EX-99.1 2 cavm-ex991_6.htm EX-99.1 - Q3 2016 EARNINGS RELEASE cavm-ex991_6.htm

Exhibit 99.1

 

Cavium

Announces Financial Results for Q3 2016

SAN JOSE, Calif., November 1, 2016 – 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 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

 

•

October 31, 2016 - Cavium Introduced 1025GbE Adapter Family for Open Compute Project Servers

 

•

October 27, 2016 - Cavium QLogic Added PowerShell Integrated Management Solution for FastLinQ Ethernet Adapters

 

•

October 25, 2016 - Cavium Showcased ARMv8 Processor Solutions to Accelerate Next Generation Infrastructure at ARM TechCon 2016

 

•

October 25, 2016 - Cavium Showcased Highly Optimized Platforms for OpenStack Deployments at OpenStack Summit 2016

 

•

October 25, 2016 - Cavium QLogic Accelerates Cloud Deployments with OpenStack Integration

 

•

October 25, 2016 - SUSE Steps Up to Support Innovative ARM Solutions for Customers

 

•

September 27, 2016 - Cavium QLogic Accelerates Software Defined Datacenters with Windows Server 2016

 

•

August 30, 2016 - QLogic Showcased Multiple Technologies that Simplify and Accelerate Virtualized Server Deployments at VMworld 2016

 

•

August 16, 2016 - Cavium Completed the Acquisition of QLogic

 

•

August 16, 2016 - Cavium, Inc. Announced Successful Completion of the Exchange Offer in Connection with the Proposed Acquisition of QLogic Corporation

 

•

August 10, 2016 - Cavium, Inc. Announced Extension of the Expiration of the Exchange Offer in Connection with the Proposed Acquisition of QLogic Corporation

 

•

August 2, 2016 - Cavium, Inc. Announced the Expiration of HSR Waiting Period for the Acquisition of QLogic Corporation

 

•

July 26, 2016 - Cavium Named Raghib Hussain Chief Operating Officer

 

•

July 26, 2016 - Cavium Added Industry Veterans Brad W. Buss and Dr. Edward H. Frank to Board of Directors

 

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

 

 

 

Cavium Contact:

 

Art Chadwick

 

Angel Atondo

Vice President of Finance and Administration and Chief Financial Officer              

 

Senior Marketing Communications Manager

Tel: (408) 943-7104

 

Tel: (408) 943-7417    

Email: art.chadwick@cavium.com

 

Email: angel.atondo@cavium.com