Cavium Announces Financial Results for Q4 2017
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Cavium Announces Financial Results for Q4 2017

SAN JOSE, Calif., Jan. 31, 2018 — (PRNewswire) —  Cavium, Inc. (NASDAQ: CAVM), a leading provider of semiconductor products that enable intelligent processing for enterprise, data center, cloud, wired and wireless networking, today announced financial results for the fourth quarter ended December 31, 2017. Due to the pending merger with Marvell Technology Group Ltd. ("Marvell"), the Company will not schedule an earnings conference call.

Net revenue in the fourth quarter of 2017 was $260.4 million, a 3.3% sequential increase from the $252.0 million reported in the third quarter of 2017 and 15.1% from the $226.2 million reported in the fourth quarter of 2016.

Generally Accepted Accounting Principles (GAAP) Results

Net loss for the fourth quarter of 2017 was $1.1 million, or ($0.02) per diluted share, compared to $6.2 million, or ($0.09) per diluted share in the third quarter of 2017. Gross margins were 53.9% in the fourth quarter of 2017 compared to 54.6% in the third quarter of 2017. As a percentage of revenue, GAAP loss from operations was 4.7% in the fourth quarter of 2017 compared to GAAP operating income of 0.2% in the third quarter of 2017. Total cash and cash equivalents were $140.5 million at December 31, 2017.

The GAAP results of operations in the fourth quarter of 2017 included an income tax benefit of $11.1 million as a result of the Company's preliminary assessment of the impact of the newly enacted U.S. Tax Reform. On December 22, 2017, the United States enacted tax reform legislation through the Tax Cuts and Jobs Act (the "Act"), which significantly changes the existing U.S. tax laws. Major reforms in the legislation include a reduction in the corporate tax rate from 35.0% to 21.0%, and a move from a worldwide tax system to a territorial system. As a result of enactment of the legislation, the Company recognized a tax benefit mentioned above due to the reduction in its net long term deferred tax liabilities recorded on its consolidated balance sheet. Although the Company believes the amount of recognized tax benefit is a reasonable estimate of the income tax effects of the Act, it should be considered provisional and may differ from the amounts that will be reported in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 as the Company continuously refines its assessment of the impact. Further, the final assessment of the impact of the Act may differ due to and among other things, changes in interpretations, assumptions made by the Company, the issuance of additional guidance, and actions the Company may take as a result of tax reform. The SEC has issued rules which allow for a measurement period of up to one year after the enactment date of the Act to finalize the accounting for the related tax impacts. Any adjustments to these provisional amounts will be reported as a component of income tax expense or benefit in the reporting period in which any such adjustments are determined, which will be no later than the fourth quarter of 2018.

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 core operational activities 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 Non-GAAP results exclude the effect of stock-based compensation and related payroll taxes, amortization of acquisition related assets, acquisition related inventory charges, acquisition and integration related costs, tax reform impact and acquisition related tax adjustment. The acquisition and integration related costs in the fourth quarter of 2017 included various transaction-related charges associated with the pending Merger with Marvell, primarily financial advisory and outside legal fees. The reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.

In the fourth quarter of 2017, Non-GAAP net income was $60.8 million, or $0.83 per diluted share, Non-GAAP gross margin was 65.2% and Non-GAAP income from operations as a percentage of revenue was 24.2%.

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About Cavium

Cavium, Inc. (NASDAQ: CAVM), offers a broad portfolio of infrastructure solutions for compute, security, storage, switching, connectivity and baseband processing. Cavium's highly integrated multi-core SoC products deliver software compatible solutions across low to high performance points enabling secure and intelligent functionality in Enterprise, Data Center and Service Provider Equipment. Cavium processors and solutions are supported by an extensive ecosystem of operating systems, tools, application stacks, 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 further information, please visit the investor relations section of the Cavium web site at http://www.cavium.com.

CAVIUM, INC.


Unaudited GAAP Condensed Consolidated Statements of Operations


(in thousands, except per share amounts)





Three Months Ended



December 31, 2017



September 30, 2017


Net revenue

$

260,361



$

251,987


Cost of revenue


119,921




114,455


Gross profit


140,440




137,532


Operating expenses:








     Research and development


98,610




93,860


     Sales, general and administrative


53,963




43,184


        Total operating expenses


152,573




137,044


Income (loss) from operations


(12,133)




488


Other income (expense), net:








    Interest expense


(6,468)




(6,493)


    Other, net


75




277


Total other expense, net


(6,393)




(6,216)


     Loss before income taxes


(18,526)




(5,728)


     Provision for (benefit from) income taxes


(17,476)




486


Net loss

$

(1,050)



$

(6,214)


Net loss per common share, basic and diluted

$

(0.02)



$

(0.09)


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


69,044




68,675


 

CAVIUM, INC.


Unaudited Reconciliation of Non-GAAP Adjustments


(in thousands, except per share data and percentages)





Three Months Ended



December 31,
2017



September 30,
2017


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








Net revenue

$

260,361



$

251,987


GAAP gross profit


140,440




137,532


GAAP gross margin


53.9

%



54.6

%









Stock-based compensation and related payroll taxes


887




879


Inventory charges


543




(18)


Amortization of acquisition related assets


27,947




27,947


Non-GAAP gross profit

$

169,817



$

166,340


Non-GAAP gross margin


65.2

%



66.0

%









Reconciliation of GAAP operating expenses to non-GAAP:








GAAP research and development expenses

$

98,610



$

93,860


Stock-based compensation and related payroll taxes


(16,647)




(17,437)


Amortization of acquisition related assets


(646)




(725)


Acquisition and integration related costs


(3,068)




(743)


Non-GAAP research and development expenses


78,249




74,955










GAAP sales, general and administrative expenses


53,963




43,184


Stock-based compensation and related payroll taxes


(8,909)




(9,035)


Amortization of acquisition related assets


(1,280)




(1,278)


Acquisition and integration related costs


(15,108)




(3,997)


Non-GAAP sales, general and administrative expenses


28,666




28,874


Total Non-GAAP operating expenses

$

106,915



$

103,829










Reconciliation of GAAP Income tax to non-GAAP:








GAAP provision for (benefit from) income tax

$

(17,476)



$

486


Tax reform impact and acquisition related tax adjustment


13,232




-


Non-GAAP provision for (benefit from) income tax

$

(4,244)



$

486


 

CAVIUM, INC.


Unaudited Reconciliation of Non-GAAP Adjustments


(in thousands, except per share data and percentages)





Three Months Ended



December 31,
2017



September 30,
2017


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








GAAP income (loss) from operations

$

(12,133)



$

488


Stock-based compensation and related payroll taxes


26,443




27,351


Inventory charges


543




(18)


Amortization of acquisition related assets


29,873




29,950


Acquisition and integration related costs


18,176




4,740


Non-GAAP income from operations

$

62,902



$

62,511


Non-GAAP income from operations as a percentage of revenue


24.2

%



24.8

%









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








GAAP net loss

$

(1,050)



$

(6,214)


Non-GAAP adjustments:








Stock-based compensation and related payroll taxes


26,443




27,351


Inventory charges


543




(18)


Amortization of acquisition related assets


29,873




29,950


Acquisition and integration related costs


18,176




4,740


Tax reform impact and acquisition related tax adjustment


(13,232)




-


Total of non-GAAP adjustments


61,803




62,023


Non-GAAP net income

$

60,753



$

55,809










GAAP net loss per share, diluted

$

(0.02)



$

(0.09)


Non-GAAP adjustments detailed above


0.85




0.85


Non-GAAP net income per share, diluted

$

0.83



$

0.76










GAAP weighted average shares, diluted


69,044




68,675


Non-GAAP share adjustment


4,190




4,488


Non-GAAP weighted average shares, diluted


73,234




73,163


 

CAVIUM, INC.


Unaudited GAAP Condensed Consolidated Balance Sheets


(in thousands)





As of



December 31, 2017



September 30, 2017


Assets








Current assets








Cash and cash equivalents

$

140,498



$

152,654


Accounts receivable, net


230,143




186,447


Inventories


93,674




94,879


Prepaid expenses and other current assets


22,794




23,510


Total current assets


487,109




457,490


Property and equipment, net


192,515




169,747


Intangible assets, net


664,769




692,994


Goodwill


237,692




237,692


Other assets


7,240




5,757


Total assets

$

1,589,325



$

1,563,680










Liabilities and Stockholders' Equity








Current liabilities








Accounts payable

$

91,318



$

74,207


Accrued expenses and other current liabilities


38,753




44,898


Deferred revenue


9,236




9,501


Current portion of long-term debt


3,270




3,270


Capital lease and technology license obligations


31,435




27,803


Total current liabilities


174,012




159,679


Long-term debt


592,963




593,770


Capital lease and technology license obligations, net of current


15,370




15,025


Deferred tax liability


2,686




16,824


Other non-current liabilities


25,948




25,436


Total liabilities


810,979




810,734










Stockholders' equity








Common stock


69




69


Additional paid-in capital


1,183,819




1,157,386


Accumulated deficit


(406,352)




(405,302)


Accumulated other comprehensive income


810




793


Total stockholders' equity


778,346




752,946


Total liabilities and stockholders' equity

$

1,589,325



$

1,563,680


                      

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SOURCE Cavium, Inc.

Contact:
Company Name: 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
Financial data for Cavium, Inc.