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Cavium Announces Financial Results for Q3 2016

SAN JOSE, Calif., Nov. 1, 2016 — (PRNewswire) —  Cavium, Inc. (NASDAQ: CAVM), a leading provider of semiconductor products that enable secure and intelligent processing for enterprise, data center, cloud, wired and wireless networking, today announced financial results for the third quarter ended September 30, 2016.

Cavium, Inc. Logo. (PRNewsFoto/Cavium Networks)

Cavium completed the acquisition of QLogic Corporation ("QLogic") on August 16, 2016. The financial results for the third quarter of 2016 include results from QLogic from the closing date to the end of the quarter.

Net revenue in the third quarter of 2016 was $168.1 million, a 56.9% sequential increase from the $107.2 million reported in the second quarter of 2016 and 60.0% from the $105.1 million reported in the third quarter of 2015.

Generally Accepted Accounting Principles (GAAP) Results

Net loss for the third quarter of 2016 was $14.4 million, or ($0.23) per diluted share, compared to $7.4 million, or $(0.13) per diluted share in the second quarter of 2016. Gross margins were 28.2% in the third quarter of 2016 compared to 66.9% in the second quarter of 2016. GAAP operating loss (GAAP loss from operations as a percentage of revenue) was 56.1% in the third quarter of 2016 compared to 6.4% in the second quarter of 2016. Total cash and cash equivalents were $192.4 million at September 30, 2016.

Non-GAAP Results                  

Cavium believes that the presentation of non-GAAP financial measures provides important supplemental information to management and investors regarding financial and business trends relating to Cavium's financial condition and results of operations. Cavium believes that these non-GAAP financial measures provide additional insight into Cavium's ongoing performance and has chosen to provide these measures for more consistent and meaningful comparison between periods. These measures should only be used to evaluate Cavium's results of operations in conjunction with the corresponding GAAP measures. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.

In the third quarter of 2016, Non-GAAP net income was $28.0 million, or $0.43 per diluted share. Non-GAAP gross margin was 64.0% and Non-GAAP operating margin (non-GAAP income from operations as a percentage of revenue) was 19.2%.

Recent News Highlights

Cavium will broadcast its third quarter of 2016 financial results conference call today, November 1, 2016, at 2 p.m. Pacific time (5 p.m. Eastern time). The conference call will be available via a live web cast on the investor relations section of the Cavium website at http://www.cavium.com. Please access the website at least a few minutes prior to the start of the call in order to download and install any necessary audio software. An archived web cast replay of the call will be available on the web site for a limited period of time.

About Cavium

Cavium offers a broad portfolio of integrated, software compatible processors ranging in performance from 1Gbps to 100Gbp that enable secure, intelligent functionality in Enterprise, Data Center, Broadband, Mobile and Service Provider Equipment, highly programmable switches which scale to 3.2Tbps and Ethernet and Fibre Channel adapters up to 100Gbps. Cavium processors are supported by ecosystem partners that provide operating systems, tools and application support, hardware reference designs and other products. Cavium is headquartered in San Jose, CA with design centers in California, Massachusetts, India, Israel, China and Taiwan. For more information, please visit: http://www.cavium.com.


CAVIUM, INC.

Unaudited GAAP Condensed Consolidated Statements of Operations

(in thousands, except per share amounts)



Three Months Ended


September 30, 2016



June 30, 2016

Net revenue

$

168,123



$

107,158

Cost of revenue


120,709




35,499

Gross profit


47,414




71,659

Operating expenses:







     Research and development


67,752




52,578

     Sales, general and administrative


73,904




25,882

        Total operating expenses


141,656




78,460

Loss from operations


(94,242)




(6,801)

Other income (expense), net:







    Interest expense


(4,268)




(185)

    Other, net


54




(151)

Total other expense, net


(4,214)




(336)

     Loss before income taxes


(98,456)




(7,137)

     Provision for (benefit from) income taxes


(84,090)




273

Net loss

$

(14,366)



$

(7,410)

Net loss per common share, basic and diluted

$

(0.23)



$

(0.13)

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


62,055




57,527

 

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


 


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 loss from operations to non-GAAP income from operations:








GAAP loss from operations

$

(94,242)



$

(6,801)


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


17,472




14,541


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


16,581




-


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


2,594




-


Purchase accounting effect on inventory


9,888




-


Amortization of acquisition related assets


16,047




3,680


Acquisition and integration related costs


13,486




6,339


Manufacturing rights buy-out


37,059




-


Restructuring, severance and other employment charges


13,477




-


Non-GAAP income from operations

$

32,362



$

17,759


Non-GAAP income from operations as a percentage of revenue


19.2

%



16.6

%









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








GAAP net loss

$

(14,366)



$

(7,410)


Non-GAAP adjustments:








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


17,472




14,541


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


16,581




-


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


2,594




-


Purchase accounting effect on inventory


9,888




-


Amortization of acquisition related assets


16,047




3,680


Acquisition and integration related costs


13,486




6,339


Manufacturing rights buy-out


37,059




-


Restructuring, severance and other employment charges


13,477




-


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


522




-


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


(84,792)




-


Total of non-GAAP adjustments


42,334




24,560


Non-GAAP net income

$

27,968



$

17,150










GAAP net loss per share, diluted

$

(0.23)



$

(0.13)


Non-GAAP adjustments detailed above


0.66




0.42


Non-GAAP net income per share, diluted

$

0.43



$

0.29










GAAP weighted average shares, diluted


62,055




57,527


Non-GAAP share adjustment


3,062




2,471


Non-GAAP weighted average shares, diluted


65,117




59,998


 

CAVIUM, INC.

Unaudited GAAP Condensed Consolidated Balance Sheets

(in thousands)



As of


September 30, 2016



June 30, 2016

Assets







Current assets







Cash and cash equivalents

$

192,378



$

140,419

Accounts receivable, net


144,902




82,137

Inventories


118,936




52,702

Prepaid expenses and other current assets


20,556




10,109

Asset held for sale


38,511




-

Total current assets


515,283




285,367

Property and equipment, net


122,114




64,917

Intangible assets, net


790,368




36,698

Goodwill


319,021




71,478

Other assets


3,922




1,822

Total assets

$

1,750,708



$

460,282








Liabilities and Stockholders' Equity







Current liabilities







Accounts payable

$

55,009



$

30,024

Other accrued expenses and other current liabilities


43,163




16,447

Deferred revenue


9,399




7,856

Current portion of long-term debt


53,774




-

Capital lease and technology license obligations


27,747




17,380

Total current liabilities


189,092




71,707

Long-term debt


676,372




-

Capital lease and technology license obligations, net of current


11,780




4,182

Deferred tax liability


17,270




3,923

Other non-current liabilities


18,266




4,140

Total liabilities


912,780




83,952








Stockholders' equity







Common stock


66




58

Additional paid-in capital


1,052,840




576,927

Accumulated deficit


(215,021)




(200,655)

Accumulated other comprehensive loss


43




-

Total stockholders' equity


837,928




376,330

Total liabilities and stockholders' equity

$

1,750,708



$

460,282

 

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SOURCE Cavium, Inc.

Contact:
Cavium, Inc.
Art Chadwick, Vice President of Finance and Administration and Chief Financial Officer, Tel: (408) 943-7104, Email: Email Contact Angel Atondo, Senior Marketing Communications Manager, Tel: (408) 943-7417, Email: Email Contact
Web: http://www.cavium.com