Non-GAAP operating expenses were $280 million in the first quarter compared to $267 million in the fourth quarter, a 5 percent increase, and $307 million in the first quarter of fiscal 2016, a 9 percent decline. Refer to the GAAP to Non-GAAP reconciliation table and related footnotes contained in this press release for more details.
GAAP and Non-GAAP operating expenses for the first quarter of fiscal 2017 and fourth quarter of fiscal year 2016 include $17 million and $11 million, respectively of legal and accounting fees related to the Audit Committee investigation, and the related shareholder litigation and investigations by the SEC and United States Attorney's Office and other professional fees.
Shares used to compute GAAP net income per diluted share for the first quarter of fiscal 2017 were 509 million shares, compared with 509 million shares in the fourth quarter of fiscal 2016 and 527 million shares in the first quarter of fiscal 2016.
Shares used to compute non-GAAP net income per diluted share for the first quarter of fiscal 2017 were 522 million shares, compared with 519 million shares for the fourth quarter of fiscal 2016 and 535 million shares for the first quarter of fiscal 2016.
Net cash provided from operations for the first quarter of fiscal 2017 was ($610) million, compared to $53 million in the fourth quarter of fiscal 2016 and $59 million reported in the first quarter of fiscal 2016. Net cash provided from operations for the first quarter of fiscal 2017 reflects the $750 million payment related to the previously announced Carnegie Mellon University litigation settlement. Free cash flow for the first quarter of fiscal 2017 was ($625) million, compared to the $47 million in the fourth quarter of fiscal 2016 and the $44 million reported in the first quarter of fiscal 2016. Free cash flow as presented above is defined as cash flow from operations, less capital expenditures and purchases of technology licenses reported under investing and financing activities in the consolidated statement of cash flows.
Marvell made no share repurchases in the first quarter of fiscal 2017. Marvell paid a quarterly dividend of $0.06 per share on April 22, 2016 to all shareholders of record as of March 29, 2016.
The payment of future quarterly cash dividends on Marvell's common shares is subject to, among other things, the best interests of the company and its shareholders, its results of operations, cash balances and future cash requirements, financial condition, developments in ongoing litigation, statutory requirements of Bermuda law, and other factors that the board of directors may deem relevant.
Update Regarding NASDAQ Compliance Plan
On May 3, 2016, Marvell announced that it had received written notification from Nasdaq that, following Marvell's hearing before The Nasdaq Hearings Panel on April 14, 2016, it granted the Company an extension of time to September 6, 2016 to regain compliance with continued listing requirements. Until that time, shares of Marvell stock will remain listed on The Nasdaq Stock Market.
The filings of the Company's Annual Report on Form 10-K for fiscal year 2016, ended January 30, 2016, and its Quarterly Reports on Form 10-Q for the second and third quarters of fiscal 2016, were completed on July 21, 2016. The preparation and filing of the Company's Quarterly Report on Form 10-Q for the first quarter of fiscal 2017 ended April 30, 2016 has not yet been completed. The Company is working diligently to complete the preparation and filing of the Form 10-Q for the first quarter of 2017 as soon as practicable, at which time Marvell believes it will regain full compliance with Nasdaq continued listing requirements.
Conference Call
Marvell will conduct a conference call on Wednesday, July 27, 2016 at 1:45 p.m. Pacific Time to discuss results for the first quarter of fiscal year 2017. Interested parties may join the conference call by dialing 1-844-647-5488 or 1-615-247-0258, pass-code 54569096. The call will be webcast by Thomson Reuters and can be accessed at the Marvell Investor Relations website at http://investor.marvell.com/ with a replay available following the call until August 27, 2016.
Discussion of Non-GAAP Financial Measures
Non-GAAP financial measures exclude the effect of share-based compensation expense, amortization and write-off of acquired intangible assets, acquisition-related costs, restructuring and other related charges, litigation settlement, and certain expenses and benefits that are driven primarily by discrete events that management does not consider to be directly related to Marvell's core operating performance. Non-GAAP diluted net income per share is calculated by dividing non-GAAP net income by non-GAAP weighted average shares outstanding (diluted). For purposes of calculating non-GAAP diluted net income per share, the GAAP weighted average shares outstanding (diluted) is adjusted to exclude the potential benefits of share-based compensation expected to be incurred in future periods but not yet recognized in the financial statements. The expected compensation costs are treated as proceeds assumed to be used to repurchase shares under the GAAP treasury stock method and also include the dilutive/anti-dilutive effects of common stock options and restricted stock units.
Marvell believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Marvell's financial condition and results of operations. While Marvell uses non-GAAP financial measures as a tool to enhance its understanding of certain aspects of its financial performance, Marvell does not consider these measures to be a substitute for, or superior to, financial measures calculated in accordance with GAAP. Consistent with this approach, Marvell believes that disclosing non-GAAP financial measures to the readers of its financial statements provides such readers with useful supplemental data that, while not a substitute for GAAP financial measures, allows for greater transparency in the review of its financial and operational performance.
Externally, management believes that investors may find Marvell's non-GAAP financial measures useful in their assessment of Marvell's operating performance and the valuation of Marvell. Internally, Marvell's non-GAAP financial measures are used in the following areas:
- Management's evaluation of Marvell's operating performance;
- Management's establishment of internal operating budgets;
- Management's performance comparisons with internal forecasts and targeted business models; and
- Management's determination of the achievement and measurement of certain performance-based equity awards (adjustments may vary from award to award).
Non-GAAP financial measures have limitations in that they do not reflect all of the costs associated with the operations of Marvell's business as determined in accordance with GAAP. As a result, you should not consider these measures in isolation or as a substitute for analysis of Marvell's results as reported under GAAP. Marvell expects to continue to incur expenses similar to the non-GAAP adjustments described above, and exclusion of these items from Marvell's non-GAAP net income should not be construed as an inference that these costs are unusual, infrequent or non-recurring.
Forward-Looking Statements under the Private Securities Litigation Reform Act of 1995
This press release contains forward-looking statements within the meaning of the federal securities laws that involve risks and uncertainties, including: Marvell's expectations regarding its second quarter of fiscal 2017 financial outlook; Marvell's belief regarding the timing of its compliance with Nasdaq listing standards; and Marvell's use of non-GAAP financial measures as important supplemental information. Words such as "anticipates," "expects," "intends," "plans," "projects," "believes," "seeks," "estimates," "can," "may," "will," "would" and similar expressions identify such forward-looking statements. These statements are not guarantees of results and should not be considered as an indication of future activity or future performance. Actual events or results may differ materially from those described in this press release due to a number of risks and uncertainties, including, but not limited to: actions that may be taken by Marvell as a result of the Audit Committee's investigation; adverse impacts of litigation or regulatory activities; Marvell's ability to hire a permanent Chief Financial Officer and Chief Accounting Officer and Controller in a timely manner; Marvell's ability to regain compliance with its SEC reporting obligations within the time of the exemption granted by NASDAQ; Marvell's ability to compete in products and prices in an intensely competitive industry; Marvell's reliance on the hard disk drive and mobile and wireless markets, which are highly cyclical and intensely competitive; costs and liabilities relating to current and future litigation; Marvell's reliance on a few customers for a significant portion of its revenue; Marvell's ability to develop and introduce new and enhanced products in a timely and cost effective manner and the adoption of those products in the market; seasonality in sales of consumer devices in which Marvell's products are incorporated; uncertainty in the worldwide economic conditions; risks associated with manufacturing and selling a majority of Marvell's products and Marvell's customers' products outside of the United States ; and other risks detailed in Marvell's SEC filings from time to time. For other factors that could cause Marvell's results to vary from expectations, please see the risk factors identified in Marvell's latest Annual Report on Form 10-K for the fiscal year ended January 30, 2016 as filed with the SEC on July 21, 2016 , and other factors detailed from time to time in Marvell's filings with the SEC. Marvell undertakes no obligation to revise or update publicly any forward-looking statements.
