Marvell Technology Group Ltd. reports 2,362% Net Income growth in 2018 and 4.7% Revenue growth
03/08/2018 • About Marvell Technology Group Ltd. (
$MRVL) • By InTwits
Marvell Technology Group Ltd. reported FY2018 financial results today. Here are the key drivers of the company's long term financial model:
- EBITDA Margin is quite volatile: 21.4% in FY2018, 10.8% in FY2017, -24.3% in FY2016, 14.4% in FY2015, 12.6% in FY2014
- Marvell Technology Group Ltd. motivates its personel by high Stock Based Compensation (SBC): average SBC/Revenue for FY2014-FY2018 was 4.3% while average EBITDA Margin was 7.6% for the sames years
- Marvell Technology Group Ltd. has low CAPEX intensity: 5 year average CAPEX/Revenue was 1.8%. At the same time it's a lot of higher than industry average of 5.2%.
- CAPEX is quite volatile: $89m in 2018, $46m in 2017, $38m in 2016, $18m in 2015, $19m in 2014
- In the last 5 years the company invested considerably less than D&A: $260m vs. $590m. In FY2018 this situation was still the same: CAPEX was 39 while D&A was 87
- The company has business model with average profitability: ROIC is 10.5%
Below you can find a comprehensive analysis of the key data driving the company's performance and the stock price.
Revenue and profitability
The company's Revenue increased on 4.7%. Revenue growth showed acceleration in FY18Q4 - it increased 8.7% YoY. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin increased on 7.4 pp from 23.1% to 30.6% in 2018.
Gross Margin increased on 4.9 pp from 55.8% to 60.7% in FY2018. During the last 5 years Gross Margin bottomed in FY2016 at 46.0% and was growing since that time. SG&A as a % of Revenue decreased slightly on 1.0 pp from 10.9% to 9.9% in FY2018. Stock Based Compensation (SBC) as a % of Revenue decreased slightly on 1.4 pp from 5.0% to 3.6% in FY2018.
Net Income margin surged on 20.7 pp from 0.92% to 21.6% in FY2018. The efficient tax rate was 3.4% in FY2018.
Investments (CAPEX, working capital and M&A)
Marvell Technology Group Ltd.'s CAPEX/Revenue was 1.6% in FY2018. Marvell Technology Group Ltd. showed almost no change in CAPEX/Revenue from FY2015 to FY2018. It's average level of CAPEX/Revenue for the last three years was 1.8%.
Accounts receivable as a % of Revenue decreased on 2.9 pp from 14.6% to 11.6% in FY2018. Inventories as a % of Revenue showed almost no change at 7.1% in FY2018. Accounts payable as a % of Revenue increased slightly on 1.2 pp from 14.1% to 15.3% in FY2018.
Return on investment
The company operates at good ROE (12.8%) while ROIC is low (10.5%). ROIC increased on 7.3 pp from 3.2% to 10.5% in FY2018. ROE surged on 12.2 pp from 0.52% to 12.8% in FY2018.
Leverage (Debt)
The company has no debt. Cash increased on 9.1%.
Valuation and dividends
Marvell Technology Group Ltd.'s trades at EV/EBITDA 20.5x and P/E 22.0x.
The company paid 22.8% of Net Income as dividends in FY2018. Dividends grew on average at 0.0% per annum in the last 5 years).
Management team
Matthew J Murphy "Matt" is a Marvell Technology Group Ltd.'s CEO. Matthew J Murphy "Matt" is a founder and has spent 2 years with the company. CEO total compensation was
$6,228,496 in FY2018 which included
$764,423 salary. Jean X Hu is a the company's CFO. Jean X Hu has spent 3 years at the company.
At the end of financial year the company had 4.4% shares owned by insiders. Insider ownership didn't change in 2018.
The company has 3,749 employees. The number of employees dropped on 18.8%. Average revenue per employee in FY2018 was
$642,617 and it surged on 28.9%.
Financial and operational results
FY ended 02/03/2018
Marvell Technology Group Ltd. ($MRVL) key annual financial indicators| mln. $ | 2014 | 2015 | 2016 | 2017 | 2018 | 2018/2017 |
|---|
P&L
|
|---|
| Revenue | 3,404 | 3,707 | 2,602 | 2,301 | 2,409 | 4.7% |
| Gross Profit | 1,741 | 1,863 | 1,196 | 1,283 | 1,462 | 13.9% |
| SG&A | 259 | 274 | 279 | 251 | 238 | -5.2% |
| EBITDA | 427 | 533 | -633 | 249 | 517 | 107.6% |
| EBIT | 281 | 409 | -745 | 130 | 430 | 229.5% |
| Interest expence | | 1 | 1 | 0 | 1 | 86.1% |
| Tax | -9 | -3 | 11 | 73 | 18 | -75.1% |
| Net Income | 315 | 435 | -811 | 21 | 521 | 2,362.4% |
| Stock Based Compensation | 156 | 137 | 134 | 114 | 87 | -23.9% |
Balance Sheet
|
|---|
| Cash | 966 | 1,211 | 1,278 | 814 | 888 | 9.1% |
| Accounts Receivable | 453 | 421 | 321 | 335 | 280 | -16.4% |
| Inventory | 348 | 308 | 201 | 171 | 170 | -0.5% |
| Accounts Payable | 316 | 283 | 180 | 143 | 145 | 1.2% |
| Short Term Debt | 0 | 0 | 0 | 0 | 0 | |
| Long Term Debt | 0 | 0 | 0 | 0 | 0 | |
Cash flow
|
|---|
| Capex | 67 | 63 | 47 | 45 | 39 | -13.4% |
| Dividends | 119 | 123 | 123 | 122 | 119 | -2.5% |
| Acquisitions | 3 | | | | | |
Ratios
|
|---|
| Revenue growth | 7.4% | 8.9% | -29.8% | -11.6% | 4.7% | |
| EBITDA growth | -2.5% | 24.8% | -218.6% | -139.3% | 107.6% | |
|
|---|
| Gross Margin | 51.1% | 50.3% | 46.0% | 55.8% | 60.7% | 4.9% |
| EBITDA Margin | 12.6% | 14.4% | -24.3% | 10.8% | 21.4% | 10.6% |
| EBIT Margin | 8.2% | 11.0% | -28.6% | 5.7% | 17.8% | 12.2% |
| SG&A, % of revenue | 7.6% | 7.4% | 10.7% | 10.9% | 9.9% | -1.0% |
| SBC, % of revenue | 4.6% | 3.7% | 5.1% | 5.0% | 3.6% | -1.4% |
| Net Income Margin | 9.3% | 11.7% | -31.2% | 0.9% | 21.6% | 20.7% |
| CAPEX, % of revenue | 2.0% | 1.7% | 1.8% | 1.9% | 1.6% | -0.3% |
|
|---|
| ROIC | 6.0% | 8.3% | -16.0% | 3.2% | 10.5% | 7.3% |
| ROE | 6.9% | 8.9% | -17.5% | 0.5% | 12.8% | 12.2% |
| Net Debt/EBITDA | -2.3x | -2.3x | | -3.3x | -1.7x | 1.6x |
People
|
|---|
| Insider ownership | 4.4% | 4.4% | 4.4% | 4.4% | 4.4% | 0.0% |
| Employees | 7,355 | 7,163 | 5,437 | 4,617 | 3,749 | -18.8% |
| Revenue/Employee, th. $ | 463 | 518 | 479 | 498 | 643 | 28.9% |
Marvell Technology Group Ltd. ($MRVL) key quoterly financial indicators
| mln. $ | FY18Q1 | FY18Q2 | FY18Q3 | FY18Q4 | | YoY change |
|---|
P&L
|
|---|
| Revenue | 573 | 605 | 616 | 615 | | 10.3% | 1.2% | -1.2% | 8.7% |
| EBITDA | 123 | 146 | 172 | 75 | | 1,139.3% | 82.0% | 34.1% | 153.6% |
| Net Income | 107 | 165 | 200 | 49 | | | 222.1% | 175.7% | |
Balance Sheet
|
|---|
| Cash | 726 | 631 | 800 | 888 | | -7.0% | -12.3% | 6.5% | 9.1% |
| Short Term Debt | 0 | 0 | 0 | 0 | | | | | |
| Long Term Debt | 0 | 0 | 0 | 0 | | | | | |
Ratios
|
|---|
| Gross Margin | 60.3% | 60.4% | 61.3% | 60.7% | | 7.4% | 5.7% | 4.1% | 3.1% |
| EBITDA Margin | 21.5% | 24.1% | 28.0% | 12.2% | | 19.6% | 10.7% | 7.4% | 7.0% |
| Net Income Margin | 18.6% | 27.3% | 32.5% | 7.9% | | 23.0% | 18.7% | 20.8% | 22.1% |
Peers in Semiconductors
Below we provide Marvell Technology Group Ltd. benchmarking against other companies in Semiconductors industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.
Top companies by Revenue growth, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NanoFlex Power Corp ($OPVS) | | | | 72.5% | 354.8% |
| MoSys, Inc. ($MOSY) | | -18.4% | 37.2% | 46.8% | 87.7% |
| SMART Global Holdings, Inc. ($SGH) | | | -16.9% | 42.5% | 69.3% |
| Micron Technology, Inc. ($MU) | | -1.0% | -23.4% | 63.9% | 49.5% |
| Adesto Technologies Corporation ($IOTS) | | 4.3% | 1.6% | 27.6% | 48.8% |
| |
|---|
| Median (67 companies) | 54.6% | 9.3% | 5.2% | 11.0% | 5.0% |
|---|
| Marvell Technology Group Ltd. ($MRVL) | | 8.9% | -29.8% | -11.6% | 4.7% |
Top companies by Gross margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| CEVA, Inc. ($CEVA) | 90.2% | 90.9% | 91.6% | 92.1% | 89.8% |
| NVE Corporation ($NVEC) | 77.9% | 80.3% | 76.1% | 78.5% | 79.0% |
| Rambus, Inc. ($RMBS) | 85.9% | 84.7% | 80.1% | 79.9% | 76.8% |
| Universal Display Corporation ($OLED) | 76.0% | 64.2% | 83.9% | 80.8% | 75.5% |
| Intermolecular, Inc. ($IMI) | 48.3% | 57.4% | 66.5% | 67.5% | 70.3% |
| |
|---|
| Median (65 companies) | 45.3% | 47.0% | 48.0% | 48.6% | 50.4% |
|---|
| Marvell Technology Group Ltd. ($MRVL) | 51.1% | 50.3% | 46.0% | 55.8% | 60.7% |
Top companies by EBITDA margin, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| NVE Corporation ($NVEC) | 58.8% | 66.0% | 61.8% | 65.6% | 65.1% |
| Micron Technology, Inc. ($MU) | 31.7% | 35.0% | 25.4% | 47.9% | 65.0% |
| NXP Semiconductors N.V. ($NXPI) | 25.7% | 41.5% | 21.6% | 46.2% | 49.9% |
| Texas Instruments Incorporated ($TXN) | 39.7% | 42.0% | 43.5% | 46.7% | 48.6% |
| Intel Corp ($INTC) | 42.8% | 41.0% | 35.2% | 41.7% | 45.7% |
| |
|---|
| Median (66 companies) | 9.6% | 11.3% | 9.2% | 10.7% | 9.8% |
|---|
| Marvell Technology Group Ltd. ($MRVL) | 12.6% | 14.4% | -24.3% | 10.8% | 21.4% |
Top companies by CAPEX/Revenue, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| Alpha and Omega Semiconductor Limited ($AOSL) | 3.0% | 6.6% | 6.5% | 12.2% | 42.2% |
| Renesola Ltd. ($SOL) | 3.5% | 0.0% | 0.0% | 78.0% | 41.7% |
| First Solar, Inc. ($FSLR) | 7.6% | 4.0% | 7.9% | 17.5% | 33.0% |
| Sigma Designs Inc ($SIGM) | 11.0% | 6.5% | 6.2% | 14.1% | 29.3% |
| Micron Technology, Inc. ($MU) | 19.0% | 24.8% | 46.9% | 23.3% | 29.2% |
| |
|---|
| Median (66 companies) | 3.6% | 4.0% | 3.7% | 4.7% | 4.6% |
|---|
| Marvell Technology Group Ltd. ($MRVL) | 2.0% | 1.7% | 1.8% | 1.9% | 1.6% |
Top companies by ROIC, %
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| SMART Global Holdings, Inc. ($SGH) | | | 2.5% | 21.5% | 51.7% |
| Texas Instruments Incorporated ($TXN) | 25.1% | 29.8% | 34.9% | 43.1% | 47.5% |
| Micron Technology, Inc. ($MU) | 18.8% | 15.8% | 0.8% | 21.5% | 42.9% |
| Applied Materials Inc ($AMAT) | 15.8% | 15.2% | 19.0% | 31.2% | 36.4% |
| NVIDIA Corporation ($NVDA) | 9.2% | 13.3% | 13.1% | 27.3% | 35.3% |
| |
|---|
| Median (73 companies) | 5.0% | 3.8% | 1.7% | 4.0% | 3.0% |
|---|
| Marvell Technology Group Ltd. ($MRVL) | 6.0% | 8.3% | -16.0% | 3.2% | 10.5% |
Top companies by Net Debt / EBITDA
| Top 5 | FY2014 | FY2015 | FY2016 | FY2017 | FY2018 |
|---|
| MACOM Technology Solutions Holdings, Inc. ($MTSI) | 25.4x | 3.3x | 3.0x | 7.2x | 98.6x |
| Inphi Corporation ($IPHI) | | -6.4x | 4.5x | 33.7x | 32.2x |
| JinkoSolar Holding Company Limited ($JKS) | 4.2x | 3.3x | 4.1x | 11.0x | 8.2x |
| Lattice Semiconductor Corporation ($LSCC) | -1.8x | | 6.5x | 19.0x | 3.9x |
| Renesola Ltd. ($SOL) | 7.0x | 35.0x | 123.6x | 2.3x | 3.3x |
| |
|---|
| Median (45 companies) | -0.5x | -0.2x | 0.2x | 0.4x | 0.3x |
|---|
| Marvell Technology Group Ltd. ($MRVL) | -2.3x | -2.3x | | -3.3x | -1.7x |
