Cavium Announces Financial Results for Q1 2017

CAVIUM, INC.

Unaudited GAAP Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)

Three Months Ended

March 31, 2017

December 31, 2016

Net revenue

$

229,577

$

226,151

Cost of revenue

137,454

127,926

Gross profit

92,123

98,225

Operating expenses:

     Research and development

90,713

87,031

     Sales, general and administrative

40,397

40,340

        Total operating expenses

131,110

127,371

Loss from operations

(38,987)

(29,146)

Other income (expense), net:

    Interest expense

(10,124)

(8,073)

    Other, net

(133)

158

Total other expense, net

(10,257)

(7,915)

     Loss before income taxes

(49,244)

(37,061)

     Provision for income taxes

1,279

84,539

Net loss

$

(50,523)

$

(121,600)

Net loss per common share, basic and diluted

$

(0.75)

$

(1.82)

Shares used in computing basic and diluted net loss per common share

67,640

66,949

CAVIUM, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data and percentages)

Three Months Ended

March 31, 2017

December 31, 2016

Reconciliation of GAAP gross profit and margin to non-GAAP:

Net revenue

$

229,577

$

226,151

GAAP gross profit

92,123

98,225

GAAP gross margin

40.1

%

43.4

%

Stock-based compensation and related payroll taxes

694

584

Inventory charges

25,803

21,015

Realignment charges

5,104

-

Amortization of acquisition related assets

27,053

27,176

Non-GAAP gross profit

$

150,777

$

147,000

Non-GAAP gross margin

65.7

%

65.0

%

Reconciliation of GAAP operating expenses to non-GAAP:

GAAP research and development expenses

$

90,713

$

87,031

Stock-based compensation and related payroll taxes

(16,214)

(13,665)

Realignment charges

(422)

-

Amortization of acquisition related assets

(743)

(1,507)

Acquisition and integration related costs

(1,346)

-

IPR&D written-off

-

(2,000)

Non-GAAP research and development expenses

71,988

69,859

GAAP sales, general and administrative expenses

40,397

40,340

Stock-based compensation and related payroll taxes

(8,769)

(8,434)

Realignment charges

(552)

-

Amortization of acquisition related assets

(1,246)

(1,422)

Acquisition and integration related costs

(1,618)

(2,282)

Non-GAAP sales, general and administrative expenses

28,212

28,202

Total Non-GAAP operating expenses

$

100,200

$

98,061

Reconciliation of GAAP non-operating expenses to non-GAAP:

GAAP other expense, net

$

(10,257)

$

(7,915)

Acquisition related debt refinancing costs

2,680

-

Financing costs associated with interim term loan facility

-

164

Non-GAAP other expense, net

$

(7,577)

$

(7,751)

Reconciliation of GAAP Income tax to non-GAAP:

GAAP provision for income tax

$

1,279

$

84,539

Acquisition related tax adjustments

-

(83,174)

Non-GAAP provision for income tax

$

1,279

$

1,365

CAVIUM, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data and percentages)

Three Months Ended

March 31, 2017

December 31, 2016

Reconciliation of GAAP loss from operations to non-GAAP income from operations:

GAAP loss from operations

$

(38,987)

$

(29,146)

Stock-based compensation and related payroll taxes

25,677

22,683

Inventory charges

25,803

21,015

Realignment charges

6,078

-

Amortization of acquisition related assets

29,042

30,105

Acquisition and integration related costs

2,964

2,282

IPR&D written-off

-

2,000

Non-GAAP income from operations

$

50,577

$

48,939

Non-GAAP income from operations as a percentage of revenue

22.0

%

21.6

%

Reconciliation of GAAP net loss to non-GAAP net income:

GAAP net loss

$

(50,523)

$

(121,600)

Non-GAAP adjustments:

Stock-based compensation and related payroll taxes

25,677

22,683

Inventory charges

25,803

21,015

Realignment charges

6,078

-

Amortization of acquisition related assets

29,042

30,105

Acquisition and integration related costs

2,964

2,282

IPR&D written-off

-

2,000

Acquisition related debt refinancing costs

2,680

-

Financing costs associated with interim term loan facility

-

164

Acquisition related tax adjustments

-

83,174

Total of non-GAAP adjustments

92,244

161,423

Non-GAAP net income

$

41,721

$

39,823

GAAP net loss per share, diluted

$

(0.75)

$

(1.82)

Non-GAAP adjustments detailed above

1.33

2.38

Non-GAAP net income per share, diluted

$

0.58

$

0.56

GAAP weighted average shares, diluted

67,640

66,949

Non-GAAP share adjustment

4,688

4,365

Non-GAAP weighted average shares, diluted

72,328

71,314

CAVIUM, INC.

Unaudited GAAP Condensed Consolidated Balance Sheets

(in thousands)

As of

March 31, 2017

December 31, 2016

Assets

Current assets

Cash and cash equivalents

$

132,409

$

221,439

Accounts receivable, net

136,510

125,728

Inventories

100,467

119,692

Prepaid expenses and other current assets

22,461

22,259

Total current assets

391,847

489,118

Property and equipment, net

152,690

150,862

Intangible assets, net

740,004

764,885

Goodwill

241,067

241,067

Other assets

5,559

4,599

Total assets

$

1,531,167

$

1,650,531

Liabilities and Stockholders' Equity

Current liabilities

Accounts payable

$

68,772

$

65,456

Accrued expenses and other current liabilities

54,704

64,967

Deferred revenue

8,213

8,412

Current portion of long-term debt

3,249

3,865

Capital lease and technology license obligations

21,402

25,535

Total current liabilities

156,340

168,235

Long-term debt

593,880

675,414

Capital lease and technology license obligations, net of current

24,929

27,878

Deferred tax liability

19,314

18,774

Other non-current liabilities

17,735

18,386

Total liabilities

812,198

908,687

Stockholders' equity

Common stock

68

67

Additional paid-in capital

1,106,649

1,079,043

Accumulated deficit

(388,016)

(336,621)

Accumulated other comprehensive income (loss)

268

(645)

Total stockholders' equity

718,969

741,844

Total liabilities and stockholders' equity

$

1,531,167

$

1,650,531