Marvell paid out more in share compensation last quarter than it reported in profit, and the adjusted figure it prefers is 2.8 times the one it filed

Marvell reported $308.0m of net income for its second quarter and recorded $326.2m of stock-based compensation in the same three months. The compensation is the larger of the two, by $18.2m.

The filing landed at five past four on Thursday afternoon and the headline numbers are strong. Net revenue was $2,739.3m for the quarter ended 1 August, against $2,006.1m a year earlier, which the company rounds to 37 percent growth and describes as a record. It came in $39.0m above the mid-point of the guidance given on 27 May. Operating income was $459.7m against $290.1m.

Two profits

GAAP diluted earnings per share were $0.33. Non-GAAP diluted earnings per share were $0.94.

The gap between the two is $594.6m of pre-tax special items, less $36.7m of tax effects. Stock-based compensation is $326.2m of it and amortisation of acquired intangible assets is $214.9m. The remainder is a $52.0m movement in the fair value of a contingent consideration liability, netted against a forward stock purchase contract, and $4.5m of other items. Non-GAAP net income comes out at $865.9m, which is 2.81 times the reported figure.

Share compensation is the line that moved. A year ago it was $153.6m against revenue of $2,006.1m. This quarter it was $326.2m against revenue of $2,739.3m, so it grew at more than twice the rate of the business.

The dilution shows up where dilution shows up. Diluted weighted-average shares were 921.2m, against 870.4m a year earlier, and that is after $400m of buybacks in the first half. Part of the increase is the Series A convertible preferred stock the company issued on 31 March, which is why earnings per share are now computed under the two-class method.

The balance sheet grew faster than the income statement

Total assets went from $22,285.3m at the end of January to $27,554.6m on 1 August. Goodwill accounts for $2,811.7m of that increase, rising to $13,873.9m, and acquired intangibles rose to $2,346.6m. Together they are 58.9 percent of everything the company owns.

The cash flow statement shows $1,270.9m paid for acquisitions, net of cash acquired, in the six months. The release does not name what was bought.

It also shows $2,000.0m of proceeds from the preferred issue and $998.9m of new borrowing against $500.0m repaid. Cash stands at $3,932.8m, up from $2,638.8m. Long-term debt is $4,962.9m.

The guide

The company expects $3.150bn of revenue in the quarter ending 31 October, plus or minus 5 percent, with GAAP diluted earnings per share of $0.53 and non-GAAP of $1.10. Non-GAAP operating expenses are put at about $655m against GAAP operating expenses of about $1.015bn, and the $285m of stock-based compensation inside that difference is stated on the face of the outlook.

Matt Murphy, the chairman and chief executive, said data centre revenue growth accelerated to 46 percent year on year. That figure appears only in his statement. The release carries no revenue table split by end market, and the end-market table it does carry lists products rather than numbers.