CAVIUM, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data and percentages)

Three Months Ended

September 30, 2016

June 30, 2016

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

Net revenue

$

168,123

$

107,158

GAAP gross profit

47,414

71,659

GAAP gross margin

28.2

%

66.9

%

Stock-based compensation and related payroll taxes from awards granted by the Company

274

261

Stock-based compensation and related payroll taxes from awards assumed from the acquisition

134

-

Purchase accounting effect on inventory

9,888

-

Manufacturing rights buy-out

37,059

-

Amortization of acquisition related assets

12,880

157

Non-GAAP gross profit

$

107,649

$

72,077

Non-GAAP gross margin

64.0

%

67.3

%

Reconciliation of GAAP operating expenses to non-GAAP:

GAAP research and development expenses

$

67,752

$

52,578

Stock-based compensation and related payroll taxes from awards granted by the Company

(9,644)

(9,017)

Stock-based compensation expense related to employees with change in control provision

(956)

-

Stock-based compensation and related payroll taxes from awards assumed from the acquisition

(1,363)

-

Amortization of acquisition related assets

(2,643)

(3,523)

Non-GAAP research and development expenses

53,146

40,038

GAAP sales, general and administrative expenses

73,904

25,882

Stock-based compensation and related payroll taxes from awards granted by the Company

(7,554)

(5,263)

Stock-based compensation expense related to employees with change in control provision

(15,625)

-

Stock-based compensation and related payroll taxes from awards assumed from the acquisition

(1,097)

-

Acquisition and integration related costs

(13,486)

(6,339)

Amortization of acquisition related assets

(524)

-

Restructuring, severance and other employment charges

(13,477)

-

Non-GAAP sales, general and administrative expenses

22,141

14,280

Total Non-GAAP operating expenses

$

75,287

$

54,318

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

GAAP other expense, net

$

(4,214)

$

(336)

Interest expense and amortization of debt financing cost associated with interim term loan facility

522

-

Non-GAAP other expense, net

$

(3,692)

$

(336)

Reconciliation of GAAP Income tax to non-GAAP:

GAAP provision for (benefit from) income tax

$

(84,090)

$

273

Partial reversal of the deferred tax asset valuation allowance due to acquisition

84,792

-

Non-GAAP provision for income tax

$

702

$

273