Wednesday, September 25, 2019 9:05:22 AM
I’m surprised the stock is not reacting to this news detailed in the SEC report. Here are my thoughts, I’d love to hear others.. am I way off here?
The SEC filing notes irregularities discovered in years 2015 and 2016 and MRVL settled with cease and desist. However, this kind of revenue management technique can be carried on for a long time (since a balance sheet account is being manipulated) and then blows up. Future years are not discussed one way or another in the SEC filing, other than the panic within the company about continuing the revenue scheme to keep meeting earnings and how this eventually affects future earnings.
The stock price barely reacted DESPITE the company issuing, the next day, earnings guidance that next quarter earnings is going to miss. I do not think investors realize how much earnings can miss when this kind of revenue scheme comes to an end and is reflected in the financial statements.
Tech company revenue recognition can be extremely difficult, especially for longer term projects, custom software, or third party suppliers or distributors. This undisclosed revenue scheme alleges that the company was pulling from future earnings (basically customer deposits or unearned revenue on in-process projects) to meet current earnings targets. "Unearned revenue" is the account on the balance sheet holding future earnings, and is where they were pulling from to meet projected revenues on their balance sheet.
However, in 2019 this unearned revenue account went from around $50-$70M most years to just under $5M. It appears the gig is up, as there is very little to pull from or all future earnings have been pulled for past earnings by the revenue scheme from this account (or unreasonably shipped to customers, as discussed in the SEC charges).
The last few quarters, unearned revenue/deferred income was so small it was buried with other liabilities, not presented on the front of the balance sheet, so it is difficult to track this account during 2019.
On page 6 of the SEC filing, the impact on future earnings and the vicious cycle of this unearned revenue scheme is highlighted. The SEC filing does not note when the undisclosed revenue management scheme ended or any information about 2017 and future years.
Here is an excerpt from Page 6 of the SEC report:
“ c. Second Quarter of Fiscal Year 2016 (ended August 1, 2015) 20. Several weeks into Q2 FY2016, Marvell’s senior management renewed its pressure on its sales managers to pull-in as much revenue as possible to meet the quarter’s revenue targets. Internal FP&A analyses reflected that the combination of declining market demand coupled with the effects of the prior quarter pull-ins had left the company almost $100 million short of its public revenue guidance of $710-$740 million. Again, senior management’s response was that the company could simply not afford to miss its revenue guidance. As one Marvell employee explained: “[W]e need to pull into this QTR, we are still short, we will worry about next QTR later.” “
Either way, the unearned revenue account affected dropped 90% on last fiscal year financials ending 2/2019 to only $5M and they announced disappointing earnings for next quarter.. I certainly am short now and curious to see how this scheme ending plays out in earnings released December 2019!!!
SEC filing https://www.sec.gov/litigation/admin/2019/33-10684.pdf
SEC news release https://www.sec.gov/news/press-release/2019-175
Marvell Financials https://investor.marvell.com/financial-information/annual-reports
Recent MRVL News
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/16/2024 10:30:20 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 07/16/2024 09:45:40 PM
- Marvell Extends Connectivity Leadership With Industry's First 1.6T PAM4 DSP for Active Electrical Cables • PR Newswire (US) • 06/27/2024 01:00:00 PM
- Marvell Technology, Inc. Declares Quarterly Dividend Payment • PR Newswire (US) • 06/21/2024 08:05:00 PM
- Form SD - Specialized disclosure report • Edgar (US Regulatory) • 05/31/2024 08:06:26 PM
- Dell Shares Drop 15% in Pre-Market; Gap Soars 24% on Surprising Quarterly Profits, and More in Earnings • IH Market News • 05/31/2024 11:50:33 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 05/30/2024 08:06:48 PM
- Marvell Technology, Inc. Reports First Quarter of Fiscal Year 2025 Financial Results • PR Newswire (US) • 05/30/2024 08:05:00 PM
- Marvell Expands Connectivity Portfolio With New PCIe Retimer Product Line to Scale Compute Fabrics of Accelerated Infrastructure • PR Newswire (US) • 05/30/2024 01:00:00 PM
- Form 4 - Statement of changes in beneficial ownership of securities • Edgar (US Regulatory) • 05/16/2024 10:14:13 PM
- Form ARS - Annual Report to Security Holders • Edgar (US Regulatory) • 05/08/2024 08:10:11 PM
- Form DEFA14A - Additional definitive proxy soliciting materials and Rule 14(a)(12) material • Edgar (US Regulatory) • 05/08/2024 08:07:41 PM
- Form DEF 14A - Other definitive proxy statements • Edgar (US Regulatory) • 05/08/2024 08:05:59 PM
- Marvell Technology, Inc. Announces Conference Call to Review First Quarter of Fiscal Year 2025 Financial Results • PR Newswire (US) • 05/06/2024 08:05:00 PM
- Marvell Appoints Rick Wallace and Daniel Durn to its Board of Directors • PR Newswire (US) • 04/29/2024 01:00:00 PM
- GM Recognizes Marvell With 2023 Overdrive Award For Its Automotive Ethernet Technology • PR Newswire (US) • 04/23/2024 01:00:00 PM
- Marvell Launches Products, Technology and Partnerships at OFC 2024 to Scale Optical Technology for Accelerated Infrastructure • PR Newswire (US) • 03/26/2024 03:08:00 PM
- Marvell Announces Industry's First 5nm Transmit-Only 800G PAM4 Optical DSP for AI and Cloud Interconnects • PR Newswire (US) • 03/25/2024 01:00:00 PM
- Marvell Extends 1.6T Connectivity Leadership With Industry's First PAM4 Optical DSP Integrating 200 Gbps Electrical and Optical Interfaces • PR Newswire (US) • 03/25/2024 01:00:00 PM
- Marvell Doubles Reach of 800 Gbps ZR/ZR+ Pluggable Modules with PCS, Expands Ecosystem for COLORZ® 800 • PR Newswire (US) • 03/25/2024 01:00:00 PM
- Marvell Demonstrates Industry's First 200G 3D Silicon Photonics Engine to Scale Accelerated Infrastructure • PR Newswire (US) • 03/25/2024 01:00:00 PM
- Marvell Technology, Inc. Declares Quarterly Dividend Payment • PR Newswire (US) • 03/15/2024 08:05:00 PM
- Marvell Optical CTO Dr. Radha Nagarajan Awarded 2024 David Richardson Medal from Optica • PR Newswire (US) • 03/08/2024 02:00:00 PM
- Samsara Stock Surges 15% After Earnings Beat, MongoDB Faces 8% Decline Amid Gloomy Forecast • IH Market News • 03/08/2024 11:21:16 AM
- Form 8-K - Current report • Edgar (US Regulatory) • 03/07/2024 09:10:01 PM
Greenlite Ventures Completes Agreement with No Limit Technology • GRNL • Jul 19, 2024 10:00 AM
VAYK Expects Revenue from First Airbnb Property Starting from August • VAYK • Jul 18, 2024 9:00 AM
North Bay Resources Acquires Mt. Vernon Gold Mine, Sierra County, California, with Assays up to 4.8 oz. Au per Ton • NBRI • Jul 18, 2024 9:00 AM
Nightfood Holdings Signs Letter of Intent for All-Stock Acquisition of CarryOutSupplies.com • NGTF • Jul 17, 2024 1:00 PM
Kona Gold Beverages Reaches Out to Largest Debt Holder for Debt Purchase Negotiation • KGKG • Jul 17, 2024 9:00 AM
Avant Technologies Welcomes Back Former CEO with Eye Toward Future Growth and Expansion • AVAI • Jul 17, 2024 8:00 AM