Marvell Technology, Inc.

Good afternoon and welcome to the Marvel Technologies Physical First Quarter 2022 Earnings Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. Please note that this event is being recorded. I would now like to turn the conference over to Mr. Ashish Saran, Vice President of Investor Relations. Please go ahead, sir.

Thank you and good afternoon, everyone. Welcome to Marvell's first quarter fiscal year 2022 earnings poll. Joining me today are Matt Murphy, Marvell's president and CEO, and Jun Hu, our CFO. I would like to remind everyone that certain comments made today may include forward-looking statements which are subject to significant risks and uncertainties that could cause our actual results to differ materially from management's current expectations. Please review the cautionary statements and risk factors contained in our earnings press release, which we filed with the SEC today, and posted on our website, as well as our most recent 10Q and 10Q filings. We do not intend to update our forward-looking statements. During our call today, we will refer to certain non-GAAP financial measures. A reconciliation between our GAAP and non-GAAP financial measures is available on our website in the Investor Relations section. We closed the acquisition of InFi on April 20th, 2021. Therefore, the results we reported today for the first quarter of fiscal year 2022, include the results from the InFi business for 10 days of the fiscal quarter. Revenue from the acquired InFi business is reported within our networking product group. To provide a direct comparison to the first fiscal quarter business outlook we provided in our earnings call on March 3rd, we have provided a table in our earnings press release which breaks out Marvell standalone non-GAAP results for the first quarter, excluding partial quarter results from the acquired InFi business. We are providing Marvell standalone non-GAAP results only on a one-time basis. As a reminder, there are no GAAP results for standalone Marvell. Matt and Jean's first quarter commentary will primarily focus on the non-GAAP results from the standalone Marvell business as it relates to the guidance we provided on our March 3rd call understated otherwise. Please note that the financial outlook for the second quarter of fiscal year 2022 includes expected results from the acquired inside business for the full quarter. On the subject of revenue reporting, as you know, we currently report revenue in three broad product groups, networking, storage, and other. However, as you may recall, during our investor day presentations, we also described our addressable opportunities by end market. This market focus, we provide more information and transparency about the key growth drivers of our business and was received positively by the investment community. We are now taking steps to align our external revenue reporting to our end markets. We believe this will provide investors with a better and more granular understanding of our business. Accordingly, we will discontinue reporting revenue by product growth, and instead, we will report revenue from the following five end markets, data center, carrier, enterprise networking, auto industrial, and consumer. Please note we will implement this change starting next quarter when we report results for our second quarter of fiscal 2022. In that earnings release, we will report revenue by end market for the second quarter and provide historical end market revenue data for the preceding seven quarters. Matt's discussion of business results and expectations will also transition to this end market view. In our second quarter earnings results, On a one-time basis, we will provide revenue results under both the current product growth process and the new end market process. With that, I'll turn the call over to Matt for his comments on our performance. Matt?

Thanks, Ashish, and good afternoon, everyone. I'll start with a summary of our first quarter GAAP results for the combined company. Revenue for the combined company was $832 million. GAAP gross margin was 50.2%, and loss per diluted share was $0.13%. I'm now going to review standalone Marvell non-GAAP results, excluding those of Infi. We began fiscal 2022 on a strong note, delivering solid results in the first quarter, driven by the strength of our core businesses and continued operational excellence. Marvell's standalone revenue for the first quarter was $810 million, exceeding the midpoint of our guidance. Revenue grew 17% year on year, driven by robust growth in both our networking and storage businesses. Higher revenue coupled with stronger gross margin and lower operating expenses drove non-GAAP earnings per share two cents above the midpoint of guidance to 29 cents. Non-GAAP EPS grew 61% year-on-year, demonstrating the significant operating leverage in our business model. I'm pleased that Marvell delivered the fourth straight quarter of double-digit year-on-year revenue growth, despite industry-wide supply constraints that have tightened considerably over the same time period. In fact, our year-on-year growth rate accelerated in the first quarter on strong and growing demand across all our end markets, and I'm pleased that our operations team rose to the challenge in a difficult environment. But we have more work to do. The majority of our products are proprietary and sole sourced, and demand for our solutions continues to grow. We need to support our customers with a flexible supply chain capable of delivering to upside demand within a reasonable lead time, something that has not been feasible this year. To further improve our supply, Chris Koopmans, who has played an instrumental role in Marvell's ongoing transformation, has been appointed as our Chief Operations Officer to lead our global operations and supply chain organization, in addition to his current role leading marketing and business operations. Chris is leveraging his deep understanding of our markets and customers to prioritize and align supply to our key growth initiatives. We are extending our planning horizons, strengthening strategic supplier partnerships, and using our balance sheet where appropriate to build more flexibility. Our suppliers value Marvell's focus on data infrastructure as a source of sustainable growth, driven by favorable secular trends compared to other cyclical end markets, and as a result, they are excited to partner with us. Looking to the second half of this fiscal year, we are confident that we have secured sufficient supply to enable accelerating year-on-year revenue growth for standalone Marvell above that of the first half. We expect supply to further improve next fiscal year. In a few moments, I'll discuss NFI's business, where we also expect strong revenue growth throughout the year. Moving on to our merger with NFI and related organizational changes. We received regulatory approval to merge with NFI in April, earlier than originally anticipated, and began integrating the talented NFI team. We have emerged from this transaction as a U.S. corporation, which we believe better positions the combined company for long-term success. Reflecting the larger scale and broader scope of Marvell, several key NFI executives have joined my direct staff. Loy Nguyen and Naraman Yousefi will manage the NFI businesses, and I've also increased their scope to include additional Marvell businesses. Lauren C., NFI's central engineering leader, will manage Marvell's analog and mixed signal organizations. In addition, Raghav Hussain has taken on a broader elevated role as president, products, and technologies to drive strategy, alignment, and growth across the company. Similar to our prior acquisitions, we expect the infusion of in-flight talent will add scale and further strengthen the capabilities of the combined company. We have built a world-class management team with deep technical expertise, vast industry experience, and a proven track record in driving growth and value creation. Let me move on now to discussing our two businesses in more detail. Networking. First, for Marvell standalone networking, revenue during the first quarter was $476 million, consistent with our outlook for strong growth. On a sequential basis, revenue grew 9%, underpinned by growth in all key product lines with the exception of 5G ASICs. However, Overall, 5G revenue continued to grow, marking our seventh straight consecutive quarter of growth. Year-on-year growth was a very robust 21% in networking, with solid contributions from multiple end markets. In 5G, growth was driven by standard and semi-custom product shipments to Samsung and Nokia, partially offset by a decline in ASICs as deployments in China paused. In cloud networking, we continued to benefit from strong customer demand for our SmartNIC DPUs. In automotive, we are growing rapidly, with our Ethernet products shipping into multiple model year 2021 vehicles. Our enterprise networking business also delivered solid results, extending the double-digit growth trend established last year, despite a soft-end market. This performance is a result of our expanding market position, driven by our refreshed Ethernet switches and multi-gigabit PHYs. To the extent the enterprise spending recovers later this year, that would be another tailwind to our business. Not only are we winning and ramping in the access, aggregation, and core switching markets, we are also making inroads in the data center with our feature rich and scalable multi-terabit family of switches. As a reminder, these products leverage a modular architecture to deliver multiple capacity points from 3.2 terabits per second to 12.8 terabits for a broad range of data center applications. We have been winning new sockets and expect these design wins to start contributing meaningfully higher levels of revenue next fiscal year. Let me now discuss the outlook for the second quarter of fiscal 2022 for our networking business. This outlook includes revenue from InFi's complete electro-optics platform comprised of their industry-leading PAM and coherent DSPs, high-performance broadband analog drivers and TIAs, highly integrated silicon photonics, and data center interconnect modules. For the second quarter, we anticipate networking revenue to grow just over 70% year-on-year, Let me walk you through the growth expectations from the Marvell and InFi businesses implicit in this guidance. We expect Marvell standalone networking to drive strong year-on-year revenue growth in the high teens on a percentage basis and be up slightly on a sequential basis. Similar to the prior quarter, we expect broad growth from multiple products, off-site by a pause in China 5G. This outlook reflects ongoing supply constraints, which have been more acute for our networking products. However, as I discussed earlier, we believe we have line of sight to supply improvements later this year and next year to support our growth plans. As we look forward, we expect a strong second half ramp compared to the first half in standalone Marvell's networking business, including an acceleration in our 5G business from both our own product ramps and an increase in 5G adoption in the US and other regions. From the acquired InFi business, we expect approximately $215 million in revenue in our second fiscal quarter. I am very pleased that at this level of revenue, we expect the In-Fi business will be accretive to our non-GAAP earnings in the first full quarter as a combined company. We expect this business to drive strong growth above Marvell's growth rate, benefiting from the demand for high-speed connectivity inside and between data centers and in the carrier market. Let me briefly discuss In-Fi's data center growth drivers. Inside data centers, as demand for bandwidth continues to increase, a generational shift is underway from traditional NRZ signaling to more advanced pulse amplitude modulation, or PAM, which enables a significant increase in bandwidth. This is one of the biggest changes in data center connectivity, and InFi is leading this industry transition. InFi is the largest provider of PAM-4 DSPs to the optical connectivity market, having shipped millions of devices. As the market continues to transition to higher speeds, 400 gig adoption has been accelerating. And last year, we started sampling our next generation 800 gig solution, which is seeing strong traction with customers. In collaboration with Microsoft, InFi pioneered pluggable transceiver technology to directly interconnect regional cloud data centers at lower cost, complexity, and power compared to traditional optical transport solutions. The first product, Colors, used PAM4 technology to enable 100 gig per wavelength, which could be multiplexed to support up to four terabits per second of bandwidth over a single fiber for data center interconnect or DCI applications. This product has been shipping in volume and established in five leadership in this category. Building on the success of Colors, which was deployed primarily by one hyperscaler last year, InFi introduced Colors 2, the industry's first pluggable transceiver compatible with the 400 ZR industry standard, which enables 400 gig per wavelength using coherent technology. We expect to maintain our leadership position in the DCI market, and projected Colors 2 deployments will start this year. With an industry standard now in place, we see multiple hyperscalers and additional customers adopting pluggable ZR technology, which creates a significantly larger revenue opportunity for our DCI platform. Turning now to our storage business. Storage revenue for the first quarter was $303 million, growing 17% year on year and declining 7% sequentially. Results were better than our expectations as we benefited from stronger demand for SSD controllers. Stellar year-on-year results were driven by ramps in our custom DIY SSD controller programs and ongoing growth in cloud demand for near-line drives, which benefited our HDD controllers and preamplifiers. The sequential decline was primarily due to our fiber channel business. Looking to the second quarter of fiscal 2022, we expect storage to deliver another strong performance driven by the near-line HDD and data center SSD markets. We are projecting revenue to grow year-on-year in the mid-teens, and in the double digits sequentially on a percentage basis. Our recent results and expectations for ongoing growth reflect the significant transformation of our storage business. In our HDD business, data center has become the largest revenue contributor relative to other markets. Our preamplifier business is now ramped up to an annualized run rate of over 50 million. We believe that we can more than double this run rate. We are continuing to step up the technology cadence for SSD controllers and we recently introduced the industry's first PCIe Gen 5 SSD controller family, designed to address the data movement and security challenges in cloud infrastructure. We are excited to collaborate directly with hyperscalers and NAND vendors to bring this leading solution to market. In addition, I'm pleased to announce that a key NAND OEM has chosen to partner with Marvell to develop custom PCIe Gen 5 and Gen 6 SSD controllers for their enterprise and cloud solutions. The Gen 6 product will be built on our 5 nanometer process. In the storage market, this is a quantum leap in process node cadence and is a testament to Marvell's advanced technology platform. We expect to leverage the leading edge IP we are developing to be deployed in additional advanced node storage solutions. Our strategy to refocus this business on the data center market has been a huge success. Data Center has grown to over 60% of storage revenue from less than 20% in fiscal 2017. In closing, we had a great start to fiscal 2022, and I'm very excited about the growth prospects in front of us as a combined company. When we announced the acquisition of InFi, we increased our long-term target model for revenue growth to 12% to 16% annually. I'm pleased that our recent results and near-term expectations are, in fact, currently trending above the high end of this target range. This is primarily due to our own product cycles combined with sustainable secular growth trends and our data infrastructure markets. The acquisition of InFi has increased our exposure to the data center, which is our largest end market. And within that, cloud is the largest growth opportunity across Marvell, significantly bigger than our 5G opportunity. InFi has already established a strong position within cloud, addressing an opportunity growing at a 60% plus CAGR. The Marvell organic opportunity in cloud is also substantial, which we are addressing with our merchant, semi-custom, and flexible ASIC model for compute, networking, acceleration, security, and storage applications. At our analyst day last year, we discussed this opportunity growing at an expected 19% CAGR to over $5 billion by calendar 2023. The adoption of ARM processors in servers continues to gain traction, and this further increases our cloud opportunity. We expect cloud revenue for the combined company to grow rapidly. As Marvell's 5 nanometer products come to market, we expect a substantial step up in our cloud revenue. I'm very pleased to report that we have been recently awarded a number of significant design wins leveraging our advanced technology platform. Respecting customer confidentiality, we will not be in a position to discuss any specific win. They are with multiple customers across a variety of applications and business models. We expect these products to start ramping into production in calendar 2023, achieving peak revenue in the calendar 2024 to 2025 timeframe. As I approach my five-year anniversary at Marvell, I've never felt stronger about our growth prospects, and I'm grateful to all our employees who have worked hard to transform the company to position us for what we believe will be a very exciting future. With that, I'll turn the call over to Jean for more detail on our recent results and outlook.