CAVIUM, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data and percentages)

Three Months Ended

December 31, 2016

September 30, 2016

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

Net revenue

$

226,151

$

168,123

GAAP gross profit

98,225

47,414

GAAP gross margin

43.4

%

28.2

%

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

509

274

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

75

134

Purchase accounting effect on inventory

21,015

9,888

Manufacturing rights buy-out

-

37,059

Amortization of acquisition related assets

27,176

12,880

Non-GAAP gross profit

$

147,000

$

107,649

Non-GAAP gross margin

65.0

%

64.0

%

Reconciliation of GAAP operating expenses to non-GAAP:

GAAP research and development expenses

$

87,031

$

67,752

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

(11,030)

(9,644)

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

(2,635)

(1,363)

Amortization of acquisition related assets

(1,507)

(2,643)

IPR&D written-off

(2,000)

-

Non-GAAP research and development expenses

69,859

53,146

GAAP sales, general and administrative expenses

40,340

73,904

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

(7,734)

(7,554)

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

(700)

(1,097)

Acquisition and integration related costs

(2,282)

(13,486)

Amortization of acquisition related assets

(1,422)

(524)

Restructuring, severance and other employment charges

-

Non-GAAP sales, general and administrative expenses

28,202

22,141

Total Non-GAAP operating expenses

$

98,061

$

75,287

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

GAAP other expense, net

$

(7,915)

$

(4,214)

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

164

522

Non-GAAP other expense, net

$

(7,751)

$

(3,692)

Reconciliation of GAAP Income tax to non-GAAP:

GAAP provision for (benefit from) income tax

$

84,539

$

(84,090)

Acquisition related tax adjustments

(83,174)

84,792

Non-GAAP provision for income tax

$

1,365

$

702