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Cavium Announces Financial Results for Q3 2017

SAN JOSE, Calif., Nov. 1, 2017 /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 third quarter ended September 30, 2017.

Net revenue in the third quarter of 2017 was $252.0 million, a 4.1% sequential increase from the $242.1 million reported in the second quarter of 2017 and 49.9% from the $168.1 million reported in the third quarter of 2016.

Generally Accepted Accounting Principles (GAAP) Results

Net loss for the third quarter of 2017 was $6.2 million, or ($0.09) per diluted share, compared to $11.1 million, or ($0.16) per diluted share in the second quarter of 2017. Gross margins were 54.6% in the third quarter of 2017 compared to 53.5% in the second quarter of 2017. As a percentage of revenue, GAAP income from operations was 0.19% in the third quarter of 2017 compared to GAAP operating loss of 2.5% in the second quarter of 2017. Total cash and cash equivalents were $152.7 million at September 30, 2017.

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 reconciliation between GAAP and non-GAAP financial results is provided in the financial statements portion of this release.

In the third quarter of 2017, Non-GAAP net income was $55.8 million, or $0.76 per diluted share, Non-GAAP gross margin was 66.0% and Non-GAAP income from operations as a percentage of revenue was 24.8%.

Recent News Highlights

  • October 24, 2017 - Cadence and Arm Delivers First SoC Verification Solution for Low-Power, High-Performance Arm-Based Servers
  • October 9, 2017 - China Unicom Awarded "Best 5G Initiative" RANNYs Award in Partnership with Cavium
  • September 11, 2017 - Cavium Showcased M-CORD NFV/5G on ARM with Leaf and Spine SDN Fabric at Mobile World Congress Americas 2017
  • September 11, 2017 - Cavium and Enea Delivers Optimized Software and Hardware Platform for uCPE
  • August 28, 2017 - Cavium Demonstrated NVMe Scale-out Technologies at VMworld US 2017
  • August 10, 2017 - Cavium Announced Support for FC-NVMe Standard
  • August 8, 2017 - Cavium Demonstrated Breakthrough NVMe over Fabrics Performance at Flash Memory Summit 2017

Cavium will broadcast its third quarter of 2017 financial results conference call today, November 1, 2017, 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 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 more information about the Company, 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, 2017



June 30, 2017

Net revenue

$

251,987



$

242,093

Cost of revenue


114,455




112,604

Gross profit


137,532




129,489

Operating expenses:







Research and development


93,860




94,758

Sales, general and administrative


43,184




40,791

Total operating expenses


137,044




135,549

Income (loss) from operations


488




(6,060)

Other income (expense), net:







Interest expense


(6,493)




(6,062)

Other, net


277




1

Total other expense, net


(6,216)




(6,061)

Loss before income taxes


(5,728)




(12,121)

Provision for (benefit from) income taxes


486




(1,049)

Net loss

$

(6,214)



$

(11,072)

Net loss per common share, basic and diluted

$

(0.09)



$

(0.16)

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


68,675




68,199

CAVIUM, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data and percentages)



Three Months Ended



September 30, 2017



June 30, 2017


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








Net revenue

$

251,987



$

242,093


GAAP gross profit


137,532




129,489


GAAP gross margin


54.6

%



53.5

%









Stock-based compensation and related payroll taxes


879




718


Inventory charges


(18)




1,661


Amortization of acquisition related assets


27,947




27,706


Non-GAAP gross profit

$

166,340



$

159,574


Non-GAAP gross margin


66.0

%



65.9

%









Reconciliation of GAAP operating expenses to non-GAAP:








GAAP research and development expenses

$

93,860



$

94,758


Stock-based compensation and related payroll taxes


(17,437)




(18,298)


Amortization of acquisition related assets


(725)




(731)


Acquisition and integration related costs


(743)




(811)


Non-GAAP research and development expenses


74,955




74,918










GAAP sales, general and administrative expenses


43,184




40,791


Stock-based compensation and related payroll taxes


(9,035)




(9,363)


Amortization of acquisition related assets


(1,278)




(1,277)


Acquisition and integration related costs


(3,997)




(1,984)


Non-GAAP sales, general and administrative expenses


28,874




28,167


Total Non-GAAP operating expenses

$

103,829



$

103,085










Reconciliation of GAAP Income tax to non-GAAP:








GAAP provision for (benefit from) income tax

$

486



$

(1,049)


Acquisition related tax adjustments


-




2,605


Non-GAAP provision for income tax

$

486



$

1,556


CAVIUM, INC.

Unaudited Reconciliation of Non-GAAP Adjustments

(in thousands, except per share data and percentages)



Three Months Ended



September 30, 2017



June 30, 2017


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








GAAP income (loss) from operations

$

488



$

(6,060)


Stock-based compensation and related payroll taxes


27,351




28,379


Inventory charges


(18)




1,661


Amortization of acquisition related assets


29,950




29,714


Acquisition and integration related costs


4,740




2,795


Non-GAAP income from operations

$

62,511



$

56,489


Non-GAAP income from operations as a percentage of revenue


24.8

%



23.3

%









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








GAAP net loss

$

(6,214)



$

(11,072)


Non-GAAP adjustments:








Stock-based compensation and related payroll taxes


27,351




28,379


Inventory charges


(18)




1,661


Amortization of acquisition related assets


29,950




29,714


Acquisition and integration related costs


4,740




2,795


Acquisition related tax adjustments


-




(2,605)


Total of non-GAAP adjustments


62,023




59,944


Non-GAAP net income

$

55,809



$

48,872










GAAP net loss per share, diluted

$

(0.09)



$

(0.16)


Non-GAAP adjustments detailed above


0.85




0.83


Non-GAAP net income per share, diluted

$

0.76



$

0.67










GAAP weighted average shares, diluted


68,675




68,199


Non-GAAP share adjustment


4,488




5,019


Non-GAAP weighted average shares, diluted


73,163




73,218


CAVIUM, INC.

Unaudited GAAP Condensed Consolidated Balance Sheets

(in thousands)



As of


September 30, 2017



June 30, 2017

Assets







Current assets







Cash and cash equivalents

$

152,654



$

127,061

Accounts receivable, net


186,447




173,754

Inventories


94,879




94,116

Prepaid expenses and other current assets


23,510




21,669

Total current assets


457,490




416,600

Property and equipment, net


169,747




157,542

Intangible assets, net


692,994




714,636

Goodwill


237,692




241,067

Other assets


5,757




5,286

Total assets

$

1,563,680



$

1,535,131








Liabilities and Stockholders' Equity







Current liabilities







Accounts payable

$

74,207



$

72,494

Accrued expenses and other current liabilities


44,898




49,825

Deferred revenue


9,501




8,990

Current portion of long-term debt


3,270




3,256

Capital lease and technology license obligations


27,803




19,195

Total current liabilities


159,679




153,760

Long-term debt


593,770




594,590

Capital lease and technology license obligations, net of current


15,025




20,563

Deferred tax liability


16,824




16,972

Other non-current liabilities


25,436




18,722

Total liabilities


810,734




804,607








Stockholders' equity







Common stock


69




68

Additional paid-in capital


1,157,386




1,128,752

Accumulated deficit


(405,302)




(399,088)

Accumulated other comprehensive income


793




792

Total stockholders' equity


752,946




730,524

Total liabilities and stockholders' equity

$

1,563,680



$

1,535,131

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SOURCE Cavium, Inc.