Marvell Technology Group Ltd.

Reconciliations from GAAP to Non-GAAP (Unaudited)

(In thousands, except per share amounts)

Three Months Ended

Six Months Ended

August 3,
2019

May 4,
2019

August 4,
2018

August 3,
2019

August 4,
2018

GAAP gross profit:

$

350,702

$

361,428

$

377,110

$

712,130

$

752,803

Special items:

Share-based compensation

3,662

2,926

4,748

6,588

6,653

Amortization of acquired intangible assets

61,132

59,906

18,984

121,038

18,984

Other cost of goods sold (a)

—

450

22,933

450

22,933

Total special items

64,794

63,282

46,665

128,076

48,570

Non-GAAP gross profit

$

415,496

$

424,710

$

423,775

$

840,206

$

801,373

GAAP gross margin

53.4

%

54.6

%

56.7

%

54.0

%

59.3

%

Non-GAAP gross margin

63.3

%

64.1

%

63.7

%

63.7

%

63.1

%

Total GAAP operating expenses

$

396,930

$

382,554

$

385,401

$

779,484

$

636,015

Special items:

Share-based compensation

(60,014)

(55,672)

(68,675)

(115,686)

(90,622)

Restructuring related charges (b)

(16,585)

(5,682)

(35,415)

(22,267)

(36,982)

Amortization of acquired intangible assets

(19,835)

(19,834)

(6,955)

(39,669)

(6,955)

Other operating expenses (c)

(20,676)

(6,569)

(28,229)

(27,245)

(43,481)

Total special items

(117,110)

(87,757)

(139,274)

(204,867)

(178,040)

Total non-GAAP operating expenses

$

279,820

$

294,797

$

246,127

$

574,617

$

457,975

GAAP operating margin

(7.0)

%

(3.2)

%

(1.2)

%

(5.1)

%

9.2

%

Other cost of goods sold (a)

—

%

0.1

%

3.5

%

—

%

1.9

%

Share-based compensation

9.7

%

8.8

%

11.0

%

9.3

%

7.7

%

Restructuring related charges (b)

2.5

%

0.9

%

5.3

%

1.7

%

2.9

%

Amortization of acquired intangible assets

12.3

%

12.0

%

3.9

%

12.2

%

2.0

%

Other operating expenses (c)

3.2

%

1.0

%

4.2

%

2.0

%

3.3

%

Non-GAAP operating margin

20.7

%

19.6

%

26.7

%

20.1

%

27.0

%

GAAP interest and other income (loss), net

$

(21,651)

$

(20,051)

$

(14,921)

$

(41,702)

$

(7,625)

Special items:

Restructuring related items (d)

75

(338)

(121)

(263)

(1,633)

Write-off of debt issuance costs (e)

—

458

6,104

458

6,104

Deal costs (f)

1,009

—

—

1,009

—

Total special items

1,084

120

5,983

1,204

4,471

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

$

(20,567)

$

(19,931)

$

(8,938)

$

(40,498)

$

(3,154)

GAAP net income (loss)

$

(57,331)

$

(48,450)

$

6,759

$

(105,781)

$

135,371

Special items:

Other cost of goods sold (a)

—

450

22,933

450

22,933

Share-based compensation

63,676

58,598

73,423

122,274

97,275

Restructuring related charges in operating expenses (b)

16,585

5,682

35,415

22,267

36,982

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

75

(338)

(121)

(263)

(1,633)

Amortization of acquired intangible assets

80,967

79,740

25,939

160,707

25,939

Write-off of debt issuance costs (e)

—

458

6,104

458

6,104

Deal costs in interest and other income, net (f)

1,009

—

—

1,009

—

Other operating expenses (c)

20,676

6,569

28,229

27,245

43,481

Pre-tax total special items

182,988

151,159

191,922

334,147

231,081

Other income tax effects and adjustments (g)

(15,728)

2,324

(36,720)

(13,404)

(39,818)

Non-GAAP net income

$

109,929

$

105,033

$

161,961

$

214,962

$

326,634

Weighted average shares — basic

663,603

658,963

552,238

661,280

524,787

Weighted average shares — diluted

663,603

658,963

562,149

661,280

535,433

GAAP diluted net income (loss) per share

$

(0.09)

$

(0.07)

$

0.01

$

(0.16)

$

0.25

Non-GAAP diluted net income per share (h)

$

0.16

$

0.16

$

0.28

$

0.32

$

0.60

(a)

Other costs of goods sold includes amortization of the Cavium inventory fair value step up in 2018 as well as charges for past intellectual property licensing matters in 2019.

(b)

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

(c)

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

(d)

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

(e)

Write-off of debt issuance costs is associated with the partial term loan repayment during the three months ended May 4, 2019, as well as during the three and six months ended August 4, 2018.

(f)

Deal costs include transaction costs incurred in connection with 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 May 4, 2019 and the three and six months ended August 3, 2019, and based on a non-GAAP income tax rate of 4% for the three and six months ended August 4, 2018.

(h)

Non-GAAP diluted net income per share for the three months ended August 3, 2019 and May 4, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 675,755 shares and 671,048 shares, respectively, due to the non-GAAP net income reported in the respective period. Non-GAAP diluted net income per share for the six months ended August 3, 2019 was calculated by dividing non-GAAP net income by weighted average shares outstanding (diluted) of 673,399 shares due to the non-GAAP net income reported in the period.