregate principal amount of $500.0 million of new 4.875% Senior Notes due 2028 issued by MTI (the “MTI 2028 Notes” and, together with the MTI 2023 Notes, the “MTI Senior Notes”). Each new series of MTI Senior Notes have the same interest rate, maturity date, redemption terms and interest payment dates and are subject to substantially similar covenants as the corresponding series of the MTG Senior Notes for which they were offered in exchange.
The settlement of the Exchange Offers occurred on May 4, 2021 with $433.9 million aggregate principal amount of the MTG 2023 Notes and $479.5 million aggregate principal amount of the MTG 2028 Notes. The exchange was accounted for as a debt modification in accordance with applicable accounting guidance. On December 16, 2021, the MTI Senior Notes issued on May 4, 2021 were exchanged for new notes. The terms of the new notes issued in the exchange are substantially identical to the notes issued in May 2021, except that the new notes are registered under the Securities Act and the transfer restrictions and registration rights applicable to the MTI Senior Notes issued in May 2021 do not apply to the new notes.
The MTI 2023 Notes and MTG 2023 Notes with aggregate principal of $500.0 million matured on June 22, 2023 and was repaid.
The MTI 2028 Notes mature on June 22, 2028. The stated and effective interest rates for the MTI 2028 Notes are 4.875% and 4.988%, respectively. The Company may redeem the MTI Senior Notes, in whole or in part, at any time prior to their maturity at the redemption prices set forth in MTI Senior Notes. In addition, upon the occurrence of a change of control repurchase event (which involves the occurrence of both a change of control and a ratings event involving the MTI Senior Notes being rated below investment grade), the Company will be required to make an offer to repurchase the MTI Senior Notes at a price equal to 101% of the principal amount of the notes, plus accrued and unpaid interest to, but excluding, the repurchase date. The indenture governing the MTI Senior Notes also contains certain limited covenants restricting the Company’s ability to incur certain liens, enter into certain sale and leaseback transactions and merge or consolidate with any other entity or convey, transfer or lease all or substantially all of the Company’s properties or assets to another person, which, in each case, are subject to certain qualifications and exceptions.
The MTG 2028 Notes mature on June 22, 2028. The stated and effective interest rates for the MTG 2028 Notes are 4.875% and 4.940%, respectively. The Company may redeem the MTG Senior Notes, in whole or in part, at any time prior to their maturity at the redemption prices set forth in MTG Senior Notes.
As of November 2, 2024, the Company had $499.9 million borrowings outstanding from MTI 2028 Notes and MTG 2028 Notes.
MARVELL TECHNOLOGY, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS ‑ (Continued)
Interest Expense and Future Contractual Maturities
During the three and nine months ended November 2, 2024, the Company recognized $45.6 million and $138.9 million, respectively, of interest expense in its unaudited condensed consolidated statements of operations related to interest, amortization of debt issuance costs and accretion of discount associated with the outstanding debt.
During the three and nine months ended October 28, 2023, the Company recognized $49.6 million and $152.0 million, respectively, of interest expense in its unaudited condensed consolidated statements of operations related to interest, amortization of debt issuance costs and accretion of discount associated with the outstanding debt.
As of November 2, 2024, the aggregate future contractual maturities of the Company’s outstanding debt, at face value, are as follows (in millions):
| | | | | | | | |
Fiscal Year | | Amount |
Remainder of 2025 | | $ | 32.8 | |
2026 | | 131.2 | |
2027 | | 959.4 | |
2028 | | — | |
2029 | | 1,249.9 | |
Thereafter | | 1,750.0 | |
Total | | $ | 4,123.3 | |
Note 8. Commitments and Contingencies
Warranty Obligations
The Company generally warrants that its products sold to its customers will conform to its approved specifications and be free from defects in material and workmanship under normal use and conditions for one year. The Company may offer a longer warranty period in limited situations based on product type and negotiated warranty terms with certain customers.
Commitments
The Company’s commitments primarily consist of wafer purchase obligations with foundry partners, supply capacity reservation payment commitments with foundries and test & assembly partners, and technology license fee obligations.
Total future unconditional purchase commitments as of November 2, 2024, are as follows (in millions):
| | | | | | | | | | | | | | |
Fiscal Year | | Purchase Commitments to Foundries and Test & Assembly Partners | | Technology License Fees |
Remainder of 2025 | | $ | 640.8 | | | $ | 21.9 | |
2026 | | 557.8 | | | 86.5 | |
2027 | | 131.1 | | | 56.7 | |
2028 | | 96.5 | | | 56.4 | |
2029 |