Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP (Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

August 4,
2018

May 5,
2018

July 29,
2017

August 4,
2018

July 29,
2017

GAAP gross profit:

$

377,110

$

375,693

$

365,178

$

752,803

$

710,689

Special items:

Share-based compensation

4,748

1,905

1,810

6,653

3,236

Amortization of and write-off acquired  intangible assets

18,984

—

—

18,984

—

Other cost of goods sold (a)

22,933

—

3,000

22,933

3,000

Total special items

46,665

1,905

4,810

48,570

6,236

Non-GAAP gross profit

$

423,775

$

377,598

$

369,988

$

801,373

$

716,925

GAAP gross margin

56.7

%

62.1

%

60.4

%

59.3

%

60.4

%

Non-GAAP gross margin

63.7

%

62.5

%

61.2

%

63.1

%

60.9

%

Total GAAP operating expenses

$

385,401

$

250,614

$

240,815

$

636,015

$

484,901

Special items:

Share-based compensation

(68,675)

(21,947)

(19,557)

(90,622)

(39,870)

Restructuring related charges (b)

(35,415)

(1,567)

(4,285)

(36,982)

(5,171)

Amortization of and write-off acquired intangible assets

(6,955)

—

(1,065)

(6,955)

(2,136)

Other operating expenses (c)

(28,229)

(15,252)

(1,687)

(43,481)

(3,990)

Total special items

(139,274)

(38,766)

(26,594)

(178,040)

(51,167)

Total non-GAAP operating expenses

$

246,127

$

211,848

$

214,221

$

457,975

$

433,734

GAAP operating margin

(1.2)

%

20.7

%

20.6

%

9.2

%

19.2

%

Other cost of goods sold (a)

3.5

%

—

%

0.5

%

1.9

%

0.3

%

Share-based compensation

11.0

%

3.9

%

3.5

%

7.7

%

3.7

%

Restructuring related charges (b)

5.3

%

0.3

%

0.7

%

2.9

%

0.4

%

Amortization and write-off of acquired intangible assets

3.9

%

—

%

0.2

%

2.0

%

0.2

%

Other operating expenses (c)

4.2

%

2.5

%

0.3

%

3.3

%

0.3

%

Non-GAAP operating margin

26.7

%

27.4

%

25.8

%

27.0

%

24.1

%

GAAP interest and other income (loss), net

$

(14,921)

$

7,296

$

7,188

$

(7,625)

$

10,521

Special items:

Restructuring related items (d)

(121)

(1,512)

(3,085)

(1,633)

(3,085)

Issuance cost related to terminated standby loan

6,104

—

—

6,104

—

Total special items

5,983

(1,512)

(3,085)

4,471

(3,085)

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

$

(8,938)

$

5,784

$

4,103

$

(3,154)

$

7,436

GAAP net income

$

6,759

$

128,612

$

165,259

$

135,371

$

271,880

Less: Income from discontinued operations, net of tax

—

—

29,809

—

36,838

GAAP net income from continuing operations

6,759

128,612

135,450

135,371

235,042

Special items:

Other cost of goods sold ( a )

22,933

—

3,000

22,933

3,000

Share-based compensation

73,423

23,852

21,367

97,275

43,106

Restructuring related charges in operating expenses (b)

35,415

1,567

4,285

36,982

5,171

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

(121)

(1,512)

(3,085)

(1,633)

(3,085)

Amortization of and write-off acquired intangible assets

25,939

—

1,065

25,939

2,136

Issuance cost related to terminated standby loan

6,104

—

—

6,104

—

Other operating expenses (c)

28,229

15,252

1,687

43,481

3,990

Pre-tax total special items

191,922

39,159

28,319

231,081

54,318

Other income tax effects and adjustments (e)

(36,720)

(3,098)

(10,298)

(39,818)

(10,362)

Non-GAAP net income from continuing operations

$

161,961

$

164,673

$

153,471

$

326,634

$

278,998

Weighted average shares — basic

552,238

497,335

500,817

524,787

502,303

Weighted average shares — diluted

562,149

508,716

510,309

535,433

513,951

Non-GAAP adjustment

13,123

6,871

9,129

9,997

7,345

Non-GAAP weighted average shares — diluted (f)

575,272

515,587

519,438

545,430

521,296

GAAP diluted net income per share from continuing operations

$

0.01

$

0.25

$

0.26

$

0.25

$

0.46

Non-GAAP diluted net income per share from continuing operations

$

0.28

$

0.32

$

0.30

$

0.60

$

0.54

(a)

Other costs of goods sold in the three and six months ended August 4, 2018 include amortization of the Cavium inventory fair value step up.  Other cost of goods sold in the three and six months ended July 29, 2017 include charges for past intellectual property licensing matters.

(b)

Restructuring related charges include employee severance, facilities related costs, and impairment of equipment.

(c)

Other operating expenses primarily include Cavium merger costs and costs of retention bonuses offered to employees who remained through the ramp down of certain operations due to restructuring actions.

(d)

Interest and other income, net includes restructuring related items such as foreign currency remeasurement associated with restructuring related accruals.

(e)

Other income tax effects and adjustments relate to tax provision based on a non-GAAP income tax rate of 4%.

(f)

Non-GAAP diluted share count excludes the impact of share-based compensation expense expected to be incurred in future periods and not yet recognized in the Company's financial statements, which would otherwise be assumed to be used to repurchase shares under the GAAP treasury stock method.